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(Alliance News) - In normal times, the decision by a FTSE 100 property investor to pay its final dividend would be unremarkable.
These are not normal times.
As more blue-chip peers pulled their payouts on Thursday - following the decision by all UK banks to do so - SEGRO said it has decided it is appropriate to proceed with the payment of a 14.4p final dividend in May.
The property investor said it is "very well capitalised" with a strong balance sheet, high liquidity, and "significant" headroom to its financial covenants. SEGRO had cash and undrawn facilities of GBP1.2 billion at the end of March.
Rental income would have to fall by 80% or asset values by 64% before any debt covenants are breached, the firm highlighted.
Trading in the early part of 2020, prior to the Covid-19 crisis ramping up, was "encouraging". SEGRO said it is working, on a case by case basis, with customers representing around a quarter of total headline rent regarding relief, primarily by delaying rental payments.
For the most recent quarterly payment date, being March 25, 71% of rent due has been paid, and around 25% is subject to discussions over rescheduling payments. At the same stage last year, 96% of rent had been paid, Segro said.
Jefferies raised Segro shares to Buy from Hold.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 6.93 points, 0.1%, at 5,461.50
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Hang Seng: up 0.5% at 23,201.20
Nikkei 225: closed down 1.4% at 17,818.72
DJIA: closed down 973.65 points, 4.4%, at 20,943.51
S&P 500: closed down 4.4% at 2,470.50
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GBP: up at USD1.2416 (USD1.2395)
EUR: up at USD1.0949 (USD1.0927)
Gold: soft at USD1,589.32 per ounce (USD1,590.30)
Oil (Brent): up at USD27.64 a barrel (USD25.38)
(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
1100 CEST EU producer price index
0730 EDT US Challenger job-cut report
0830 EDT US initial jobless claims
0830 EDT US international trade in goods & services
1000 EDT US manufacturers' shipments, inventories & orders
1030 EDT US EIA weekly natural gas storage report
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The UK government is coming under increasing pressure over Covid-19 testing as the country experienced its biggest day-on-day rise in deaths so far. Some 2,352 patients had died in hospital after testing positive for the virus as of 5pm on Tuesday, the Department of Health said, up by 563 from 1,789 the day before. UK Prime Minister Boris Johnson said in a video posted on Twitter that it was a "sad, sad day" and that his "thoughts go out to the families of the victims". It comes as Downing Street said more than 2,000 NHS staff have been tested for coronavirus as the government faces intense scrutiny over its policy on testing.
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UK house price growth accelerated in March prior to the government's Covid-19 lockdown, data from Nationwide showed, but activity has stalled since then. Annually, house prices were up 3.0% in March, accelerating from a 2.3% rise in February. Month-on-month, prices were up 0.8%, again an uptick from the previous month which saw a rise of 0.3%. Robert Gardner, Nationwide's chief economist, noted that March's annual growth rate was the fastest since January 2018, when prices rose 3.2%. "It is important to note that, while we use a full month's worth of data to generate the index, the cut-off point is slightly before the end of the month. This means that developments following the UK government's lockdown will not be reflected in these figures," he said.
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Most UK firms only have up to three months' cash in reserve as they deal with a huge fall in domestic and overseas revenue, a new study suggests. Research by the British Chambers of Commerce indicated that almost one in five firms have less than a month's worth of cash. A survey of 600 businesses in the UK found that almost half expect to take advantage of the government's coronavirus job retention scheme, which covers 80% of the wages of furloughed workers, to a maximum of GBP2,500 per month. A third of those polled said they were planning to furlough between three-quarters or all their staff in the next week, while one in four said they would not use the scheme. Almost a fifth of those surveyed said they had closed their business temporarily.
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US President Donald Trump said he is weighing grounding domestic flights between coronavirus hot spots as he ramps up efforts to try to contain the pandemic's spread in the US. "We're thinking about doing that," Trump told reporters at a White House briefing. His comments came a day after he warned the nation to brace for a "hell of a bad two weeks", with 100,000 to 240,000 coronavirus deaths projected, even if current social distancing guidelines are maintained. Limited flights continue to run between cities such as New York and Detroit, though passenger counts have plummeted across the nation.
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BROKER RATING CHANGES
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DZ BANK CUTS BP TO 'SELL' (HOLD) - FAIR VALUE 300 (350) PENCE
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JEFFERIES RAISES LAND SECURITIES TO 'BUY' ('UNDERPERFORM') - TARGET 640 (800) PENCE
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JEFFERIES RAISES DS SMITH TO 'BUY' ('HOLD') - TARGET 325 (370) PENCE
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JEFFERIES RAISES SEGRO TO 'BUY' ('HOLD') - TARGET 878 (978) PENCE
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JPMORGAN RAISES HIKMA PHARMA TO 'OVERWEIGHT' ('UNDERWEIGHT') TARGET 2400(1850)P
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COMPANIES - FTSE 100
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Centrica cancelled its proposed final payout for 2019 and paused the divestment of Spirit Energy until markets "have settled". In the customer-facing businesses, the British Gas owner said it is starting to see increased energy demand from residential customers as more people work from home, but a "more significant reduction" in demand from business customers as sites temporarily close. "We also expect to see an increase in working capital outflows and customer bad debt, as certain customer segments defer payments due to the reduction of household incomes and business revenues," said Centrica. A slump in oil prices is set to hit Exploration & Production's adjusted operating cash flow in 2020 by around GBP100 million. In response, Centrica has taken actions to reduce cash capital expenditure. As at the end of March, the company had GBP600 million of available cash and cash equivalents and GBP2.7 billion of credit facilities. There are no material covenants on any existing debt, Centrica added.
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Distribution firm Bunzl said its "resilient" business delivered a good performance in the first quarter of 2020, but it has withdrawn guidance due to Covid-19. Revenue was up 4.5% at actual exchange rates, and when adjusted for trading days and at constant rates, revenue was up 6%. Of this, acquisitions contributed 3% and underlying revenue growth 3%. Given uncertainty around Covid-19, the firm withdrew its guidance for 2020. Bunzl said it has a strong balance sheet and has paused all acquisition activity. It will no longer propose a final dividend for 2019 at its annual general meeting later in the month.
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British Airways is reportedly set to suspend some 36,000 staff members as a result of the coronavirus outbreak's effect on the travel industry. The BBC reports the airline, part of International Consolidated Airlines Group, has been in consultation with the industry's chief union, Unite, on the furlough plan for more than a week. The reported move comes after BA suspended its operations at Gatwick on Tuesday, and with London City Airport closed to commercial and private flights. BA's expected decision would mean up to 80% of BA cabin crew, ground staff, engineers and head office personnel would have their jobs suspended, although no staff are expected to be made redundant.
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COMPANIES - FTSE 250
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Recruitment firm Hays said Covid-19 has caused a "very material deceleration in client activity", and it is now seeking to raise GBP200 million. Trading between the start of 2020 and mid-March was in line with forecasts, the firm said, with like-for-like net fees down 5% year-on-year. "However, since then the rapidly escalating impact of Covid-19 has driven a very material deceleration in client and candidate activity. To date, across our major markets, the impact has been felt most in Europe, and least in Australia," said Hays. While unable to estimate the extent of the impact on earnings this financial year, it is likely to be "substantial" and operating profit for the financial year ending June is expected to be "materially" below consensus of GBP190 million. Hays has decided to cancel its 1.11p interim dividend, due to be paid next week, and will look to return to paying dividends at an appropriate time. It has also decided to raise around GBP200 million in a share placing and subscription.
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COMPANIES - INTERNATIONAL
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SoftBank Group said its tender offer for up to USD3 billion worth of shares in office-space provider The We Co has ended because some conditions to the tender offer were not satisfied. The Tokyo-headquartered telecommunications firm and tech investor said the termination of the tender offer will have no impact on the operations, customers, or five-year business and strategic plan of the company, which trades as WeWork. "SoftBank remains fully committed to the success of WeWork and has taken significant steps to strengthen the company since October, including newly committed capital, the development of a new strategic plan for WeWork and the hiring of a new, world-class management team," said Rob Townsend, senior vice president & chief legal officer of SoftBank. WeWork has suffered a dramatic reversal in fortunes since its USD47 billion valuation at the start of 2019. Late last year, WeWork cancelled its planned initial public offering in New York and pushed out co-founder Adam Neumann, albeit with a reported severance package of more than USD1.5 billion. The debacle raised questions about SoftBank's past investment decisions.
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Thursday's Shareholder Meetings
redT Energy (re merger)
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By Tom Waite; thomaslwaite@alliancenews.com
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