There was little in the way of positivity from FTSE 100 shares with only minor gains noticeable in packaging company Smurfit Kappa and a number house builders.
FTSE 100 sinks on travel restrictions and US stimulus stalemate
The FTSE 100 sank on Friday and in the process wiped nearly wiped the entire weeks gains as the latest round of UK travel restrictions, poor Chinese data, and a stalemate in the US stimulus debate sapped confidence from the market.
The FTSE 100 traded as low as 6,033 in morning trading on Friday, before recovering some of the losses as US markets opened.
The implementation of fourteen day quarantines for UK citizens returning from France, Holland and Malta sparked negativity in markets as airline International Consolidated Airlines crashed over 6% whilst aircraft engine maker Rolls Royce shed 4%.
There was little in the way of positivity from FTSE 100 shares with only minor gains noticeable in packaging company Smurfit Kappa and a number house builders.
There was little in the way of positivity from FTSE 100 shares with only minor gains noticeable in packaging company Smurfit Kappa and a number house builders.
Travel shares tumble on new quarantine rules, dragging down FTSE 100
Shares in Easyjet (LON: EZJ), Ryanair (LON: RYA) and IAG (LON: IAG) are down on Friday morning as the UK government announced France to be removed from the UK’s travel corridor list.
From 4 am on Saturday, travellers will have to quarantine for 14 days or face a fine due to a spike in new Coronavirus cases. France and the Netherlands have joined Spain, Belgium and Luxembourg on the list of countries that are on the quarantine list.
Easyjet shares fell over 7% on the news, following the news that the budget airline had finished the sale and leaseback of 23 aircrafts to raise a total of £608m amid the pandemic.
Easyjet has already withdrawn £600m from the Bank of England’s Covid Corporate Financing Facility, as well as raise £419m through the issue of new equity.
On Friday morning shares fell 49.42 points to 6140.28. Neil Wilson, chief market analyst at Markets.com, said that adding new countries to the quarantine list would “force a large swathe of cancellations right at the peak of the summer holiday season for one of the largest markets for UK tourists”.
IAG (LON: IAG) shares were also down over 6%, whilst Ryanair shares are trading down over 4%.
Michael Hewson, chief market analyst at CMC Markets, remains positive despite the fall.
“It’s also important to remember that for all of the weakness of the last 24 hours that markets here in Europe remain on course for their second successive weekly gain, despite some anxiety about rising infection rates across various parts of Europe, as well as here in the UK,” he said.
GVC cancels its dividend with half-year profits falling 13%
Gaming and sports betting company GVC (LON:GVC) announced it would cancel its dividend after a challenging half-year of pandemic trading.
The company saw first-half revenues fall year-on-year by 11% from £1.78 billion to £1.58 billion. This drop led to similar drops including a slide in earnings, with underlying EBITDA falling 5% from £367 million to £349 million. Similarly, the company reported a gross profit of £1.03 billion, contracting 13% year-on-year from £1.18 billion during the first half of FY19.
GVC stated, however, that the difficult trading period had been somewhat cushioned by strong activity in its online gambling division, with the company’s online earning rising by 53% during the period.
Despite this, the company said it recognised the difficulties it would face in what would continue to be an uncertain market, and as such, it had decided to conserve cash by cancelling its interim dividend, which had stood at 17.6p a share at the end of H1 FY19. Similarly, shareholders would see their dividend cover shrink further with basic EPS falling from a 0.6p loss per share, to 1.0p loss per share, while adjusted diluted EPS fell from 31.3p to 28.7p year-on-year.
GVC response
Commenting on the results and outlook, company CEO Shay Segev stated:“Given the unprecedented trading environment, GVC has delivered an encouraging performance in the first half, underlining the strength of our diversified business model and the expertise, adaptability and dedication of our people.”
“These results show that we have a strong foundation. As a technologist, I have huge admiration for what Kenny and the rest of my colleagues have achieved but I am also determined to pursue a programme of continuous improvement as we focus on our four technology-enabled priorities.”
“These are leading the US market, organic growth, expanding into new markets, and being the most responsible operator in our industry. Our industry-leading technology will enable us to grow responsibly and sustainably, using our data-driven customer insights to ensure all of our customers have an enjoyable and safe experience while gaming with us. That is how we will deliver greater and more sustainable value for all our stakeholders.”
Investor insights
Following the announcement, GVC shares dipped slightly by 0.61% or 4.80p, to 780.60p per share 13/08/20 12:59 BST. This is comfortably below its 12-month target price of 1,080.00p, while also a 40% increase on its price on this day last year. The company’s p/e ratio stands at 12.06.RA International shares rally 24% on ‘major’ contract win
Construction, facilities management and supply chain services provider, RA International Group PLC (AIM:RAI) saw its shares spike on Thursday, as the company announced it had been awarded a ‘significant’ contract.
The contract was signed with an undisclosed, ‘large’, ‘global’ construction firm with a focus on the oil and gas sector. It spans over a two year period and is expected to be worth a minimum of US$60 million dollars over that time frame.
RA International stated that under the agreed terms, it would be fulfilling its integrated facilities management capacity in Southern Africa. It added that the contract’s nature means that activity will escalate as time passes, with the provision of the company’s services expected to commence within a year of the contract being awarded.
The company also said that today’s contract award represents a ‘significant’ contribution to its order book, now standing at US$188 million.
Commenting on the news, company CEO Soraya Narfeldt, stated:“This is an important contract win for RA International that underlines the strengths of our business and our growing reputation for managing and delivering large, complex projects for commercial clients in the energy sector.”
“It is testament to our capability to provide a full service offering to our clients’ personnel, to the value of our long-term, strategic approach to planning and to our focus on delivering resourceful solutions for clients notwithstanding COVID-19 and project specific challenges.”
Following the contract announcement, RA International shares rallied by a healthy 23.92%, or 11.05p, to 57.25p a share 13/08/20 12:00 BST. This rally saw the company take the top spot as Thursday’s biggest riser. It also sees the company beat its previous year-to-date high, which was set on Wednesday when the company hit 46.2p a share. The Group’s p/e ratio is currently 8.15, its dividend yield stands at 2.17%.UK job vacancies on the rise, new figures show
New data from the Office of National Statistics has revealed UK job vacancies to be increasing.
Between 31 July and 7 August 2020, the total volume of online job adverts increased from 53% to 62% of its 2019 average. This is the largest weekly increase in 2020.
Whilst unemployment is on the rise and companies continue to announce large-scale redundancies, job adverts are on the rise.
According to Jonathan Planner, an independent head hunter, the new figures should be taken with a “pinch of salt”.
“Pretty much all of my clients have shut up shop until next year so the increase in the number of online job ads is an enigma,” he said.
“I can only think that some employers are having to hire additional junior staff as people who have been working for them over the summer start heading off to university.”
The largest rise in UK vacancies was in transport, logistics and warehousing, which boasts a 117% rise in the 2019 figures amid the pandemic.
Meanwhile, job vacancies in media, arts, and culture have fallen by 41%.
London mayor, Sadiq Khan, has called on Boris Johnson to do more to protect the sector.
“Until we have an operational vaccine in place social distancing will have to continue to protect people’s health, and with employers planning to continue home-working well into next year, the numbers of people visiting the West End will be reduced for many months ahead,” he said.
“As Mayor I’m doing all within my powers to help.”
Watches of Switzerland shares soar on “strong performance”
Shares in Watches of Switzerland (LON: WOSG) have soared 25% on Thursday after the group posted a sales growth in June and July.
Despite a fall in sales during the lockdown and 27.6% fall in revenue in the three months to 26 July, the luxury watch retailer said it was “delighted” with sales since the reopening of stores.
Whilst stores were closed over the lockdown revenue fell, online sales jumped 79.3% in the quarter.
In the year to April 26, revenue grew by 5.9% to £819.3m.
“I am delighted with our achievements during FY20, our first year as a public company. We delivered a strong performance during the first 46 weeks of the year before adapting with speed and agility to the challenges presented by the COVID-19 pandemic. Momentum accelerated in our US business adding to the positive performance in the UK and we remain confident in our strategy to drive profitable growth in both markets,” said Brian Duffy, the chief executive officer.
“Looking ahead, we will continue to invest in delivering on our strategic priorities to leverage our leading position in the UK and to become a leader in the US luxury watch market. We are confident that we are well-positioned to emerge even stronger from these uncertain and challenging times,” she added. The company is off to a promising start after floating in London last May. Watches of Switzerland (LON: WOSG) shares are currently trading +21.86 at 319.26 (1117GMT).
Tui reports 98% fall in revenue but remains positive for 2021
After posting a €1.1bn (£995m) loss for Q2, Tui remains positive as it reveals a 145% increase in 2021 bookings.
This summer saw a 98% dive in revenue as bookings fell 81% and the group made plans to shut 166 High Street stores in the UK and Ireland.
Tui has received €1.2 billion from the German government to stay afloat and it plans to cut costs by 30%.
“We are targeting a permanent annual saving of more than €300 million with the first benefits expected to be delivered from FY21 and full benefits to be delivered by FY23,” said the group.
“Negotiations have begun within respective business units and we expect FY20 restructuring costs to be in the region of €240 million in FY20, €40 million in FY21 and €10 million in FY22.
“In two years’ time, TUI Group will emerge stronger, leaner, more digitalised and more agile, in what is likely to be a much more consolidated market.
The company announced in May that it would cut around 8,000 jobs globally to save costs.
Shares in Tui (LON: TUI) are trading down over 4% at 351.90 (1007GMT).
National Express shares take a hit as group posts £30m loss
As passenger numbers plummetted by 80%, National Express (LON: NEX) has posted a £30m loss for the first six months.
The coach operator’s profits fell from £139.3m in the same period last year. Although the group recorded a record in January and February, the drop in travel amid the pandemic hit profits.
National Express furloughed 40,000 members of staff and the government has said it will provide £700m in emergency funding to bus operators.
With travel still impacted and high uncertainty surrounding the pandemic, National Express has not given profit guidance for the second half of the year.
Dean Finch, National Express Group Chief Executive, said: “During the lockdowns we proactively communicated with customers to vary service and negotiate additional support and payments. We have also secured exceptional governmental funding across all of our major markets and made use of furlough schemes. We were swift to save operating costs as we have nimbly reduced service.”
“As we have restarted services, we have again worked closely with customers and ensured safety is paramount. While there are some signs of demand returning, levels are both significantly reduced and subject to variability given local lockdowns, the impact of quarantines and uncertainty over the extent of US school re-openings. We do not know when pre-pandemic levels of demand will return but have developed plans to respond to future scenarios and maintain safe and efficient operations thereby ensuring the continued financial well-being of the Group.”
“We remain fundamentally positive about the future. The diversification of the Group in recent years has provided resilience during the pandemic, as risk has been spread. In addition, we believe our leadership positions in many diverse and attractive markets are likely to strengthen, as other operators are unable to withstand the impact of the pandemic.”
National Express shares (LON: NEX) have fallen over 12% and are trading at 154.84 (0857GMT).
Gold sees largest one-day drop since 2013
The price of gold has slipped below the $1,900 per ounce benchmark, reaching a near three-week low of $1,872.19 on Wednesday, while gold futures also slid 2.4% to $1,900. It marks the largest one-day fall since 2013.
Just last week, gold prices soared to a record high of $2,075 after sustaining one of its longest price rallies in history. The rally began back in 2018 and was expected to peak sometime in 2020, but the economic impact of the coronavirus pandemic sent investors clambering for gold, as it historically tends to perform well during periods of market turbulence.
Despite the record fall, the price of gold is still up by nearly 30% this year. Its lowest level in 2020 was just $1,484 on 20 March, as the burgeoning fears surrounding coronavirus struck fear into equities worldwide.
Hopes that the US government might approve another trillion dollar stimulus bill (after the $2.3tn package released in April) to boost the economy sustained investors’ interest in gold over the past few weeks, but with the dollar making a leaping comeback, attention has turned back towards typically more risky assets – such as stocks – and away from the coveted metal.
Governments around the world have pumped unprecedented levels of state funds into their economies, as the pandemic paralysed the retail and travel industries, and sent global markets tumbling. The tsunami of additional cash flow helped to lift gold to its highest price in more than 7 years.
But, IG Markets analyst Kyle Rodda told Business Insider, gold’s rally was unlikely to be sustainable: “It looks like some of the euphoria is coming out of the gold market. A lot hinges on US [Treasury bond] yields and the factors driving them at the moment. Also, the dollar’s strength will be something very important to watch over the next few days and weeks”.
With this in mind, gold may well rally once again. The simmering geopolitical tensions between the US, UK and China look set to continue – especially as the US presidential election fast approaches, with Donald Trump and Joe Biden expected to go head-to-head over a proposed solution to both the situation in Hong Kong and Huawei’s controversial 5G project.
And, the coronavirus pandemic has by no means just gone away. With cases beginning to rise once again across the UK, the US and several European countries, investors might be forced to run back to the relative safety of precious metals if markets take a turn for the worse. So, the record fall might not be something to despair about just yet.
To this end, Naeem Aslam wrote for Forbes today: “Despite the current sell-off in the gold price, the future remains positive for the gold price. There is too much geopolitical uncertainty, and global economic growth is likely to remain fragile”.
ASOS shares surge to two-year high, raises profit forecast
British online fashion retailer ASOS plc (LON:ASC) is revelling in a two-year high in its share price, after the company announced that it expects full-year sales and profit to be “significantly ahead” of previous forecasts due to the surge in online shopping during the coronavirus lockdown.
Shares at the company soared more than 13% on Wednesday afternoon, with investors set to gain from “strong operational performance and year-on-year improvements in profitability”.
Full year profit and sales are expected to be “significantly ahead of market expectations”, with revenue growth projected to fall between 17% – 19% and profit before tax in the region of £130 million – £150 million.
ASOS cited “stronger than anticipated underlying demand” and the continuation of the “beneficial” new returns policy – aimed at tackling the costly wear-it-once trend – as the key reasons for the company’s resilient performance during the pandemic.The firm had been expecting to see returns rates “normalise” once lockdown measures eased and customers began to “feel more comfortable” arranging to return their purchases, but instead ASOS announced “a significant and sustained reduction in returns rates since April”.
Demand for popular “lockdown” categories – such as activewear and beauty products – grew more so than for clothing, and this no doubt played a role in reduced returns as these products have historically been harder to send back due to hygiene concerns, even before the pandemic. However, ASOS also cited a shift in consumer attitude toward online shopping as contributing to the fall in returns, with customers making “more deliberate” purchases since the company clamped down on exploitations of its lenient returns policy. CEO Nick Beighton welcomed the company’s strong results, commenting: “ASOS had a strong start to the year, making significant progress against the priorities we set out and delivering a better than anticipated first-half performance, driven by the operational improvements we are making to the business. “Along with other businesses, we have been significantly impacted by the COVID-19 outbreak. Our first priority was to quickly put in place the necessary measures to ensure the health and wellbeing of our people. I have been extremely impressed with the pace of change and the flexibility our teams have shown in adopting these new ways of working. “Since then, we have been focused on keeping our business delivering for customers whilst implementing a series of actions to mitigate the sales impact we have been experiencing. At the same time we have been working to strengthen our financial position, including reaching agreement with our lenders to provide us with additional short-term financial flexibility”. Despite its strong balance sheet, ASOS warned that it could not yet make solid predictions of its future performance, stating: “Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist”. Shares at the company nonetheless surged by 13.10% to 4773.00p at BST 15:14 12/08/20, continuing an impressive track record – up 50.55% over the past 6 months.