Maitland/AMO Morning Monitor – Wednesday 9 September 2020
In the news
- UK government admits it will break international law over Brexit treaty
- AstraZeneca pauses vaccine trial after suspected adverse event
- SoftBank shares sink as tech rout spreads to Asia
- Social gatherings of more than six people in England will be banned from Monday, barring exemptions, as ministers rush to control what they fear is the start of a second wave of the coronavirus pandemic.
- The government today publishes its much-anticipated Internal Market Bill seeking to “clarify” aspects of the Northern Ireland Protocol in the event of no deal.
Stock market moves
- In Europe, the STOXX 600 opened up 0.5% and the FTSE 100 opened up 0.6%.
- In Asia, Shenzhen’s tech-focused ChiNext index lost 3.3% while the broader CSI 300 dropped 1.6%. In Hong Kong, the benchmark Hang Seng retreated 0.9% as Chinese ecommerce group Alibaba shed as much as 2.7%.
- Tech stocks on Wall Street dropped for a third straight session on Tuesday. The Nasdaq fell 4.1%, taking the index into correction territory, defined as a decline of more than 10% from a recent high.
- Oil prices dropped further on concerns that a resurgence in coronavirus cases would hobble a recovery in energy demand. Brent crude, the global benchmark, fell 0.3% to $39.66 a barrel while US marker West Texas Intermediate dropped 0.4% t to $36.62.
Corporate announcements* Maitland Client
Tullow Oil PLC Half-year Results
- Sales revenue decreased to $731m (H1 2019: $872m).
- Gross profit decreased to $164m (H1 2019: $527m).
- Profit/loss afteer tax decreased to $1,327m loss (H1 2019: $103m profit).
- Rahul Dhir, CEO, said: “Despite the very tough conditions in the first half of this year, we have successfully delivered reliable production and major, sustainable reductions to our cost base. We are also close to completing the important sale of our interests in Uganda. The quality of Tullow’s assets remains robust. Since my arrival as CEO, we have been developing new plans for our business, with the support of our Joint Venture Partners and expert advisors. These plans will deliver enhanced value from our assets to benefit all our stakeholders including our host countries and investors. We will host a Capital Markets Day towards the end of 2020 at which we will update the market on these plans to deliver on Tullow’s true potential.”
- Revenue increased 1.5% to £2,464.2m (H1 2019: £2,427.0m).
- Adjusted PBT increased 39.4% to £74.6m (H1 2019: £53.5m).
- Diluted EPS increased 36.4% to 45.3p (H1 2019: 33.2p).
- Mike Norris, CEO, said: “It is impossible to predict exactly how the world will recover in 2021, and beyond, and the implications for our customer base. We do believe that our customers will continue to invest in technology and that we have built a substantial reseller business with the largest service capability of any reseller in the world and the most substantial international footprint which should enable us to deliver a reliable and consistent business for our customers, employees and shareholders.”
- During August, Group revenues recovered to 90% of FY20 levels, with I&C at 87% and landfill at 86%. As a result, underlying profit contribution is also continuing to steadily improve month on month and the Group expects to cease furloughing staff at the end of September.
- The Collections division has now completed its first I&C business acquisition of the year, of a trade waste business which had pre-CV-19 run rate revenues of around £4m. Active negotiations continue on several other deals and the pipeline is expanding as expected.
- The Group continues to make good progress on the Protos energy from waste project with the EPC and funding aspects of the transaction now well advanced.
- Whilst the outlook for the rest of the year is dependent on the pace and shape of the economic recovery, based on the recovery to date, the Board’s expectations for the full year remain unchanged.
- Net revenue increased 10.7% to £83.9m (H1 2019: £75.9m).
- Operating profit increased 20.0% to £23.0m (H1 2019: £19.2m).
- Diluted EPS increased 30.9% to 12.3p (H1 2019: 9.4p).
- Martin Schnaier, CEO, said: “The changes that we have made to the business over the past fifteen months have enabled the Group to deliver a resilient financial performance during the first half despite the backdrop of the COVID-19 pandemic. Our ambition remains to provide high quality, professional services to our clients and this year we have particularly focused on technology across the Group which I see as a really exciting development. Operationally we have prioritised the health, safety and wellbeing of all our people and I would like to thank everyone for their continued efforts in delivering uninterrupted quality service to our clients. We remain excited about the long-term opportunities for the business and committed to our stated strategy.”
- The Group announces the signing of an agreement to acquire Team Wendy, a leading supplier of helmets and helmet liner and retention systems for military and first responder markets.
- The Group will acquire Team Wendy for US$130m (approximately £100m) on a cash-free and debt-free basis, subject to a normalised level of working capital.
- The acquisition price represents a multiple of 9.7x Team Wendy’s 2019 EBITDA.
- The Board believes that the Acquisition will be an important step in the strategic development of Avon Rubber as a leading provider of life critical personal protection systems to military and first responder markets.