(Alliance News) - Stock prices in London are seen opening lower on Monday after a substantial stimulus package to help the US deal with the new coronavirus pandemic was blocked over the weekend.
In early company news, education publisher Pearson paused its share buyback programme in light of uncertainty caused by the coronavirus. Broadcaster ITV said it has withdrawn guidance for 2020 and halted dividend payments. Transport operators Stagecoach and Go-Ahead similarly suspended dividend payments to conserve cash.
IG futures indicate the FTSE 100 index is to open 246.23 points lower at 4,910.10. The blue-chip index closed up 4.72 points, or 0.1%, at 5,156.33 on Friday.
Pearson said it has suspended its share buyback programme in light of the ongoing uncertainty caused by the coronavirus outbreak. The company noted that GBP167 million of the GBP350 million buyback was completed before the suspension.
The company said that following the completion of its recent restructuring programme, it is operating more efficiently "than ever before".
"We have already identified actions to reduce operating expenditure and discretionary spend to partially mitigate the potential impact from Covid-19, and we are actively exploring further efficiencies. We are also exploring whether we qualify for governmental relief in key territories, as a result of the closure of schools and testing centres," Pearson said.
Pearson said uncertainty from Covid-19 has meant its Pearson VUE, US Student Assessments and Higher Education institutions in South Africa - which rely on physical sites - will take a hit. However, it is seeing a significant increase in the use of its digital products and services.
"While we are experiencing unprecedented times as a result of Covid-19, we have a diversified business with a presence in multiple geographies, a strong balance sheet with relatively low net debt, and we are taking immediate measures to contain our costs and protect our financial position. In the longer term the growing interest in digital products and online learning mean Pearson is well-placed given the investment we have made in this space," the company said.
Pearson added that trading to the end of February was in line with expectations.
ITV said recent restrictions on working practices in the UK was hurting its ability to film productions, and it has had to pause a significant number of productions in the UK and internationally as a result.
Further, the broadcaster said measures implemented by the UK government - which has led to the closure of shops, factories and entertainment facilities - has hurt advertising revenue. As such, ITV said forecasts for March and April have "deteriorated" since its last update earlier this month.
"We have seen further deferrals in advertising which are now coming from across the advertiser categories rather than just in travel, and we are staying in close contact and working constructively with our client and agency partners. The situation remains dynamic and therefore we are not in a position today to give guidance for March or April," ITV said.
As a result of the uncertainty of Covid-19, ITV has withdrawn its market guidance for 2020. Further, the board has decided not to propose the final dividend of 5.4 pence per share for 2019 at the forthcoming AGM in April, and to withdraw its previously announced intention to pay an 8p full year dividend for 2020, the company added.
ITV said savings from not paying the 2019 final dividend will ensure that more than GBP300 million of cash will be retained within the business.
Go-Ahead Group said it retains a strong balance sheet with good liquidity under its existing facilities and maintains a "positive dialogue with its lenders", as it moved to reassure investors over the coronavirus outbreak.
However, the public transport operator has decided to suspend the proposed interim dividend of 30.17p, reflecting the "current priority of prudent cash management".
Go-Ahead added that it was too early to provide earnings guidance for the current financial year.
Stagecoach Group said it has taken decisive action to reduce its cost base and capital expenditure in order to limit the effect of the revenue downturn on cash flow. The company said no new business acquisitions are currently being considered and no new non-essential capital commitments are being made.
Stagecoach said that due to the coronavirus, it was unlikely to propose any further dividends for the financial year ending May 2.
FirstGroup said it has seen substantial volume reductions in its passenger businesses in North America and the UK because of the coronavirus. The transport company said it was no longer able to provide financial guidance for the remainder of the financial year to March 31.
The global death toll from the virus has surged past 14,700, with nearly a billion people confined and non-essential businesses shut in dozens of countries and growing fears about a recession.
On Sunday, a trillion-dollar Senate proposal to rescue the US economy crashed to defeat after receiving no support from Democrats, and with five Republicans absent from the chamber because of virus-related quarantines.
Democrats said the Republican plan failed to sufficiently protect millions of US workers or shore up the critically under-equipped health care system during the coronavirus crisis. The bill proposed an estimated USD1.7 trillion or more in funding to cushion the blow for American families and thousands of shuttered or suffering businesses.
Despite intense negotiations between Republicans, Democrats and President Donald Trump's administration, the roll call was 47-47, far short of the 60 votes needed to advance.
In the US on Friday, Wall Street ended lower, with the Dow Jones Industrial Average down 4.6%, S&P 500 down 4.3% and Nasdaq Composite down 3.8%.
The Shanghai Composite ended down 2.9% on Monday, while the Hang Seng index in Hong Kong is down 4.6%.
The Japanese Nikkei 225 index closed up 2.0%. Financial markets in Japan were catching up, having been closed for a holiday on Friday.
Against the yen, the dollar was quoted at USD109.70 on Monday, down from JPY111.33 on Friday.
"This sell-off in Asia, which took its cues from the slide in the US on Friday, is likely to see huge falls in European markets when they open later this morning," CMC Markets analyst Michael Hewson said.
The pound was quoted at USD1.1704 Monday morning, lower than USD1.1745 at the London close Friday.
Over the weekend, UK Prime Minister Boris Johnson said the government is ready to impose tougher restrictions to curb the spread of the coronavirus if people do not follow the guidance on social distancing.
His warning came as the latest official figures showed the number of people across the UK who have died after testing positive for Covid-19 has risen by 48 to 281, including patients aged 18 and 102 – thought to be the youngest and oldest victims so far.
However, amid reports of crowds flocking to parks, beaches and beauty spots across the country, he said the government was ready to impose the kind of "tougher" measures adopted in other European countries if people did not behave responsibly.
The euro was quoted at USD1.0756, up from USD1.0700.
Brent oil was trading at USD26.26 a barrel Monday morning, down from USD27.31 late Friday. Gold was quoted at USD1,491.40, up from USD1,488.90.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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