LONDON MARKET PRE-OPEN: Ashtead Expects Profit Hit From Coronavirus

(Alliance News) - Stock prices in London are seen opening sharply higher on Monday, fuelled by gains in Asian equity markets, as governments worldwide outside the UK begin to ease lockdown measures.

In early company news, equipment rentals firm Ashtead Group warned of a fall in underlying annual profit due to the novel coronavirus outbreak. Hotel operator InterContinental Hotels Group said it has secured new financing arrangements to bolster its liquidity. Redrow became the latest housebuilder to announce plans to reopen building sites.

IG futures indicate the FTSE 100 index is to open 93.17 points higher at 5,845.40. The blue-chip index closed down 74.38 points, or 1.3%, at 5,752.23 on Friday.

Ashtead Group said the lockdowns imposed by governments to stop the spread of Covid-19 has put pressure on its end-markets.

The company, which generates a bulk of its revenue in the US, said rental-only revenue for Sunbelt US in March was 2% higher than the prior year, but it expects April US rental-only revenue to be 15% lower than April 2019.

Ashtead that said since April 10, it has seen the level of US fleet on rent stabilise and show a modest improvement. This positive trend follows a period of consistent decline over the previous four weeks. This recent trend in fleet on rent is similar in its UK and Canadian businesses, the company added.

As such, Ashtead expects underlying profit for financial 2020, ending on Thursday, to be around GBP1.05 billion. In financial 2019, underlying profit was GBP1.11 billion.

Ashtead said that it remains in a strong financial position with long-term committed debt facilities. In response to the coronavirus crisis, the company has modelled a variety of downside scenarios over the coming year. Under such scenarios, Ashtead said it remains free cash flow positive throughout the next financial year.

The company has paused its share buyback in a bid to preserve cash.

"Looking forward, I am certain the swift actions we took during these unprecedented times and the strength of our balance sheet will serve the group well. These factors, when combined with the diversity of our products and end markets, contribute to the strength of our long-term business model and put the board in a position of confidence to look to the coming financial year as one of strong cash generation and strengthening our market position," said Chief Executive Brendan Horgan.

InterContinental Hotels Group said it expects to report that revenue per available room fell 25% in the first-quarter due to travel restrictions and lockdowns in response to the coronavirus pandemic. RevPAR is a key metric used in the hotel industry.

IHG said trading in Greater China continues to steadily improve, with only 12 out of 470 hotels now closed. In the US, 10% of hotels are currently closed, demonstrating "the resilience of our mainstream, franchised business". In Europe Middle East Africa and Asia, 50% of hotels are closed.

In addition, IHG said the Bank of England has also now confirmed IHG as an eligible issuer for the UK government's Covid Corporate Financing Facility, and IHG has issued GBP600 million in commercial paper under this facility. IHG said it now has access to USD1.35 billion of cash on deposit and existing bank facilities are currently USD660 million undrawn, taking total available liquidity to USD2 billion.

Redrow said it will start to reopen building sites from May 11 and make a phased restart of construction on May 18. The housebuilder added that net reservations have been running at "very low levels" since the lockdown was imposed and net debt at the end of June is now expected to be GBP200 million.

The Japanese Nikkei 225 index closed up 2.6%. In China, the Shanghai Composite is up 0.7%, while the Hang Seng index in Hong Kong is up 1.8%.

The pound was quoted at USD1.2438 early Monday, up from USD1.2333 at the London close Friday.

UK Prime Minister Boris Johnson is due to return to work in Downing Street on Monday, after spending the past fortnight recuperating at his official country residence, Chequers. The government is coming under intense pressure from senior Tories to relax the strict social-distancing measures, amid concern at the damage they are doing to the economy.

The euro was quoted at USD1.0848, up from USD1.0801. Against the yen, the dollar was quoted at JPY107.24, soft from JPY107.45.

Gold was trading at USD1,721.70 an ounce on Monday morning, flat from USD1,721.60 late Friday. Brent oil was quoted at USD20.78 a barrel, down from USD21.15 late Friday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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