Powerscourt

By Powerscourt on 06/04/2020

Powerscourt Coronavirus Briefing – 06 April 2020

ANALYSIS

A number of mid-cap and large-cap UK companies issued updates today – the increasingly familiar mix of equity raises, dividend cuts and cost reductions (see below). The FTSE 100 started almost 3% up and the FTSE 250 3.5% as investors drew on the mild optimism in Asia and good news in some of the this morning’s updates.

Some see flickers of good news, especially from France and Spain where the pandemic is seen by some to have peaked. Certainly, rises in markets in Asia Pacific overnight were attributed to hopes for relaxation of restrictions in some European countries.  the Topix gained 1.8%, the Kospi 2.4%, the S&P/ASX 200 3.6% and the Hang Seng 1.1%. Oil prices by contrast fell after continued tension between Saudi Arabia and Russia over the weekend, leading to doubt that they will reach agreement on reducing global oil supply soon.

The Queen’s speech to the British people (not forgetting the Commonwealth) appeared an uplifting if sombre end to the weekend – only her fourth such broadcast of an extraordinarily long reign. It was almost immediately overshadowed by news that Boris Johnson had been admitted to hospital for tests as a result of ongoing coronavirus. He will remain in charge of government but if his condition worsens, foreign secretary Dominic Raab is designated to take charge. It isn’t clear who will chair a 9.15am meeting of the government’s COVID-19 committee this morning.

Leading scientist and government adviser Neil Ferguson predicts that Coronavirus will reach its peak in the UK within the next 10 days and speculation is growing about what the exit strategy might be. Ferguson stressed that reaching this peak on the predicted timeline depends on strict observation of lockdown rules, meaning no real change for some time. In Germany Martin Lohse, Professor of Pharmacology at the University of Würzburg, said that any loosening of restrictions there would depend on ramping up testing further.

The market response is starting to show. This morning saw at least three stock exchange announcements regarding coronavirus treatments and tests. Novacyt, an international specialist in clinical diagnostics based in France and the UK, announced French approval of its COVID-19 test, making it available for immediate distribution in France. Guildford-based Ergomed announced that it is providing support for a clinical development programme for an antibody therapy for the treatment of patients with rapidly worsening COVID-19, while Dutch IGEA Pharma announced the start of supply of an antibody test exclusively for New York, California and Louisiana, with FDA approved distribution to start within a very short time.

 

 

WHAT ARE COMPANIES SAYING?

 

Consumer and Retail

GVC Holdings

GVC Holdings has updated on the impact of COVID-19 on the business, namely that the closure of retail outlets and the cancellation of sports events “significantly reduced revenue from mid-March”. The company advised that, following mitigating actions, the expected drop in EBTIDA is approximately £50 million per month. The Group has also withdrawn its planned dividend due for 23 April 2020.  

WH Smith

In response to press commentary, WH Smith announced it has secured new lending facilities of £120m, which “will strengthen its balance sheet, working capital and liquidity position” in response to the impact of COVID-19. The company further advised these new financing arrangements are conditional on raising new equity. As a result, the Group is in an advanced stage of preparation for an equity issue of a maximum of 13.7% of its issued share capital by way of a placing.

Angling Direct

AIM-listed Angling Direct plc, the largest specialist fishing tackle and equipment retailer in the UK, announced a range of measures in light of COVID-19, including maximised working from home policies and the installation of necessary technology to ensure the continuing servicing to customers. Stores across the UK have closed, in line with the UK government’s advice, although the online business is showing “encouraging levels of trade in both the UK and international markets”. The company has finally taken the “difficult decision” to furlough some employees in order to preserve cash flows and boost liquidity.

 

Industrials

Rolls Royce

Rolls Royce became the latest industry giant to suspend its dividend and abandon its targets for 2020. According to the Financial Times, the company is also looking to bolster liquidity by opening new credit facilities worth £1bn. Rolls Royce provides the engines for Airbus’ A350 and A330 aircraft, alongside Boeing’s 737 Dreamliner. This is the first time the company has suspended its dividend since privatisation in 1987. Link to article.

Centamin

Centamin has committed 10 million Egyptian pounds from its Sukari Gold Mine to support Egypt’s response efforts to combat the coronavirus pandemic. The mining giant also affirmed that, as Egypt’s largest employer, it has taken several mitigating actions to protect its workforce in the region. The company further committed to provide additional logistical support to the Egyptian government, while clarifying it has no known cases of COVID-19 throughout the company.

React plc

React plc, the AIM-listed leading decontamination firm, has updated on the impact of COVID-19 on its business. The company advised the business is experiencing high demand to provide decontamination and infection control services, including the thorough deep cleaning of premises thought be harbouring COVID-19. It has therefore entered into a number of new partnerships with customers, while significantly expanding capacity “to support demand by cross training our experienced operators and through partnerships and sub-contracting with smaller specialist cleaning operators”.

Babcock International

In a trading update, Babcock reaffirmed its main focuses were ensuring the safety of its employees and continuing to serve its customers. Financially, the Group warned of a “small” impact from COVID-19 in the final quarter of 2019, particularly with “short cycle work and some training and transportation activities”. Priority is now being given to “critical programmes” across the company. The company also announced mitigation measures including postponing the annual pay increase for senior management, reducing non-essential capital expenditure and “considering” the use of government support.

MJ Gleeson

MJ Gleeson, a leading urban regeneration group, has announced a raft of mitigation measures in response to COVID-19. This includes a total of 456 employees, representing 76% of the workforce will be furloughed in-line with the Government’s Job Retention Scheme and with the Company topping-up salaries of those affected up to a minimum of 80% and a maximum of 95% of salary. All members of the Board are taking a reduction in salary/fees of 30%. Senior management are taking reductions in salary of between 5% and 20%, weighted according to salary bands. The Company will review the position at the end of May.

Biffa plc

Biffa plc, the FTSE 250 waste management company, announced a range of measures to combat the impact of COVID-19. These include the furloughing of staff under the UK government’s scheme, a 20 per cent pay cut for the Board of Directors and Group Executive Team, and a 10 per cent pay cut for Biffa’s Leadership Group, a further 85 people. The bonus payouts for the year ended 27 March 2020 will also be converted into share options, while bonus payouts for FY 2021 has been suspended until further notice.

Antofagasta

FTSE 100 miner Antofagasta advised that, as it is not possible to continue working normally as a result of the health emergency caused by the coronavirus, the company has decided to temporarily suspend the contracts with most of the companies building the INCO project of Minera Los Pelambres in Chile. The decision will be continually reviewed and will be implemented for an initial expected duration of 120 days. It “does not imply the contract is terminated”.

NQ Minerals Plc

NQ Minerals, the base and precious metals producer from its flagship Hellyer Gold Mine (“Hellyer”) in Tasmania Australia, announces “excellent production levels of base metals concentrate” were achieved for the First Quarter ending 31 March 2020. This came despite the coronavirus, mainly due to the swift actions of the Tasmanian government – “The Tasmanian Government responded quickly to the virus and was the first State in Australian to limit any travel to its island State and has implemented strict controls within the state. Confirmed COVID-19 infections in the State remain low”.

Ergomed

Ergomed plc, a company focused on providing specialised services to the pharmaceutical industry, today announces it is providing support for a clinical development programme for namilumab, a monoclonal antibody therapy targeting granulocyte-macrophage colony stimulating factor (GM-CSF), for the treatment of patients with rapidly worsening COVID-19. The programme is being conducted at the Humanitas Research Hospitals in Bergamo and Milan, Italy and is supported by Izana Bioscience, an Oxford, UK-based biopharmaceutical company focused on the development of namilumab (see announcement below).

Bodycote

Bodycote, the world’s largest provider of heat treatments and specialist thermal processing services, has announced a range of measures implemented in response to COVID-19, including additional personal protection measures, intensified hygiene, and social distancing protocols “that meet or exceed WHO, government and local guidelines”.

Novacyt

Novacyt, an international specialist in clinical diagnostics, announces that the CNR (Centre National de Référence des Virus des Infections Respiratoires (dont la grippe)) of the Institut Pasteur, an internationally renowned centre for biomedical research with a goal of improving public health in France, has approved its COVID-19 test. The Company’s CE-Mark test is available for immediate distribution into the French market.

IGEA Pharma

Netherlands-based IGEA Pharma announced to starting supply of a COVID-19 antibody test following an agreement signed with a PRC independent SARS-CoV-2 IgM/IgG test developer and manufacturer.  According to terms, IGEA has ensured the exclusivity of the test under certain volume-based conditions for the US States New York, California, and Louisiana, severely affected by the pandemic outbreak.The company expects to start FDA approved distribution within a very short time. The actual supply capacity is 100’000 tests per day, with the ability to expand if demand increases.

 

Financials & Real Estate 

Grainger

Grainger plc, the largest listed provider of private rental housing, has published its full year results and advised “Leasing activity expected to slow due to Coronavirus disruption” although “churn in existing customers is also likely to slow as people defer moves”. The company also affirmed a range of measures including employees working from home, customer support and particularly regular check-ins on older customers.

Dolphin Capital Investors

Dolphin Capital Investors, an investor in high-end residential resort developments in the eastern Mediterranean, warned of a “significant impact” across the business, which has in turn affected “the pace of our construction progress, our ability to market and sell plots and villas in our development projects and Aristo as well as undermining our potential to execute portfolio asset disposals”. The company advised it cannot quantify the disruption extent at this stage, and will monitor closely and adjust its strategy accordingly “over the coming months”.

 

TMT

Sage Group

Sage Group advised its business operations have continued with minimal disruption to date, “thanks to the ongoing dedication and commitment of our colleagues, most of whom are now working from home”.  The company also stated it has put in place a range of measures to help customers, including offering practical advice and quick access to expert support.  The company clarified the  “impact of COVID-19 remains highly uncertain, and we are closely monitoring developments in order to adapt our response accordingly”.

Access Intelligence plc

Access Intelligence, the AIM-listed software company, advised that “at present there are no discernible trends being seen for the Group” although it has had a “variable impact” on existing clients and prospects for the group. As examples, the Group has seen a slowdown in demand from brand led PR agencies while the company is closely monitoring the smaller freelance clients where the risk of default is considered to be greater.

Be Heard Group plc

Be Heard Group, the AIM-listed digital marketing services group, warned COVID-19 could have “a material and adverse impact on the demand and supply side of both national and international economies”. The company announced a range of measures including mandatory working from home and wider restrictions on freedom of movement. This is alongside cost-cutting measures including reduction of unnecessary capex and temporary reduction in senior salaries.

 

IN THE NEWS

Coronavirus: PM admitted to hospital over virus symptoms BBC News

Europe’s coronavirus numbers offer hope as US enters ‘peak of terrible pandemic’ The Guardian

US banks defend dividend payments during pandemic – Financial Times

Lockdown to cost £2.4bn a day as economy crashes – The Times

 




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