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(Alliance News) - Aviation and energy firm Stobart Group said Thursday it will write down its investment in Flybe after the regional airline's collapse.
The airline announced in the early hours of Thursday it had ceased trading with immediate effect and that administrators had been appointed. Crisis talks were held throughout Wednesday to try to secure a rescue package, but no deal was agreed.
Flybe was bought by a consortium called Connect Airways, made up of Virgin Atlantic, Stobart Group Ltd and Cyrus Capital, in February 2019, after running into earlier financial problems.
"Stobart Group's initial investment was made up through the sale of Stobart Air and its aircraft leasing business, Propius. As a result, the non-cash balance sheet impact on Stobart Group is GBP43.3 million and the additional GBP7m investment made in 2020. The value of both these investments will now be written down to nil on its balance sheet," said Stobart.
Stobart added that Flybe had shown "promising signs of a turnaround", but the impact of Covid-19 on Flybe's trading means the consortium "can no longer commit to continued financial support".
"As a result of this news, London Southend Airport will see a short-term impact, with Flybe having planned to operate ten routes from the airport from Spring of this year. However, the long-term prospects of that airport remain compelling," said Stobart, which operates it.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 6,833.94
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Hang Seng: up 2.1% at 26,772.54
Nikkei 225: closed up 1.1% at 21,329.12
DJIA: closed down 1,173.45 points, 4.5%, at 27,090.86
S&P 500: closed down 4.2% at 3,130.12
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GBP: up at USD1.2873 (USD1.2812)
EUR: soft at USD1.1126 (USD1.1141)
Gold: down at USD1,638.03 per ounce (USD1,643.40)
Oil (Brent): down at USD51.54 a barrel (USD52.17)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
OPEC meeting starts in Vienna.
0900 GMT UK SMMT registration figures
1100 GMT Ireland industrial production and turnover
0730 EST US challenger job-cut report
0830 EST US revised productivity & costs
0830 EST US initial jobless claims
1030 EST US EIA weekly natural gas storage report
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California declared a state of emergency over the novel coronavirus Wednesday as a cruise ship was held off the coast over fears of a new outbreak. The measures came as the death toll in the US hit 11, including the first fatality in California, and lawmakers in Congress agreed to provide more than USD8 billion to fight the rapidly spreading disease. California Governor Gavin Newsom announced the emergency measures as he reported the death of an elderly person who had taken a cruise to Mexico. "The State of California is deploying every level of government to help identify cases and slow the spread of this coronavirus," Newsom told reporters. The emergency proclamation would help the state prepare "in the event it spreads more broadly," he said. Thousands travelling aboard the Grand Princess – the same cruise ship on which California's first victim was thought to have contracted the virus – were held offshore Wednesday night. The ship cut short its current voyage back from Hawaii after passengers and crew members developed symptoms. But its planned return to San Francisco was held up in order to carry out testing on board for those potentially infected.
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BROKER RATING CHANGES
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JPMORGAN RAISES BHP GROUP TO 'NEUTRAL' ('UNDERWEIGHT') - TARGET 1900 (1890) PENCE
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GOLDMAN CUTS MEGGITT TO 'NEUTRAL' ('BUY') - TARGET 654 (682) PENCE
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BERNSTEIN RAISES BAT TO 'OUTPERFORM' (MARKET-PERFORM) - PRICE TARGET 3900 (3800) PENCE
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COMPANIES - FTSE 100
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Insurer Aviva said it has made good progress, though underwriting profitability has declined as expected. The 2019 results are Maurice Tulloch's first as chief executive. Tulloch, formerly the head of Aviva's International Insurance unit, was promoted a year ago, around the same time as 2018 results. Aviva posted a statutory pretax profit of GBP3.93 billion for 2019, more than double the GBP1.65 billion reported a year prior. This was helped by a GBP40.58 billion investment income, after a GBP10.91 billion loss in 2018. Taking into account a change to accounting standards, Aviva's pretax profit rose 58% to GBP3.37 billion. Operating profit for the year was 6% higher at a record GBP3.18 billion, Aviva reported, beating market consensus of a figure of GBP3.10 billion. Aviva's return on equity improved to 14.3% from 12.%, while the Solvency II cover ratio was 206% from 204%. Aviva is paying a final dividend of 21.40 pence per share. This takes the 2019 total to 30.90p, 3% higher than the year before.
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ITV said its results for 2019 were ahead of expectations, with total advertising revenue falling by less than anticipated. Total external revenue was up 3% to GBP3.31 billion while total advertising revenue was down 1.5%, having been guided to fall 2%. Pretax profit for the year fell to GBP530 million from GBP567 million, though, as operating costs increased to GBP2.77 billion from GBP2.61 billion. Looking ahead, ITV expects advertising revenue to be up 2% in the first quarter of 2020, though early indications suggest it will be down 10% in April. The broadcaster noted that it has seen travel advertising deferments relating to the coronavirus outbreak. Britbox UK is on plan, ITV said, following the launch of the video streaming service in November. "Early results show a good performance in line with our business plan, with brand awareness high following a successful advertising and brand launch. We are seeing strong subscriber appeal with the majority of customers converting to become paying subscribers after the free trial period," said ITV. ITV said its BritBox UK venture made a loss of GBP21 million in 2019 and it expects this to widen to be around GBP55 million to GBP60 million in 2020, "broadly equivalent to the net investment we previously guided to".
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Industrial turnaround specialists Melrose Industries said its 2019 results were "comfortably ahead" of expectations. Revenue for the year jumped to GBP10.98 billion from GBP8.15 billion in 2018, while it swung to a pretax profit of GBP106 million from a GBP542 million loss. GKN Aerospace sales grew by 7% in 2019, and the division's adjusted operating margin rose to 10.6%, up from 9.9% in 2018. GKN Automotive sales fell by 6% with a margin of 7.7% versus 6.8% in 2019. Melrose said it has appointed advisers to explore "strategic options" for the Nortek Air Management business. Melrose lifted its full-year dividend by 11% to 5.1 pence.
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Kingfisher, TUI and NMC Health will be leaving the FTSE 100 on March 23, following the quarterly review by FTSE Russell. They will be replaced by Intermediate Capital Group, Pennon Group, and Fresnillo.
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COMPANIES - FTSE 250
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Exhibitions and conferences firm Hyve said it expects a hit from the coronavirus outbreak. It expects a hit between GBP17 million to GBP19 million on revenue in the current financial year, translating to a GBP16 million to GBP18 million dent in profit. This comes as it has had to postpone events, particularly in Asia, also noting that US companies are discouraging business travel, including conference attendance. Hyve added that it has already booked GBP200 million in revenue for the current financial year, and it continues to be "highly cash generative".
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Gamesys Group, Biffa, Chemring, Petropavlovsk, Impax Environmental Markets, Forterra, Hipgnosis Songs Fund and XP Power join the FTSE 250 on March 23, while Hunting, NewRiver REIT, Restaurant Group, Tullow Oil, 888 Holdings, SIG, Finablr and Galliford Try depart.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Metro Bank's interim chief risk officer, Grahame McGirr, has quit the company days before he was set to formally take up the role, Sky News reported. McGirr, Sky News said, had been lined up to replace Aileen Gillian on an interim basis from March 1. However, he departed last week. Sky News said the circumstances surrounding McGirr's departure were unclear, though said Metro Bank had said he was "asked to leave" after working at Metro Bank for just two weeks.
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COMPANIES - INTERNATIONAL
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Large US banks have begun testing crisis measures in case of a broader coronavirus outbreak that prevents staff from going to work, banking sources told AFP. JPMorgan Chase, Morgan Stanley, Goldman Sachs and Citigroup have asked hundreds of workers to work from home as part of emergency preparedness. "We are asking some employees to work from home over the next two weeks just so we can test systems and remote access," said one person familiar with the process, characterizing the step as "typical contingency stuff". JPMorgan has undertaken tests at a disaster recovery site in London and two in the US, in Brooklyn and the state of New Jersey, a source told AFP. Citigroup has undertaken a similar process in London and New Jersey, while Goldman Sachs has done tests at a site in London.
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Thursday's Shareholder Meetings
Shoe Zone
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
