(Alliance News) - The following is a summary of top news stories Monday.
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COMPANIES
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Royal Dutch Shell joined peers in taking steps to mitigate the fallout from the new coronavirus outbreak, halting its share buyback programme and cutting costs, but at least for now not touching its dividend. The Anglo-Dutch firm said it will axe operating costs by USD3.0 billion to USD4.0 billion over the next 12 months. Shell said it will cut annual spending to a maximum of USD20 billion for 2020 from its previous expectations of USD25 billion. In addition, the oil major said it has decided not to continue with the next tranche of the share buyback programme following the completion of the current tranche announced in January.
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Fellow oil major Total also suspended its buyback programme, having previously announced USD2 billion in share buybacks for 2020. It also plans to implement organic capital expenditure cuts of more than USD3 billion, cutting 2020 net investment to below USD15 billion. It intends to achieve USD800 million of savings in 2020 on operating costs compared to 2019, up from previously announced savings of USD300 million.
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Pearson has paused its share buyback as a result of the Covid-19 outbreak. To date, GBP167 million of the education group's GBP350 million share buyback programme has been completed. Pearson reported uncertainty in its businesses that rely on learners and staff accessing physical sites. These businesses include Pearson VUE, the Pearson Test of English, US Student Assessments and higher institutions in South Africa, which is expected to hurt group profit. This is particularly true in the US, where test cancellations in several states is expected to lower operating profit for 2020 by GBP15 million. Pearson said there is risk of other states cancelling tests, which could further hit profit. Looking ahead, Pearson said it has identified actions to reduce operating costs and spending to partially limit the damage from Covid-19 and is exploring further steps to take.
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Associated British Foods warned that it stands to lose around GBP650 million per month in net sales from the closure of all 376 Primark stores in 12 countries until further notice due to the Covid-19 pandemic. In the year to September 14, 2019, fast-fashion retailer Primark recorded GBP7.79 billion in sales and adjusted operating profit of GBP913 million. The FTSE 100-listed company, however, said it has not seen a material impact from the virus on its other divisions - sugar, grocery, ingredients and agriculture businesses.
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ITV withdrew its guidance for 2020 and its proposal of its 2019 final dividend, amid disruptions caused by the Covid-19 and resultant containment measures. The broadcaster said recent restrictions on working practices have hurt ITV Studios' ability to film productions, leading to productions both in the UK and internationally being paused. ITV said it is unable to predict how the pause in productions would hurt revenue and profit of its studios. As a result of the uncertainty of Covid-19, ITV has withdrawn its financial guidance for 2020, as well as its intention to pay an 8 pence annual dividend for 2020. Further, the board has decided not to propose the final dividend of 5.4 pence per share for 2019 at the forthcoming annual general meeting on April 24. ITV said savings realised from these steps will ensure that more than GBP300 million of cash will be retained within the business.
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Airbus followed arch rival Boeing in withdrawing its 2019 dividend and 2020 financial guidance due to the Covid-19 pandemic. The European aircraft manufacturer whose main plant is in Toulouse, France also said its board had approved plans to secure a new EUR15 billion credit facility to sit on top of Airbus's existing EUR3 billion revolving credit facility. In terms of guidance, Airbus had originally forecast adjusted earnings before interest and taxation of around EUR7.5 billion in 2020, up from EUR6.95 billion in 2019. Free cash flow before mergers and acquisitions and customer financing was expected to be approximately EUR4 billion. Its 2019 free cash flow before mergers and acquisitions and customer financing was EUR3.51 billion. This guidance has been withdrawn, along with a proposed 2019 dividend of EUR1.80 per share, which would have represented a 9.1% increase from 2018's EUR1.65 per share dividend.
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MARKETS
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London shares were in the red as the coronavirus death toll continued to soar, with the FTSE 100 falling back below the 5,000 mark. In London, a slew of companies halted shareholder returns to mitigate the fallout from the pandemic. US stock market futures were pointed to a lower open after lawmakers in Washington failed to agree a trillion-dollar emergency package over the weekend.
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FTSE 100: down 3.8% at 4,996.27
FTSE 250: down 3.8% at 13,075.32
AIM ALL-SHARE: down 4.8% at 593.54
GBP: down at USD1.1554 (USD1.1745)
EUR: down at USD1.0688 (USD1.0700)
GOLD: up at USD1,493.33 per ounce (USD1,488.90)
OIL (Brent): down at USD25.40 a barrel (USD27.31)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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UK Prime Minister Boris Johnson has 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. The prime minister insisted that he did not want to close down access to parks and playgrounds because of the benefits to people's mental and physical wellbeing. But 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. Meanwhile the NHS is to begin sending out letters to the 1.5 million people considered to be most at risk of the disease urging them to remain at home for the next 12 weeks.
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A trillion-dollar Senate proposal to rescue the reeling US economy crashed to defeat Sunday after receiving zero 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 American 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. Mnuchin, US President Donald Trump's key representative in the negotiation, had expressed hope an agreement could be reached Sunday. Speaking on Fox News earlier Sunday, Mnuchin detailed a separate massive relief plan by US financial authorities that "will have up to USD4 trillion of liquidity that we can use to support the economy." Together, the urgent measures represented one of the most dramatic governmental rescue efforts outside wartime.
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Italy, Iran and the US have reported soaring new death tolls as the coronavirus pandemic marches relentlessly across the globe. It has prompted a scramble in hard-hit regions to set up more hospital beds and replenish the dwindling medical supplies needed to keep health workers safe. Italian Premier Giuseppe Conte went on live TV to announce he was tightening the country's lockdown and shutting down all production facilities except those providing essential goods and services.
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Postponing the 2020 Olympics "may become inevitable" if the new coronavirus outbreak makes it impossible to hold the Games safely, Japan's prime minister said. Shinzo Abe told parliament that Japan was still committed to a "complete" Games, but added: "if that becomes difficult, in light of considering athletes first, it may become inevitable that we make a decision to postpone". The comments were his first acknowledging the possibility that the Games may not open as scheduled on July 24 as the coronavirus continues to spread across the world. Overnight, the International Olympic Committee also shifted its tone on the Games, saying it would step up planning for different scenarios, including postponement. World Athletics chief Sebastian Coe called for the Tokyo Olympics to be postponed over the coronavirus pandemic as Canada pulled out.
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