(Alliance News) - International Consolidated Airlines said Thursday it plans to raise EUR2.74 billion to strengthen its balance sheet.
The British Airways parent will issue 2.98 billion shares at a subscription price of EUR0.92, representing a 36% discount to the theoretical ex-rights price based on Wednesday's closing price.
IAG's biggest shareholder, Qatar Airways, will subscribe for its pro-rata entitlement.
The funds will be used to strengthen IAG's balance sheet by reducing leverage and boosting liquidity.
"IAG believes the capital increase, together with its quick response to the crisis, should enable the group to emerge from the current pandemic in a strong position, with more resilience, greater flexibility and the ability to make the right operational and strategic decisions for the long term benefit of all its stakeholders," the company said.
Turning to trading, IAG said it saw a "significant increase" in bookings in June, to around 30% of prior year levels by the end of the month. Since July, however, IAG has experienced an "overall levelling off" of bookings.
"Short-haul bookings have fallen slightly following the re-implementation of quarantine requirements by the UK and other European governments for travellers returning from specific countries including Spain," IAG noted.
As a result, available seat kilometres are expected to decline 63% in 2020, from a forecast of minus 59% originally. Third-quarter capacity is expected to fall 78% and fourth quarter capacity by 60%.
"Despite a lower capacity in 4Q 2020 than under the previous planning scenario, the group continues to expect that it would reach breakeven in terms of net cash flows from operating activities during 4Q 2020. This is as a result of mitigating actions taken to reduce operating expenses further and enhance working capital," said IAG.
IAG shares were down 0.5% early Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 6,007.23
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Hang Seng: marginally higher at 24,470.47
Nikkei 225: closed up 0.9% at 23,235.47
DJIA: closed up 439.58 points, 1.6%, at 27,940.47
S&P 500: closed up 67.12 points, 2.0%, at 3,398.96
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GBP: up at USD1.3025 (USD1.2999)
EUR: up at USD1.1831 (USD1.1812)
Gold: soft at USD1,944.23 per ounce (USD1,945.72)
Oil (Brent): up at USD40.90 a barrel (USD40.32)
(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 BST Ireland consumer price index
1000 CEST EU long-term interest rates statistics
1345 CEST EU European Central Bank interest rate decision
1430 CEST EU press conference with ECB President Christine Lagarde
0830 EDT US producer price index
0830 EDT US initial jobless claims
1000 EDT US monthly wholesale Trade
1030 EDT US EIA weekly natural gas storage report
1100 EDT US EIA weekly petroleum status report
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House prices in the UK accelerated at the sharpest rate in four years in August, surveyors reported. An overall net balance of 44% of property professionals reported house prices increasing rather than falling, the Royal Institution of Chartered Surveyors said. It was the strongest reading since 2016, and marks a "dramatic turnaround" compared with May, when a net balance of a third of professionals saw prices falling rather than rising, the report said. Virtually all parts of the UK are seeing prices increase, Rics said, with the exception of London, where prices have remained generally flat over the past two months. Rics said a net balance of 63% of professionals reported an increase in buyer interest in August, and a balance of 46% noted an increase in sellers bringing properties to market. This translated into sales growth, with a balance of 61% of surveyors seeing a pick-up.
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Ambitious mass testing plans in the UK that could keep hopes of Christmas parties alive would cost as much as GBP100 billion. Leaked documents seen by medical journal BMJ suggest that the "Operation Moonshot" project – which would see millions of UK-wide tests carried out daily – could have a price tag close to that of the entire GBP114 billion budget given to NHS England in 2018-19. UK Prime Minister Boris Johnson believes the scheme could help sport and entertainment venues reopen fully and allow people to socially mix in large groups again with on-the-day tests.
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BROKER RATING CHANGES
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CITIGROUP RAISES RIO TINTO TO 'BUY' (NEUTRAL) - PRICE TARGET 5300 (4600) PENCE
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CITIGROUP INITIATES LEARNING TECHNOLOGIES WITH 'NEUTRAL' - TARGET 160 PENCE
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COMPANIES - FTSE 100
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WM Morrison Supermarkets posted a fall in interim profit as it incurred costs related to Covid-19, though it expects to see this offset by business rates savings in the second half. For the half-year to August 2, revenue was down 1.1% to GBP8.73 billion, hit by "very low demand" for fuel during and after lockdown, though which is now recovering. Excluding fuel, revenue was up 8.8% to GBP7.55 billion. Like-for-like sales - excluding VAT and fuel - in the half-year were up 8.7%, and rose 12% in the second quarter alone. Pretax profit fell to GBP145 million from GBP202 million a year ago, as the grocer noted a net Covid-19 cost of GBP62 million in the half. "In May we estimated that the costs relating directly to Covid-19 during 2020/21 would be broadly offset by the in-year business rates cost saving. This remains our expectation: we anticipate that the GBP62 million first-half net cost will be offset by a similar second-half net benefit, with extra Covid-19 specific costs at around half the level of the first half and a full six months of rates relief of about GBP137 million," WM Morrison said. The supermarket chain added that it is confident of continued strong momentum into the second half. WM Morrison declared an interim dividend of 2.04p, up 5.7% on a year ago, but kept a decision on the second half 2019-20 special dividend deferred.
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British Land Co said Chris Grigg intends to depart after more than 11 years as chief executive. He will step down as CEO after the company's interim results in November, and leave the board and the company at the end of 2020. He will be succeeded by Chief Financial Officer Simon Carter. Carter has been CFO since May 2018.
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COMPANIES - FTSE 250
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Mobile phone and electronics retailer Dixons Carphone hailed an "outstanding" online performance as it said it is exploring listing a minority stake in its Nordics business. UK & Ireland Electrics like-for-like revenue was up 12% in the 17 weeks to August 29. Online sales more than tripled year-on-year while stores were closed, Dixons said, and have continued "at more than double" last year's sales since stores reopened. UK & Ireland Mobile total revenue was down 56%, while like-for-like sales in its International operations were up 16%. The Nordics business - part of the retailer's International operations - has performed "strongly" over the last decade, Dixons said. "Against the backdrop of strong performance and liquidity across the group, the board is considering the best way to deliver value for all stakeholders from our Nordics business. As a result, the board has decided to explore the option of a partial IPO in 2021. A minority listing could further strengthen the capital structure whilst retaining the full benefits of Nordics staying firmly as part of the Dixons Carphone group," the firm said. The retailer added that, despite strong current trading, the economic outlook for this year remains uncertain and it expects to provide an update on guidance at its interim results.
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Homewares retailer Dunelm reported a 13% decline in annual pretax profit to GBP109.1 million from GBP125.9 million a year before, as total sales slipped 3.9% to GBP1.06 billion from GBP1.10 billion. However, gross margin improved to 50.3% in the 52 weeks to June 27, and recent trading has benefited from pent-up demand and the company's Summer Sale. Total sales were up 59% in July and 24% in August.
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COMPANIES - MAIN MARKET AND AIM
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Over-50s travel and insurance firm Saga confirmed its plans for a GBP150 million equity raise, supported by a GBP100 million investment by former chief executive & chair Roger De Haan. The first part of his investment, for a 20% stake and raising GBP60.6 million, will be at 27 pence, a 98% premium to Saga's price on August 28 before the plans were first revealed. The stock closed Wednesday at 16.03p and was down 0.7% at 15.91p early Thursday. De Haan will join the board as non-executive chair.
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The UK Competition & Markets Authority said it sees "reasonable grounds" to approve Breedon Group's purchase the UK businesses of Mexico's Cemex. Breedon said it had offered to sell "a small number" of ready-mixed concrete plants and an asphalt plant in England, plus two quarries and a cement terminal in Scotland.
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Thursday's Shareholder Meetings
Dixons Carphone
Montanaro European Smaller Cos Trust
NB Private Equity Partners
Atlantis Japan Growth Fund
ReNeuron Group
Tertiary Minerals - GM re buyback of deferred shares
Beowulf Mining
British Smaller Companies VCT
U & I Group
Fuller Smith & Turner
Victoria
Speedy Hire
N Brown Group
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
International Airlines (IAG)
Saga (SAGA)
Rio Tinto (RIO)
Dunelm (DNLM)
Breedon (BREE)