By Powerscourt on 26/03/2020
Powerscourt Coronavirus Briefing – 26 March 2020
ANALYSIS
Asian markets were mixed overnight despite US indexes recording back to back positive sessions for the first time in seven weeks.
Korea’s KOSPI fell 1.1% and the Nikkei 225 in Japan sunk 4.%% while Hong Kong’s Hang Seng index was broadly unchanged and China’s Shanghai Composite Index, one of the few major stock markets in the world that is now not in bear territory, was down just 0.6%.
Overnight, Singapore has become the first Asian economy to publish GDP data which showed that its economy contracted 2.2% in Q1, worse than analysts had estimated and an early indicator of the likely scale of the global downturn.
In the UK, announcements from listed property firms and engineering companies continue to point towards the impact COVID19 is having on London’s listed businesses.
FTSE 100 constituent British Land has joined the growing number of companies to announce that it is temporarily suspending its dividend payments while noting that 88% of its retail units are now closed. This sentiment is echoed by FTSE250 peer Capital & Counties, the owner of Covent Garden, which has also suspended its share buyback programme.
Also on the FTSE250, updates from a trio of leading midcap engineering names paints a remarkably similar picture.
Glasgow-headquartered Weir notes that, while its three facilities in China are now back to full operating capacity, there has been increased interruption across its other operations and supply chains as governments step up their efforts to control the spread of Covid19.
This sentiment is echoed by aerospace business Senior who state that COVID19 is causing macroeconomic disruption across its markets and their respective supply chains while marine engineering services business James Fisher and Sons states that the potential impact of COVID19 is difficult to predict with any degree of certainty.
All three firms have pointed towards their respective strong balance sheets and good liquidity while suspending dividend payments.
Away from corporate PLC, the Chancellor Rishi Sunak is set to unveil a financial aid package for the self-employed later today.
Having set out plans for 80% wage subsidies for staff kept on by employers last week, he is expected to provide a similar level of support for the nation’s army of builders and taxi drivers, hairdressers and childminders, plumbers and decorators and many, many more.
WHAT ARE COMPANIES SAYING?
Consumer and Retail
Dixons Carphone
As a result of the rapidly changing situation regarding COVID-19, Dixons Carphone issued an update on trading, further to the update on 17 March 2020. In line with Government guidance, Dixons Carphone from 24 March have closed stores across the UK and Ireland. This follows store closures in Greece from 18 March. At present almost all stores in the Nordics continue to trade. However, their large Online operations remain open where trading has been very strong in all countries over the last two weeks as people have been preparing to work from home and use essential technology to continue their lives during the Coronavirus outbreak. Early signs are that this strong trading has continued since stores closed and will help to compensate for lost store sales.
Big Yellow Group
Big Yellow Group provided an update, stating storage, mini-logistics and transport are an important part of the distribution network and as such have not been identified for closure at this stage by the Government. For the health and safety of customers and staff, the Group explained that they have limited the number of staff in a store at any one time to a maximum of two and the Group have taken all staff off public transport for the foreseeable future both for their safety and to help reduce pressure on the system. Over the past week, there has been an increase in demand from domestic and student customers urgently needing storage, as a result of the lockdown measures introduced, but this has been outweighed by some businesses directly affected by the closures choosing to move out.
Stock Spirits Group
Stock Spirits, a leading owner and producer of premium branded spirits and liqueurs in Europe, announced that it has started manufacturing hand sanitiser at its production facility in the Czech Republic, in order to lend its help to mitigating the spread of the ongoing COVID-19 outbreak. The Company’s facility in Pilsen, Czech Republic, has already produced 90,000 bottles (200ml) of hand sanitiser, and is hoping to be in a position to manufacture more in due course. The Company is also in advanced planning to do the same at its production facility in Lublin, Poland, and is in ongoing discussions with Polish state authorities.
Industrials
James Fisher & Sons Plc
The British provider of marine engineering services provided an update on management actions to offset the potential impact of Covid-19 on the Group. Proactive actions the Company have taken include the deferral of discretionary capital expenditure; a hiring freeze; and, with effect from 1 April 2020, the salaries and fees of each member of the James Fisher Board will be reduced by 20%. Furthermore, the Board has decided that the final dividend for the year should be suspended until further notice.
Weir Group
The engineering group updated the market on the impact of Covid-19 to date, recent trading and the actions it is taking to navigate through this period of uncertainty. In recent days we have seen increasing interruption of their operations and supply chains mainly in the US, UK, South Africa, Peru and Malaysia as governments step up their efforts to control the spread of Covid-19.
In China, three facilities endured a forced shut-down in early February, but are now back to full operating capacity. Trading in January and February was in line with our expectations across each of their divisions.
Senior
The international manufacturer of high technology components and systems, issued a market update. Senior said due to the increasing uncertainty the Board would no longer recommend the payment of the 2019 final dividend at the upcoming AGM in April. Whilst trading in the first two months of the year has been in line with expectations, they anticipate trading for the rest of 2020 will be impacted and are therefore suspending guidance for this year.
RoseRock Energy
The independent oil and gas production company said that whilst it was unable to publish its 2019 Annual Report and Financial Statements today as planned due to the FCA’s decision on publishing financial results the Company is pleased to provide an operations update. The Company has not experienced an adverse impact on its operations as a result of COVID-19.
Renishaw
The British engineering company made a statement to say that the Board has taken the decision to cancel the 14.0p interim dividend which was due to be paid on 6 April 2020. Whilst the Group has a strong balance sheet, the Board’s priority is to conserve cash and manage the Group in a prudent manner through this period of uncertainty.
Financials & Real Estate
Intu Properties
Intu Properties PLC, the UK-based developer, owner and manager of regional shopping centres issued a statement on the impact of COVID-19. Intu reported that all centres in the UK and Spain are operating on a semi-closed basis. In line with the latest Government advice in both countries, only essential stores, such as supermarkets, pharmacies and banks, remain open. Rent for the second quarter of the year in the UK was due on 25 March (the quarter day) and Intu stated that they have received 29 per cent of this. The Company said they had significantly reduced capital expenditure, are cutting back on head office costs and have initiated a programme of reducing non-essential service charge costs and are passing on these savings to customers.
British Land
British Land provided a business and dividend update this morning. British Land reassured that the company had a “high quality, diverse portfolio of assets and expert operational and property management teams” and “never has this been more important or evident than in recent weeks.” The Board it announced had agreed it should temporarily suspend its dividend payments while noting that 88% of its retail units are now closed.
Capital & Counties
The property investment and development company said the majority of retail and F&B units on the Covent Garden estate are closed temporarily and whilst Government-related support measures will be helpful for many occupiers, Capco expects disruption to income during the course of this year. As a long term investor in London, Capco said it will work to assist its customers with bespoke solutions on a case by case basis through this unprecedented period. This will involve moving from quarterly rental payments in advance to alternative arrangements and the deferral of rental payments in certain cases, particularly for smaller and independent operators in order to ease short-term cash flow issues and to reopen successfully once the current restrictions are lifted. It is too early at this stage to assess the full impact on rental income and property valuations.
Vistry Group
Vistry Group provided an update yesterday on COVID-19 and the measures it is taking to mitigate the impact on its business. The Group pointed to its strong forward sales position, housebuilding reservations and Vistry Partnerships’. Following the latest Government and Public Health guidance, the Group have closed their sales offices and have commenced the process of closing construction sites. The Group walked through the measures they were taking to protect their cash position, liquidity and maintain a robust balance sheet.
Admiral Group
Admiral Group Plc announced that its AGM will be held on Thursday 30 April 2020.
The Board is closely monitoring the evolving outbreak of Coronavirus (COVID-19) and currently plans to hold the AGM as planned on the day and time set out but given the evolving situation and the potential risks of aiding the spread of Coronavirus (COVID-19) by gathering together at the AGM, and the possibility of the UK Government imposing restrictions on travel and public gatherings, the Board encourages shareholders to vote on all resolutions by completing and submitting a proxy appointment in accordance with the instructions set out in the Notice of Annual General Meeting.
Barratt Developments
Barratt Developments, Britain’s largest housebuilder, issued an update on the impact of COVID-19. The Company has closed all of their sales centres, construction sites and offices transitioning the business to enable home working and offering support to employees through this period of uncertainty. The Company said due to the significant impact of Covid-19 on both construction output and reservations, the board was taking measures to manage the cost base and cash-flows such as suspending all land buying activity, ceasing all recruitment activity and postponing all non-essential capital expenditure.
Barclays
Yesterday, Barclays announced it will waive overdraft fees for a fixed period in a bid to help customers suffering from financial difficulties due to the impact of coronavirus. Barclays said it would not charge any interest on all overdrafts from Friday March 27 until the end of April to give customers extra headroom in times of financial uncertainty.
Ulster Bank
In response to the coronavirus outbreak, Ulster Bank has announced it will temporarily close 10 of its advice centres in Dublin and Cork and will stop opening branches on Saturdays. Beginning Friday, the bank said it would prioritise early opening hours for elderly or vulnerable customers and their carers. It is also providing a dedicated phone line for such customers, as well as a separate one solely for healthcare and emergency workers.
TMT
Dyson
The technology company has plans to manufacture 15,000 medical ventilators, following a call from the prime minister for British industry to supply the National Health Service with equipment to fight coronavirus. Dyson has been working with The Technology Partnership to rush forward a new design and is now awaiting government approval to go ahead with production of a ventilator for the NHS. Sir James Dyson told staff it had received a UK government order for 10,000 of the devices and plans to begin delivering them “in weeks”.
Vianet Group
The international provider of actionable data and business insight through devices connected to its Internet of Things (“IOT”) platform, provided an update on progress and trading in respect to the situation regarding COVID-19. Vianet said that the mandatory closures of pubs, bars and restaurants in the UK will have a material effect on almost all Smart Zones customers. In anticipation of this, they have therefore proposed a reduced rate on all contracts in order to maintain business continuity and to avoid more expensive reconnection costs for customers when pubs reopen. Their Smart Machines business have seen mixed trading impacts across the range of our customers. Some vending machines, including those in hospitals, supply chains and emergency services are trading very well, whereas those in closed city centre offices have experienced little or no sales.
Reach plc
The British newspaper, magazine and digital publisher said given the rapidly changing situation, they have actively shaped business operations to best adapt to the current trading environment. This has included broadening our interactions with customers (via apps and newsletters), alongside offering more convenient options for our printed products, with an increase in home delivery. Currently, the principal trading areas expected to be impacted by Covid-19 are advertising, print circulation and events. There is currently no change to the announced 2019 full year dividend.
Daily Mail and General Trust
The British media company announced that trading for the first five months of the financial year was in line with expectations but their outlook was adversely impacted by coronavirus. The Group said they were confident their diversified portfolio and strong financial position, with more than £700m of cash and bank facilities available, operating across multiple sectors, geographies and business models would enable them to “withstand a sustained period of global economic uncertainty and continue to invest through the cycle”.
JPI Media
JPI Media has announced it will temporarily stop printing a dozen of its newspaper titles as local and regional news groups suffer the consequences of the coronavirus outbreak. The company, which publishes the Scotsman and Yorkshire Post, said it would stop printing its free papers from Monday following a “substantial reduction in advertising”.
Travel & Leisure
Hostelworld Group
Hostelworld, a leading global OTA focused on the hostel market, today provided an update on trading in light of the unprecedented challenges presented by the COVID-19 outbreak. As a result of the significant uncertainty, the Group said it was too early to predict or quantify the impact this will have on their results but said their balance sheet remains strong and the Group have taken mitigating actions to preserve cash including cancelling the proposed dividend and reducing overall market spend.
IN THE NEWS
High-dividend stocks suffer as companies delay AGMs Financial Times
Rishi Sunak set to unveil coronavirus support for self-employed Financial Times
Banks urged to scrap billion-pound payouts The Times
