(Alliance News) - Supermarket chain Tesco has decided to go ahead with its dividend payments, as sales were boosted by coronavirus stockpiling, but other UK companies Wednesday pulled theirs.
UK insurers followed banks in acceding to the UK Prudential Regulation Authority's request to not pay dividends during the current health crisis. These included Aviva, Direct Line Insurance and Hiscox.
Also halting dividends Wednesday were packaging company DS Smith and soft-drinks maker AG Barr.
Tesco was down 5.0% in early trading. DS Smith was up 1.2% but AG Barr down 2.3%. Aviva was down 8.4%, Direct Line down 5.5% and Hiscox down 2.5%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 1.0% at 5,648.13
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Hang Seng: down 1.2% at 23,957.53
Nikkei 225: closed up 2.1% at 19,353.24
DJIA: closed down 26.13 points, 0.1%, at 22,653.86
S&P 500: closed down 0.2% at 2,659.41
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GBP: down at USD1.2296 (USD1.2325)
EUR: down at USD1.0847(USD1.0890)
Gold: down at USD1,647.10 per ounce (USD1,655.70)
Oil (Brent): down at USD32.35 a barrel (USD33.02)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
1000 CEST Germany Ifo economic forecast
1100 CEST EU quarterly balance of payments
1030 EDT US EIA weekly petroleum status report
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Questions remain over the UK's coronavirus strategy in the absence of Boris Johnson, as the prime minister was spending a second night in intensive care. Johnson's condition on Tuesday night remained "stable" as he stayed in St Thomas's for "close monitoring", according to Downing Street. While he was said to be still in "good spirits", concerns were raised over when the lockdown measures will be reviewed – and England's chief medical officer admitted the UK has "a lot to learn" from Germany's expansive testing scheme. But there was cautious optimism from chief scientific adviser Patrick Vallance after he said the fight against Covid-19 "could be moving in the right direction". The latest official figures from the Department of Health showed that 6,159 patients have died in hospital after testing positive for coronavirus in the UK as of 5pm on Monday – an increase of 786 on the previous day.
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Johnson's plan to review whether the coronavirus lockdown measures could be eased on Monday has been shelved. Announcing the drastic restrictions to tackle the Covid-19 outbreak, the prime minister committed to inspect the evidence to see if the measures could be eased in three weeks. But Foreign Secretary Dominic Raab announced the abandoning of that at the daily press conference on Tuesday as he deputises for Johnson, who is in intensive care with the virus. Downing Street confirmed that the review would not go ahead on the scheduled date and said it would instead take place after the three-week mark.
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BROKER RATING CHANGES
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MORGAN STANLEY RAISES BRITISH AMERICAN TOBACCO TO 'OVERWEIGHT' ('EQUAL-WEIGHT')
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EXANE BNP RAISES PENNON GROUP TO 'NEUTRAL' ('UNDERPERFORM') - TARGET 1080 (750) PENCE
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CREDIT SUISSE CUTS STANDARD LIFE ABERDEEN TO 'UNDERPERFORM' (NEUTRAL) - TARGET 200 (335) PENCE
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COMPANIES - FTSE 100
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Grocer Tesco boosted its dividend despite a fall in full-year profit, and said sales volumes have eased back to more normal levels following coronavirus-fuelled panic buying. For the financial year to February 29, revenue rose 1.3% to GBP64.8 billion, but pretax profit slumped 19% to GBP1.32 billion. Cost of sales rose 1.6% to GBP60.18 billion from GBP59.22 billion, outstripping the rate of revenue growth, while finance costs rose 14% to GBP1.24 billion from GBP1.09 billion. Like-for-like sales were down 0.6% for the year, dragged down by its central Europe operations, down 6.4%, while Asia operations suffered a 1.9% decline. In the UK & Ireland, though, like-for-like sales were up 0.2%. The supermarket chain said it will pay a final dividend of 6.50p, reflecting the strength of the year's performance and its "robust liquidity and balance sheet". This brought the fall-year payout to 9.15p, up 59% on last year's 5.77p. On the sale of its Thai and Malaysian operations, Tesco still plans to return GBP5 billion to shareholders via a special dividend and make a GBP2.5 billion one-off pension contribution to eliminate the funding deficit. Completion of the sale is expected in the second half of 2020. In the first few weeks of the coronavirus crisis, Tesco said "significant" panic buying - representing a 30% uplift in the UK - "cleared the supply chain of certain items". This has now stabilised and more normal sales volumes are being experienced.
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Aviva said it no longer recommends the payment of a final dividend for 2019 due to the "unprecedented challenges" presented by Covid-19. The insurer stressed that it remains well capitalised with strong liquidity, and will reconsider any payouts in the fourth quarter of 2020. "It remains too early to quantify the impact of Covid-19 on claims expenses in our life and general insurance businesses, and the potential effect of capital markets and economic trends on our results. Given the change in the economic outlook, we are reviewing all material discretionary and project expenditure. We intend to provide an operational update for investors in the second half of May," said Aviva.
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DS Smith said trading since has remain "resilient" with a "relatively limited" impact from Covid-19, though it has decided to pull its interim payout. In terms of demand, corrugated box volumes have continued to be good and the packaging firm said it has seen improvement on the first half on a like-for-like basis. The firm did, though, say it would be "prudent" to drop its interim dividend due to be paid at the start of May. "The board recognises the high degree of importance of dividends to shareholders and, as such, it will consider the appropriateness, quantum and timing of overall dividend payment relating to the financial year ending 30 April 2020 at the time of announcement of the results in July," said DS Smith.
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J Sainsbury has lifted buying restrictions on "thousands of products" to help customers shop for people in the vulnerable group who are unable to leave the house. Supermarkets began to ration popular items as they battled to keep shelves stocked following panic buying in response to the coronavirus pandemic. In a letter to customers, due to be delivered on Wednesday, Sainsbury's Chief Executive Mike Coupe has announced he is lifting some restrictions after shoppers told him that product limits were a barrier to buying items for others. Restrictions will remain in place for items such as pasta and long-life milk, which have been limited to two per customer.
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easyJet's founder has threatened to personally sue executives at the firm if it spends "a penny" on a GBP4.5 billion order with plane manufacturer Airbus and fails to repay its GBP600 million government loan on time. Stelios Haji-Ioannou renewed his demands on Wednesday for the company to remove Chief Finance Officer Andrew Findlay to "stop him from signing any more billion-pound cheques to Airbus every year". Stelios – who holds the biggest stake in the carrier – issued a second call for a meeting of the company's shareholders to vote on removing Findlay and another director, Andreas Bierwirth.
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COMPANIES - OTHER MAIN MARKET AND AIM
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ASOS said it has raised GBP247 million via a placing of 15.8 million shares at a price of 1,560 pence each. This was a slight premium to Tuesday's closing price of 1,559.50p. The placing shares represent just under 19% of ASOS's existing issued share capital. ASOS said it consulted with its major shareholders prior to the placing and approximately 95% of the shares were allocated to existing shareholders. The clothing retailer announced plans for the placing late Tuesday, as it also said profit for the first half of its financial year increased sevenfold on a double digit rise in retail sales globally.
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Safestyle UK late Tuesday launched a placing to raise GBP8.5 million in order to strengthen its balance sheet and provide a cash buffer to support the business during the Covid-19 pandemic. The PVC replacement window retailer and manufacturer said the 50.0 million share placing was priced at 17 pence per share and that the placing would take place via an accelerated bookbuild, which launched immediately after its Tuesday announcement with results set for release on Wednesday. Zues Capital Ltd and Liberum Ltd acted at joint bookrunners for the placing, with placing shares to represent around 38% of Safetyle's enlarged share capital.
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COMPANIES - INTERNATIONAL
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Twitter Co-Founder Jack Dorsey said Tuesday he was committing USD1 billion of his personal fortune to coronavirus relief through his philanthropic fund. Dorsey said in a series of tweets he would transfer his equity in his digital payments group Square to his limited liability corporation Start Small, contributing around 28% of his overall wealth.
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Wednesday's Shareholder Meetings
Rio Tinto
Athelney Trust
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
Tesco (TSCO)
Aviva (AV.)
Smith (DS) (SMDS)
Direct Line (DLG)
British American Tobacco (BATS)
Pennon (PNN)
Barr (A.G.) (BAG)
Hiscox (HSX)