Maitland/AMO Morning Monitor – Thursday 7 May 2020

7th May 2020

In the news

  • Telefonica and Liberty Global have agreed to combine their UK mobile (02) and fixed line (Virgin Media) businesses, in a deal which values the joint entity at £31bn and will create a new market leader
  • 20% of Wendy’s hamburger restaurants in the US have run out of burgers after meat shortages emerged as dozens of meat production plants shuttered when workers became ill with COVID-19.
  • London Mayor Sadiq Khan plans to introduce temporary cycle lanes and wider pavements in an effort to ease congestion on London’s transport networks when businesses return to work under social distancing rules
  • The German Bundesliga is set to restart later this month following the announcement of further lifting of restrictions by German premier Angela Merkel

Politics today

  • Boris Johnson will review the coronavirus lockdown in England with his cabinet later today, after suggesting some rules could be eased from Monday.

Stock market moves

  • Stocks in Asia Pacific were little changed in Thursday afternoon trade. In Japan, the Nikkei 225 added 0.26% as shares of index heavyweight and conglomerate Softbank Group dropped 2.3% while the Topix index shed 0.45%. South Korea’s Kospi advanced 0.27%.
  • The Dow Jones industrial average closed down 0.9%, and the S&P 500 down 0.7%. The Nasdaq however did close up 0.5%. US Futures at 8:30am BST point toward a positive open this afternoon.
  • The FTSE 100 and Euro Stoxx 600 are both trading marginally up this morning.

Corporate announcements

* Maitland Client

BT Group PLC Results for the full year to 31 March 2020
  • Revenue down 2% to £22,905m (2019: £23,428m).
  • PBT down marginally to £2,358m (2019: £2,666m).
  • Basic EPS down 20% to 17.5p (2019: 21.8p).
  • Final dividend suspended for 2019/20 and all dividends for 2020/21 to manage through the Covid-19 crisis; expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share.
Melrose Industries PLC Trading Statement
  • The Group traded in line with expectations from 1 January 2020 until mid-March 2020, at which point the  impact from COVID-19 caused significant disruption. Group sales in the Period were down approximately 20% versus the same period last year.
  • Melrose started the year with approximately £1bn of committed bank facility headroom and due to the results of the cash management procedures put into place, this amount of headroom also exists at the end of April 2020.
  • A combination of salary sacrifices by Group employees and furloughing has also helped to reduce costs.  Additionally, cash preservation has been significantly assisted by the cancellation of the 2019 final dividend to shareholders.
  • Factories in the Group’s Aerospace division have largely remained open. The Automotive and Powder Metallurgy businesses have seen similar trading patterns to each other with their factories in Europe and North America largely being shut since mid-March.
RSA Insurance Group PLC Q1 2020 Trading Update
  • COVID-19 affected the balance sheet but not the Group’s operating profit materially given the timing of lockdowns late in the quarter.
  • For the month of April claims frequency was down vs. prior year in a range 20-55% across the Group’s three regions, mostly reflecting COVID-19 impacts on activity levels.
  • Specific COVID-19 related claims are arising in travel insurance (which benefit from substantial reinsurance protection), wedding cancellation insurance (UK impacts) and for commercial lines business interruption and related policies. The great majority of business interruption claims are not expected to be eligible under their coverage terms for COVID-19.
  • For the period since inception of COVID-19 claims in March to end April, RSA estimates receiving a total of c.25,000 COVID-19 related claims (of which c.23,000 are travel claims) that have coverage and will pay out, at an estimated cost of c.£25m net of reinsurance.
Rolls-Royce Holdings PLC AGM statement
  • The Group expects to deliver up to £1.0bn of cash savings in 2020. The cancellation of the final 2019 shareholder payment has also conserved an incremental £137 million of cash flow.
  • Civil Aerospace widebody engine flying hours were approximately 40% lower than our prior expectations for the first four months of the year. This reflected a fall of 90% in April as airlines around the world have temporarily grounded large proportions of their fleets. As a result of this lower level of activity we are now enacting a significant reduction in the volume of service visits in maintenance, repair and overhaul (MRO) shops for 2020.
  • Additionally, airframe customers have reduced aircraft production rates and as a result we currently expect to deliver around 250 widebody engines in 2020, down from our previous guidance of 450.
  • The diversity of the Group’s business units makes it more resilient, with almost half of our sales coming from non-Civil Aerospace end markets. Year to date, the Group’s Defence business has been robust, although the impact of social distancing and self-isolation on operations and those of its suppliers represents a potential risk to activity levels.
Coca-Cola HBC AG Keeping our people safe and customers served
  • Strong trading in January and February; weaker results in March as government lockdowns severely impacted the out-of-home channel.
  • In April, with every market in lockdown, FX-neutral revenue fell -37.2% and volumes -27.3% (ex.Bambi).
  • Anticipated combined net impact of FX and raw materials for 2020 unchanged; benefits from lower commodity costs offset weaker FX.
  • Decisive actions taken to reduce costs and re-prioritise investments: 2020 discretionary expenditure cut by over €100m vs plan, cash capex cut by over €100m or just under 20% vs plan.
  • Strong balance sheet and sufficient liquidity to meet all financial commitments as well as to operate and invest in the business.
InterContinental Hotels Group PLC 2020 First Quarter Trading Update
  • Group Q1 comparable Revenue down 24.9%; March down 55%; April expected to be down around 80%.
  • Occupancy levels in comparable open hotels in the low-to-mid 20% range.
  • On track to reduce Fee Business costs by up to $150m and capex by ~$100m; further cost measures to be implemented to manage the business through the evolving trading environment.
  • Roughly $2bn of liquidity available; extension secured on $1.275bn syndicated RCF until September 2023 in addition to covenant waivers already in place; £600m (~$740m) of CCFF funding issued.
International Cons Airlines Group 1st Quarter Results and Appointment of CEO
  • (Loss)/profit before tax of -€1,683m (2019: +€70m).
  • Basic (loss)/earnings per share of -€0.848 (2019: +€0.037).
  • Passenger capacity has been reduced by 94 per cent from late March with most aircraft grounded and those retained for operating limited passenger, repatriation and cargo-only flights being appropriately-sized and new-generation, where practical.
  • Capital spending for 2020 has been reduced by €1.2 billion, with most of the remaining €3.0 billion covered by committed and agreed financing.
  • IAG is planning a meaningful return to service in July with a planning scenario that could see an overall reduction in passenger capacity of c.50 per cent in 2020.
  • Luis Gallego will succeed Willie Walsh as Group CEO on 24 September.
Impact Healthcare REIT PLC* Dividend declaration, NAV and trading update
  • The Board has today declared the Company’s first interim dividend for the year ending 31 December 2020 of 1.5725 pence per ordinary share. 
  • The Company received 100% of rent for Q1 and 100% of rent due in April 2020.  This first quarterly dividend is in line with the aggregate total dividend target of 6.29 pence per share for the year ending 31 December 2020 announced on 31 January 2020, a 1.94% increase over the 6.17 pence per share declared and paid for the 12 months ended 31 December 2019.
  • The Company is keeping this approach under careful review.  If the trading outlook changes because of the effects of the COVID-19 pandemic the Company will take appropriate decisions based on the long term interests of the Company and its stakeholders.
Hyve Group PLC Interim results announcement
  • Revenue down at £96.3m (31 March 2019: £107.8m).
  • PBT down at £19.8m (31 March 2019: £24.5m).
  • Diluted EPS down at -21.6p (31 March 2019: -0.1p).
  • Underwritten rights issue to raise £126.6m separately announced today, to provide security through the COVID-19 crisis and support the Group’s long-term success.
  • Postponement Plan has moved 30 events to later this financial year, 18 are postponed to FY21 and 13 have been cancelled in this financial year.
Polypipe Group PLC COVID-19 Update
  • Severely curtailing capital expenditure, which was expected to have been approximately £25m for the FY20 financial year.
  • Cancelling the FY19 final dividend which was due for payment on 28 May 2020, saving the Group £16m of cash.
  • Reductions in base salary/fees for both executive directors and non-executive directors of 20% until further notice.
  • Standing down all agency staff and any consultants.
Trainline PLC Results for the year ended 29 February 2020
  • Net ticket sales up 17% to £3.7bn in line with guidance, reflecting increased mobile demand from greater eticket adoption in UK and strong customer acquisition in International.
  • Revenue increased 24% to £261m at top end of guidance, benefiting from net ticket sales growth, revenue optimisation and the launch of new ancillary revenue streams.
  • Operating profit of £2m and loss after of tax of £81m, primarily driven by exceptional costs relating to the IPO.
  • Significant impact on trading in Q1 FY2021 to date as a result of COVID-19 lockdown, with UK and European passenger volumes currently down >95%.
Cairn Energy PLC Chairman Succession
  • Cairn  announces that its Chairman, Ian Tyler, has indicated to the Board that, having served on the Board for seven years, six of them as Chairman, and mindful of good corporate governance practice, it is his intention to retire from the Board once a successor has been appointed. 
  • The Board will  begin a thorough and comprehensive process to identify and appoint a successor and enable an orderly handover, in accordance with the Board’s existing succession planning.
  • Mr Tyler has indicated his commitment to serve as Chairman of the Board of Cairn until such process is completed, which is anticipated to take place within the next twelve months.
IMI PLC Interim Management Statement and Coronavirus update
  • Excluding the impact of acquisitions and exchange rate movements, organic revenues for the three months to the end of March were 5% lower when compared to the first quarter last year, as expected. Profits, margins, and operating cash flow were all higher than the same period in the prior year.
  • Overall orders for the Group in the first quarter were higher versus 2019, supported by a temporary surge in orders within Life Sciences as well as New Construction LNG in IMI Critical.
  • The Group’s performance in April has experienced a more marked impact from Coronavirus.  In April organic sales were 9% lower than the prior year, reflecting the steep decline in IMI Precision’s Commercial Vehicle segment and temporary construction site restrictions affecting IMI Hydronic.
Rathbone Brothers PLC First quarter interim management statement
  • Total funds under management and administration decreased by 15.4% to £42.6bn at the end of the first quarter (31 December 2019: £50.4bn).
  • Total net inflows were £0.7bn in the first quarter (Q1 2019: £0.2bn).
  • Total underlying net operating income of £84.6m for the three months ended 31 March 2020 was consistent with last year (Q1 2019: £85.3m).
3i Infrastructure PLC Results for the year to 31 March 2020
  • The Company reports an 11.4% return for the year.
  • Delivery of the FY20 dividend of 9.2 pence and a 6.5% increase in the target dividend for FY21 to 9.8 pence per share.
  • The Company reports £418m of total cash.
  • The Company reports £186m of new investment.
Reach PLC Trading Update
  • Group revenue in the period was down 13.1% with print revenue down 15.8%, while digital revenue grew by 4.7%.
  • The Group continues to have access to sufficient liquidity. Net cash surplus as at the 26 April 2020 was £33.2 million reflecting the proactive steps taken to conserve cash.
  • This represents a cash balance of £58.2m less £25.0m which has been drawn down from the Group’s revolving credit facility of £65 million, which is available until December 2023.
  • Jim Mullen, Chief Executive, said: “We continue to build on our position as the UK’s largest commercial national and regional news publisher. Our strategy is now even more relevant than before the crisis so we are accelerating plans to drive digital engagement and capture the customer insight and data that is so key. This will ensure a strong and sustainable future for Reach’s trusted news brands.”
Morgan Sindall Group PLC COVID-19 and trading update
  • In Construction, c80% of sites are currently operational, however they are being impacted by lower levels of productivity.
  • The Chair, Non-Executive Directors, Executive Directors and Senior Management Team have all taken salary reductions of 20% as from 1 April for a period of 3 months.
  • The Group has taken advantage of permissions to defer VAT, PAYE and other tax payments which total c£47m to date.
  • As previously announced, the final dividend for 2019 (c£17m) was cancelled.