Maitland/AMO Morning Monitor – Monday 1 June 2020
In the news
- In a sixth night of protests the US witnessed the severest racial riots since protests over the killing of Martin Luther King in the 1960’s with teargas used outside the White House. Curfews were in place across 25 American cities last night and the National Guard was out in force alongside police in a dozen states. Demonstrations spread across the Atlantic to London and Berlin over the weekend
- Citi, a US investment bank has warned that “markets were way ahead of reality” suggesting corporates raise as much cash as possible before the true cost of the pandemic is reflected in share prices.
- The quarantine about to be imposed on arrivals to Britain will "kill" the travel industry and have the same impact as the complete closure of the nation's borders, ministers have been warned. Aviation leaders urged the government yesterday to rethink the plan, saying it was the equivalent of hanging up a “Britain is closed” sign. They were joined in their opposition by tourism bodies and politicians
- Ahead of the start of the fourth round of Brexit talks this week, the EU’s chief negotiator has warned Boris Johnson that he must keep his promises if he wants to avoid the double economic hit of a no-deal Brexit and the coronavirus pandemic.
- Astronauts arrive at ISS: Elon Musk’s SpaceX opened an era of commercial activity in space on Sunday as it became the first company to carry astronauts to the International Space Station.
- After German Chancellor Angela Merkel declined to attend the G7 meeting in person, Donald Trump has postponed the meeting to after the summer and vowed to invite more countries, including Russia.
- The UK government announced the intention on Sunday to build 3,300 homes for rough sleepers, spending an estimated £160m.
Stock market moves
- Shares of Celtrion, a South Korean biotech company shot up by 7% on Monday after the company said its pre-clinical animal testing showed very positive results with an antiviral antibody treatment for Covid-19
- Wall Street turned higher late in Friday’s session after Donald Trump’s latest salvo aimed at China did not deliver the harsh sanctions traders had feared. The S&P 500 closed up 0.5 per cent and the Dow Jones Industrial Average ended little changed, recovering from a fall of more than 1 per cent, after the US president said in a scheduled address that his administration would revoke special trade privileges for Hong Kong. For the same reason, Hong Kong’s Hang Seng jumped 3.4 per cent today.
- Japan’s and Korea’s Purchasing Manager’ Indices fell to their lowest since 2009 with readings of 38.4 and 41.3 respectively. Despite the disappointing data Tokyo’s Nikkei closed up 0.84% and Seoul’s Kospi index was trading up 1.75% at the time of writing. China’s manufacturing Caixin-Markit PMI nudged higher to 50.7 in May from 49.4 in April (figures below 50 indicate weakening activity whereas a reading above 50 indicates expansion.)
- Whit Monday means that exchanges in France, Germany and the Netherlands are closed. Futures for US indices DJIA, Nasdaq and S&P showed little movement in early trading Monday with declines of 0.1%.
Corporate announcements* Maitland Client
Associated British Foods PLC Covid-19 Update
- The Group is today issuing a likely timetable for the re-opening of Primark stores.
- As at today, Primark is trading in 112 stores which represent 34 percent of our total selling space. Primark is now working to re-open all its stores in England on 15 June.
- At the start of the re-opening of stores, Primark had £1.5bn of stock on hand, and had also made commitment to our suppliers for a further £0.4bn of stock. This compares to a typical stockholding of £0.9bn.
- It remains too early for the Group to resume earnings guidance for the remainder of the current financial year.
- Profit before tax of €110.8m (FY 2019: €144.7m).
- LFL annualised rent roll increase of 6.1% to €81.2m (FY 2019: €76.6m).
- NAV per share increased by 8.9% to 77.35c (FY 2019: 71.01c), with EPRA NAV per share of 80.62c (FY 2019: 74.82c).
- Dividend per share of 1.80c in respect of the second half of FY 2020 authorised, giving total dividend for year of 3.57c.
- April collections within 98.8% of normal working practice and May collections in line with April.
- The Board does not consider it prudent to provide full year financial guidance but will continue to monitor the situation and update the market in due course.
- The Company reaffirms that the operational performance of its investment portfolio remains as expected and there has been no material change since it announced its results for the year-ending 31 December 2019 on 9 April 2020.
- 2.5 pence increase in NAV per share to 150.6 pence (31 Dec 2018: 148.1 pence per share).
- The portfolio maintains a high level of inflation-linkage such that a 1.00% increase in inflation leads to a 0.82% increase in return.
- A second half-year 2019 dividend of 3.59 pence per share was declared on 9 April 2020 and is expected to be paid on 19 June 2020.
- A target dividend for the 2020 and 2021 financial years has been set at 7.36 and 7.55 pence per share, respectively, in line with a target annual increase of c.2.5%.
- As at 27 May 2020, the Group had £452m of net cash and £375m of undrawn facilities. The average net cash for the first four months of the year was £464m (2019: £325m).
- The Group’s order book as at 30 April 2020 was £17.4bn (2019: £14.3bn), over 20% higher than the prior year end position.
- In line with the current environment, the Board has prudently decided to cancel the final dividend for 2019.
- The Board will continue to review the Group’s capital structure and the potential for further distributions to shareholders, as and when the impacts of COVID-19 on the Group are clearer.
- The Group today announces that it has agreed to acquire a 26.3% shareholding in Shaftesbury PLC across two tranches for total consideration of £436m.
- The stake has been acquired at a price of 540 pence per Shaftesbury share, representing a discount of 13.9% to the closing Shaftesbury share price on 29 May 2020.
- Capco maintains a strong balance sheet with access to significant liquidity – on a pro forma basis as at 31 March 2020, the Investment results in an LTV of 30%, with £525m of cash and undrawn committed facilities.