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(Alliance News) - Engineering firm Smiths Group on Tuesday joined the parade of UK companies pulling dividend payments in the face of the Covid-19 health crisis.
Smiths also withdrew financial guidance due to the novel coronavirus outbreak, saying it is too early to quantify the effects this will have on the business.
What's more, the company said it was not "practicable to complete" the separation of Smiths Medical in current circumstances and has delayed the separation.
Smiths Medical makes products such as catheters, thin medical tubes which can be used in surgical procedures. It was originally set to be demerged by this coming June. However, due to the company making ventilators for the UK government, coupled with uncertainty created by Covid-19, Smiths has decided to delay the separation.
"Smiths and Smiths Medical need to focus on navigating the external challenges - including the delivery of ventilators and other critical care devices. Therefore, the board has decided to delay separation until conditions improve. The intent to separate remains unchanged," Smiths said.
For the half year to January 31, Smiths said continuing operations delivered underlying revenue growth of 3%. Reported revenue increased 8%, including the acquisition of fluid management business United Flexible.
Smiths said trading to the end of March was affected to "some extent" by early Covid-19 disruption, which is now accelerating. In the first half, only the Chinese operations of John Crane and Interconnect were disrupted. Orders that were due to ship in January slipped into the second half. All its sites in China have now reopened and are operating at close to normal levels, the company noted.
In light of the uncertainty created by the pandemic, the company said it was prudent not to propose paying an interim dividend.
Looking beyond the Covid-19 outbreak, Smiths said it is well placed to deliver consistent outperformance and is well-positioned in long term, attractive growth markets.
Smiths Group shares were up 4.5% in early trade Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 1.3% at 5,634.16
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Hang Seng: up 1.1% at 23,433.96
Nikkei 225: closed down 0.9% at 18,917.01
DJIA: closed up 690.70 points, 3.2%, at 22,327.48
S&P 500: closed up 3.4% at 2,626.65
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GBP: down at USD1.2344 (USD1.2404)
EUR: down at USD1.1.1008 (USD1.1042)
Gold: soft at USD1,614.57 per ounce (USD1,619.47)
Oil (Brent): firm at USD22.78 a barrel (USD22.09)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 BST Ireland monthly unemployment
1000 CEST Germany labour market statistics
1000 EDT US consumer confidence index
1630 EDT US API weekly statistical bulletin
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UK Prime Minister Boris Johnson will chair a meeting of his Cabinet by videolink as he continues to self-isolate in Downing Street after testing positive for coronavirus, amid growing pressure to get more protective equipment to health workers. Johnson has faced heavy criticism over shortages of personal protective equipment for frontline NHS staff as well as the slow rollout of testing – issues which are likely to be discussed by ministers on Tuesday morning. Last week, four people attended the meeting in person – including Johnson, Health Secretary Matt Hancock, Cabinet Secretary Mark Sedwill and chief medical officer Chris Whitty – while others dialled in on the Zoom app. The PM and Hancock have since tested positive for Covid-19, while Whitty is self-isolating after developing symptoms. In Tuesday's meeting, all attendees are expected to join by videolink. It comes as 1,408 people are confirmed to have died in UK hospitals after testing positive for Covid-19, as of 5pm on Sunday.
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Consumer confidence in the UK weakened at the start of March, even prior to the full impact of the Covid-19 health crisis, research firm GfK said. The firm's overall consumer confidence barometer declined by two points to negative 9 from negative 7 in February. This still was better than the score of negative 13 recorded in March 2019, which was just ahead of the first expected Brexit date. However, the survey on which the recent index is based was carried out in the first two weeks of March, before UK Prime Minister Boris Johnson imposed restrictions on movement in the country to slow the spread of the new coronavirus. "While we have a long way to drop before we match the devastating numbers seen in July 2008, when the overall index score crashed to -39 points, we are likely to suffer further deterioration now that we are in lockdown in Britain," commented Joe Staton, client strategy director at GfK.
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The UK economy flatlined on a quarterly basis in the final three months of 2019, the Office for National Statistics said. The gross domestic product second estimate showed that the UK economy had no growth at all in the fourth quarter of 2019 from the third quarter. The reading was in line with the previous estimate and consensus forecasts of 0.0% growth. On an annual basis, the UK's annual economic growth was confirmed at 1.1% in the fourth quarter of 2019, unchanged from the previous reading. The figure was in line with market expectations.
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Social distancing measures have been credited with driving down Ireland's Covid-19 infection rate. Experts on the National Public Health Emergency Team welcomed data showing the infection rate has dropped from 33% to 15% since restrictions on public life were first introduced earlier this month. But the team warned that more needed to be done to further reduce infections to enable the healthcare system to cope with the looming peak in cases. Leading epidemiologist Philip Nolan said it would be another seven to 10 days before it could be determined whether the latest clamp down on movement, imposed by the Irish government on Friday night, had helped to further cut the infection rate. Ireland's death toll rose to 54 on Monday, following the report of eight more deaths. A total of 295 new confirmed cases of Covid-19 were reported in the Republic, the highest daily total so far, bringing the overall number to 2,910.
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New York's governor has issued an urgent appeal for medical volunteers amid a "staggering" number of deaths from the coronavirus. "Please come help us in New York now," Governor Andrew Cuomo said as the state's death toll climbed by more than 250 in a single day to a total of more than 1,200 victims, most of them in the city. He said an additional 1 million health care workers are needed to tackle the crisis. The spike in deaths in New York was another sign of the long fight ahead against the global pandemic, which was filling Spain's intensive care beds to capacity and shutting millions of Americans inside. The US has reported more than 160,000 infections and over 2,900 deaths, with New York City the nation's worst hot spot.
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BROKER RATING CHANGES
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JPMORGAN RAISES BERKELEY GROUP TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 4520(5370) PENCE
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JPMORGAN CUTS TAYLOR WIMPEY TO 'NEUTRAL' ('OVERWEIGHT') - TARGET 110 (250) PENCE
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JEFFERIES RAISES TATE & LYLE TO 'BUY' (HOLD) - PRICE TARGET 720 (770) PENCE
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BERENBERG RAISES MONEYSUPERMARKET.COM TO 'HOLD' ('SELL') - TARGET 310 PENCE
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COMPANIES - FTSE 100
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Water works Severn Trent said there has been no material change to current year business performance since the trading update in January. Its financial year ends on March 31. The utility said it has a robust financial liquidity position extending out to early 2022 to manage through current uncertainty and remains on track to deliver at least GBP25 million of net customer outcome delivery incentive outperformance payments for financial 2020, as previously guided. "There has been no material change to current year business performance since the trading update announced on January 28, and we continue to expect the group will deliver full-year trading performance in-line with previous guidance," Severn Trent said.
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British American Tobacco priced a series of notes as part of the Dunhill cigarette maker's USD2.40 billion debt offering. The company will issue USD900.0 million notes carrying an interest rate of 4.700% and due in 2027, USD1.00 billion notes at 4.906% due 2030, and USD500.0 million notes with a 5.282% rate due 2050. "BAT intends to use the net proceeds of the offering of the notes for general corporate purposes, including the potential repayment of upcoming maturities," it said.
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Tuesday's Shareholder Meetings
Cloudco Group
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By Tom Waite; thomaslwaite@alliancenews.com
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