Maitland/AMO Morning Monitor – Monday 7 September 2020

7th September 2020

In the news

  • The government announced that No.10 is preparing to "override" the Withdrawal Agreement signed by Johnson eight months ago before the next round of Brexit negotiations resume on Tuesday.
  • The UK recorded a 50% increase in the number of people testing positive for COVID-19, with almost 3,000 people being diagnosed with the virus in the past 24 hours.
  • Boris Johnson is planning to act after the Extinction Rebellion protests at the weekend blocked printing presses, with potential extra powers for the police and the media designated "critical national infrastructure".
  • Barclays and NatWest have dealt another blow to homebuyers after restricting how much they will lend mortgage borrowers.
  • Government is facing legal challenge on clean air targets after evidence showed a link between air pollution and COVID-19 death rates.

Politics today

  • The Prime Minister is set to release a statement on Brexit this morning which is speculated to hint to a no-deal outcome.
  • Health Secretary, Matt Hancock is set to appear on LBC this morning commenting on the sharp rise of COVID-19 cases in the UK.
  • Education Secretary, Gavin Williamson is set to answer questions in the Commons at 2.30 p.m as schools continue to re-open.
  • Home Secretary, Priti Patel is expected to give a statement on policing that is likely to go into the attacks in Birmingham and the Extinction Rebellion protests.
  • A Department for Transport Commons statement on travel corridors is also expected today.

Stock market moves

  • Shares across Asia struggled to find momentum following last week’s global market sell-off.
  • China’s CSI 300 index of Shanghai and Shenzhen listed stocks dropped 0.3% and Japan’s Topix shed 0.2%.
  • Australia’s S&P/ASX and Hong Kong’s Hang Seng were flat.
  • US markets are closed for the Labour Day holiday but futures for the benchmarks S&P were down 0.2%.
  • In Europe, the FTSE 100 is trading up 0.9% and the Euro Stoxx 600 up 0.8% in early hours.
  • After Saudi Armaco’s statement that it would cut prices on crude shipments to Asia, oil dropped with brent falling 1% to $42.25 per barrel while US West Texas Intermediate fell 1.2% to $39.31 per barrel.

Corporate announcements

* Maitland Client

Associated British Foods PLC Pre Close Period Trading Update
  • Trading in the fourth quarter in both the Group’s food businesses and Primark exceeded expectations.
  • For the full year, the Group expects a very strong increase in the aggregate adjusted operating profit for its Sugar, Grocery, Agriculture and Ingredients businesses over last year.
  •  Adjusted operating profit for Primark on an IFRS16 basis, excluding exceptional charges, is now expected to be at least at the top end of the £300-350m range previously advised (2019:£913m).
  • The Group’s expectation is that the year-end net cash balance, before lease liabilities, will be of £1.3bn.  The improvement since its last trading update is primarily driven by a reduction in working capital in Primark and in particular its inventory levels.
  • The Group has fully repaid its Revolving Credit Facility of £1.1bn in August.  An extension of the maturity date of this facility to July 2023 has been agreed with all its relationship banks.
Dechra Pharmaceuticals PLC Preliminary Results Announcement-year end 30.6.20
  • Revenue growth of 6.8% to £515.1m.
  • Underlying operating profit increased to £128.3m.
  • Reported operating profit growth of 33.6%
  • Strong cash generation with cash conversion of 99.4%.
  • Ian Page, CEO, said: “The indications at this stage, however, are positive. A key area of focus over the coming months will be the sales and marketing of our recently acquired brands, Osurnia and Mirataz, which offer solid growth prospects and strengthen our portfolio.”
Foresight Solar Fund Limited PLC Acquisition of First Spanish Solar Asset
  • Foresight Solar, a fund investing in a diversified portfolio of ground-based solar PV assets in the UK and internationally, announces the acquisition of its first solar asset in Spain.
  • The 26.1 MW Virgen del Carmen asset, based in Huelva, in the South-West of the country, is the Fund’s first acquisition in Continental Europe and also represents Foresight Solar’s initial investment in subsidy-free solar.
  • The acquisition will represent an investment of £18.0m once construction is completed and will benefit from a long-term Power Purchase Agreement entered with Shell Energy Europe Limited, a subsidiary of Royal Dutch Shell Plc, for the sale of electricity under a fixed price until 2030.
  • Following the acquisition, the Company’s portfolio comprises 55 assets, based in the UK, Australia and Spain, with an installed capacity of 895 MW.
  • Alex Ohlsson, Chairman, said: “With a long-term, fixed price PPA in place and a high production profile, the acquisition is a clear demonstration of our ability to source and deliver stable cash flows at attractive risk-adjusted returns and marks an important step in Foresight Solar’s international expansion strategy.”

Future PLC Pre-close full year trading update
  • The Group continues to benefit from the trend in a shift to digital media. In August, organic unique visitors in the UK and US were up 25% and 40% respectively compared to the prior year.
  • Combined with a better than expected performance of TI Media in the second half, full-year adjusted operating profit is now expected to be materially ahead of current market expectations.
  • Delivery on synergies continues to progress well with £10m already secured, of which at least £3m will benefit FY20.
  • Future now anticipates cost synergies of £20m per annum by the end of FY21, ahead of earlier forecasts of £15m per annum.
  • Zillah Byng-Thorne, CEO, said: “Whilst macro uncertainty remains in light of the pandemic, we are well positioned to benefit from the continued shift to digital media as we grow our global audiences.”
Home REIT PLC* Intention to float
  • Alvarium Home REIT Advisors Limited today announces its intention to launch an IPO of ordinary shares in Home REIT plc.
  • The Company will seek to contribute to the alleviation of homelessness in the UK, whilst targeting inflation-protected income and capital returns, by investing in a diversified portfolio of assets across the UK which will be dedicated to providing accommodation to the homeless.
  • The accommodation assets will be let or pre-let on very long, inflation-linked leases to registered charities, housing associations, community interest companies and other regulated organisations which have a proven operating track record in providing low-cost accommodation to the homeless and which receive housing benefit or comparable support from local or central government to fund the provision of such accommodation to the homeless.
  • Home REIT will target an issuance of £250m by means of a placing, offer for subscription and intermediaries offer of up to 250m Ordinary Shares at an issue price of £1.00 per Ordinary Share.
  • Lynne Fennah, Chairman said: “We aim to be part of the solution to the homelessness crisis in the UK, drawing on the Alvarium team’s sector specialist expertise to achieve our objective of delivering secure inflation-protected income and capital returns to shareholders, whilst delivering a positive social impact.”
EQTEC PLC* Agreement for Southport Hybrid Energy Park Project
  • EQTEC and Rotunda enter into an agreement to jointly develop a waste management project, to be held in a Project SPV, which EQTEC has the option to acquire.
  • EQTEC will be responsible for contributing 100% of the development costs pre-financial close and receive, at financial close, a return on the funds invested in the form of a development fee, no less than two times the funds invested by EQTEC.
  • Rotunda will receive a consideration of £100,000 from EQTEC, pursuant to the Agreement, in consideration for the exclusive option for EQTEC to acquire the Subsidiary, which will be treated as a development cost of the Project.
  • Under the Agreement, EQTEC will seek additional planning permission such that EQTEC’s advanced gasification technology can be applied to the Project to make it capable of converting over 55,000 tonnes annually of refuse derived fuel waste, which would be created by the proposed plant and otherwise destined for landfill or incineration, generating an estimated additional 6-8MW of ‘green’ electricity.
  • EQTEC estimates that the additional capacity for the thermal conversion of waste, utilising the Group’s advance gasification technology, has the potential to generate additional revenues for the Project SPV of c.£70m in electricity sales and, potentially, up to £15m in heat sales over a 20 year period, and save over £80m in disposal costs.
  • David Palumbo, CEO, said: “EQTEC recently raised £10 million to focus on developing projects like this, which have the potential to provide local communities and companies with a credible and commercially attractive alternative to landfill and incineration for residual municipal and commercial waste with much less of an environmental impact, whilst creating local jobs.”