BT Group (LON:BT) cancelled their dividend on Thursday as the telecoms group announced an accelerated investment programme amid the COVID-19 crisis. BT said they would not pay a dividend until 2022 as they invested in the adoption of 5G and increased the rollout of Fibre internet. The market did not take the announcement well and BT shares traded as low as 101p in early trade on Thursday, down over 10%, before recovering. Notwithstanding the scrapping of the dividend until 2022, BT posted disappointing full year earnings as adjusted EBITDA fell 3% to £7.9bn. Revenue also fell 3%, but this was broadly inline with expectations. “BT had a positive year delivering results in line with expectations and completing our £1.6bn phase 1 transformation programme, one year ahead of schedule,” said Philip Jansen, Chief Executive “Covid-19 has changed everybody’s world and I am immensely proud of how BT has responded to the challenges the Covid-19 crisis has presented. Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation.” “Of course, Covid-19 is affecting our business, but the full impact will only become clearer as the economic consequences unfold over the next 12 months. Due to Covid-19, BT is not providing guidance for 2020/21, at this time.” “BT has the best network infrastructure in the UK. We have the leading 4G network and are rapidly expanding our leadership position in 5G, that today covers over 80 towns and cities. We have the largest and most extensive fixed network and are leading the UK on the next generation Fibre-to-the-Premises (FTTP) network where we now pass 2.6 million premises.” “Today we are announcing a rapid acceleration of our FTTP build with a target of 20 million premises passed by the mid- to late-2020s, including a significant build in rural areas.” Jansen continued to explain the decision to cut the dividend was part of a broader investment plan that involved the roll out of 5G. “In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter,” Jansen said. “These decisions, particularly on the dividend, network investment and transformation are key to underpinning BT’s investment case; driving network strength, competitive strength and financial strength, providing more clarity to the market, and driving long-term value for shareholders. I am confident that these decisions position us really positively for the future.” The difficultly in coming to the decision to cut the dividend was reiterated the the BT Chairmen who said BT realised the “importance of dividends to our shareholders” who will now not see any income from their investment in BT until 2022.

Shares in Virgin Money rose sharply on Wednesday despite the bank setting aside £232m in provisions for the impact of COVID-19. The £232m hit meant, like the UK’s top traditional banks, challenger bank Virgin Money’s profit was almost entirely wiped out by the negative impact of COVID-19. Virgin Money’s profit fell to £120m, but would have been £352 before the impairment charge due to coronavirus. A profit of £352m would have represented a 3% drop in first half profit from a year ago, which was expected due to a reduction in net interest margin. The market has been rewarding those banks who recorded strong performance before the impact of COVID-19, and this was the case with Virgin Money. Virgin Money shares were up as much as 11% before falling back in afternoon trade. “The COVID-19 outbreak and its impact on the nation’s businesses and consumers has markedly changed the operating environment, driving an increased impairment charge of £232m against future loan losses and a reduction in underlying profitability,” said David Duffy, Chief Executive Office of Virgin Money. “While we delivered a resilient performance and continued to make good progress on our self-help strategy in the first half of the year, our primary objective now is safeguarding the health and well-being of our colleagues, customers and communities while also protecting the bank.” The Virgin Money CEO continued to say the impact of the pandemic will persist for a prolonged period but he felt Virgin Money had the necessary measures in place to continue delivering their services. “Amid the uncertainty, it is clear that the pandemic will have long-lasting and wide-ranging effects on how companies do business and on what customers will expect from the organisations they choose to interact with.” “Although the full impacts from the COVID-19 outbreak will take time to emerge, I’m confident that our agility, digital capabilities and focus on disrupting the status quo will make us stronger and well-equipped to support changing customer needs and play our part in the UK’s economic recovery.”

Shares in Halfords (LON:HFD) rose over 19% on Wednesday after the group announced sales that exceed the firm’s own expectations. Sales for the four weeks to 1st May were 23% lower than in the same period last year on a like-for-like basis, beating company estimates. The stronger than expected performance meant the company said it now expected profit to be towards the upper end of their previously guide £50-55m profit before tax. The strength was seen in the company’s cycling business as key worker commuters changed their travel arrangements through the coronavirus pandemic. Cycling has been a big theme for Halfords in 2020 as they actioned plans to close Cycle Republic and focus on their online business Tredz and the core in-store Halfords offering. Graham Stapleton, CEO of Halfords, commented on the update: “The health and safety of our colleagues and our customers remains our top priority. I am immensely proud of all our colleagues for their continued hard work and dedication to help keep the country moving. “There may be less journeys now but those that are undertaken are even more important. As the UK’s largest provider of motoring and cycling products and services, we take our responsibility to keep the country moving seriously. We remain focused on providing essential services during lockdown, supporting key workers, including serving over 21,000 NHS front line workers so far, as well as the wider population who need to travel. Cycling has provided commuters with an important alternative to public transport and consequently we have seen significant growth within our Cycle2Work programme, cementing our position as the market-leading business in this segment.” “Whilst trading since our last update at the end of March has been better than anticipated, driven by a strong performance in cycling, considerable uncertainty remains and as such we continue to take all necessary measures to preserve cash and protect our financial position. I am confident the actions we are taking now will put the business in a strong position when we emerge from the crisis and enable us to continue to deliver on our strategic transformation in the medium term”.

ITV’s (LON:ITV) advertising revenue crumbled in April as advertising demand fell by 42% due to the COVID-19 pandemic. The update on the impact of COVID-19 on April’s trading was included in ITV’s first quarter trading state which revealed a 7% drop in total external revenue in the three months to 31st March. Broadcast revenue was up 2% during the quarter as ITV studios revenue fell by 11% as COVID-19 restrictions started to take hold. However, as ITV moved into April, when lockdowns were in full swing, the ITV Studios business saw most work grind to halt which is likely to have an impact on earnings for ITV’s Q2. In addition to a pause in the Studio’s business, advertising revenue will be materially impacted due to advertiser uncertainty surrounding coronavirus. The reduction in demand was felt across most of ITV’s advertising categories although the company did report some positives through the COVID-19 crisis. Interaction with ITV’s library of content increased and subscription activity in Britbox also increased. Simulcast viewing jumped 112% in the first quarter as overly online viewing rose by 77%. ITV said they were working with advertisers on new and innovative marketing solutions but didn’t give any guidance or outlook for Q2 due to the ongoing distraction associated with coronavirus. Carolyn McCall, ITV Chief Executive, said: “ITV has taken swift and decisive action to manage and mitigate the impact of COVID-19, by focusing on our people and their safety, and by continuing to reduce costs and tightly manage our cashflow and liquidity. We are also ensuring that we continue to inform and entertain our viewers and stay close to our advertisers. Everyone at ITV has responded extremely well to the challenges we are facing.” “We are now very focused on emerging from this crisis in a strong position, continuing to offer advertisers effective marketing opportunities and making preparations to restart productions safely.” Shares in ITV (LON:ITV) rose 4.7% in early trade on Wednesday.

The Shell share price (LON:RDSB) should still be considered by investors, despite last week’s decision to cut their dividend. Royal Dutch Shell made the historic decision to cut their dividend for the first time since world war two to conserve cash amid falling oil prices caused largely by the ongoing uncertainty surrounding coronavirus. Royal Dutch Shell shares fell in the immediate reaction to the dividend amendment, meaning the company reversed most of the gains it made during April’s rally.

Shell share price

Shell shares are down 44% in 2020, having touched the lowest levels since 1995 during the worst of the selling in March which Shell shares briefly trading beneath 900p. However, with shares finding support in the region of 1,200p, the market seems to found a price it is comfortable for Shell to trade at with a backdrop of lower oil prices, uncertainty around COVID-19, and a reduced dividend. A change in any of these factors will likely impact the Shell share price and investors could see a sharp re-rating to the upside if the macro picture improves, or if Shell hints at a reversal of the dividend reduction. However, with the timing of any economic recovery remaining uncertain, investors will be assessing Shell’s current business, and share price, to gauge whether now is an acceptable time to enter in anticipation of such a move.

Shell valuation

Given the sharp drop, Shell trades at 30x predicted earnings which is well above average and makes Shell shares look very expensive. However, this valuation will take into consideration earnings over the next 12 months which will be factoring in the decimation in revenue caused by the lower oil price. Yet investors should look past this to a time the economy returns to some form of normality as a truer picture of what Shell’s valuation will look like in the medium and long term. What the ‘new normal’ will look like for the global economy is very difficult to accurately forecast, but there isa wide consensus demand for oil will increase as soon as economies reopen. When this demand returns, oil prices are likely to rise and in turn, Shell’s profits. This is where the value lies for investors in Shell shares. A scenario where Shell returns quickly to the same level of profitability as last year is unlikely, but Shell trades at just 8.5x trailing earnings which is very difficult to overlook, especially for the largest company by market cap listed in London. In addition to looking forward to a rebound in oil prices, long term investors should take confidence for Shell’s investments in renewable energy sources and the diversification this provides the business. Examples of Shell’s push into renewables are the acquisition of ERM Power, one of Australia’s leading commercial and industrial electricity retailers and French wind power company Elofi. Whilst Shell’s renewables business is still in its infancy and may not provide the revenue to pull Shell out of the current crisis, it shows they are prepared for the next chapter in the global energy market. Shell have a history of making bold decisions in times of uncertainty and the acquisition of BG Group during the last major down turn in oil demonstrates this. BG provided a significant exposure to the natural gas market, particularly in Asia where demand is expected to grow, and Shell had a minimal presence. Having reduced the dividend, Shell may have some spare cash to allocate to acquisitions, if lower oil prices do not persist beyond 2020. Should Shell chose to make strategic investments and forgo a quick return to higher dividend payouts, the company is a very bright prospect for the long term investor, even if income investors look elsewhere in the short term.  

Gin and Honey producer, British Honey (LON:BHC), have said a quick pivot into the production of hand sanitiser has helped offset a drop in demand for their core products. British Honey produce a range of honey, jams and spirits utilising British ingredients and have harnessed their capacity to produce hand sanitiser to help the fight against coronavirus. The company said sales from hand sanitiser have exceeded £500,000 which more than offset a reduction in sales elsewhere in the business. In a COVID-19 update released on Tuesday the company said the recent IPO meant they had a strong balance sheet and that they had been able to keep supply disruption to a minimum. British Honey listed on the Aquis Exchange, formerly known as the NEX Exchange, in 2019. Michael Williams, CEO of British Honey, commented: “Very early on during the Covid-19 outbreak we identified a clear opportunity for the Company to move into the production of alcohol-based sanitisers, to meet exceptional demand and supply shortages, given the basic ingredient is the same as for our infused spirit brands. I’m delighted to report that sales of these products have been exceptional. BHC obtaining BS EN 1500 certification for “Drip+Drop” products is another milestone in its development. “Whilst there is no doubt that, across the industry, problems in the alcohol supply chain are starting to emerge, I am pleased to confirm that we as a company have sufficient alcohol for our own spirits business plans through to the end of 2020. List Distillery are also continuing to supply rum and bourbon from their distillery in Florida. “The health, safety, and welfare of our employees remain our first priority. Our production and support operations are fully committed to meeting our customers’ needs with all staff continuing to work normal hours, albeit with various measures taken to enable required social distancing and adherence to government guidelines. “Furthermore, we continue to support key front-line workers, local care homes and other charitable institutions with complimentary products”.

Integrated Vanadium producer, Bushveld Minerals (LON:BMN), released a rise in first quarter production figures at their flagship Vandium mine on Monday. Output increased at the Vametco mine despite disruption caused by coronavirus and heavy rain. The Vametco mine produced 652 mtV in the first, up from 649 mtV in the same period a year ago. However, whilst production was disrupted by the lockdown, Bushveld Minerals said sales jumped 77% in the first quarter because of higher production in Q4 2019 and generally higher demand. Bushveld Minerals has a 76% stake in the Vametco vanadium mine which has seen increased demand for its trademark Nitrovan product. As a vertically integrated producer, Bushveld is also working on vanadium redox flow batteries (VRFB) with a range of projects including use across the gird in South Africa and modular batteries solutions. Bushveld Minerals also has ambitions for a VRFB investment platform and a series of recent acquisitions and deals demonstrate their intent. Fortune Mojapelo, CEO of Bushveld Minerals Limited, commented: “We are fortunate to operate in a country whose leadership has taken early decisive action to limit the spread of the Covid-19 virus while ensuring that we build the necessary public health care capacity and identify fiscal responses to manage the coming wave of infections, while treatments and vaccines are still under development. Navigating this situation requires us to meet the immediate challenges of ensuring the safety and health of our workers, sustain business continuity and ensure readiness to scale back up to full capacity in due course, while also supporting the fight against Covid-19 among our host communities. “We used the lockdown period to strengthen our health and safety protocols together with business continuity measures, conducted maintenance and processed intermediary stockpiles, as per the guidelines received from our authorities. We are pleased that both Vametco and Vanchem are safely increasing production to normal levels.” In addition to the measures undertaken to combat COVID-19, Fortune Mojapelo touched on the cash position of Bushveld and how they were managing Capex through the crisis. “From a liquidity perspective, we started the year with a healthy cash balance. We retain a cautiously positive growth outlook on the vanadium market and the Company’s role therein. This notwithstanding, we have undertaken a review of our capital spending, deferring some non-essential capital expenditure for the near term whilst preserving the long term integrity of our business and still positioning the company for growth in the vanadium market in the medium to long term. Furthermore, to enhance our liquidity position and financial flexibility we drew down the full ZAR375 million of bank debt facilities. Meanwhile, the Company’s finances have benefitted from a weakening Rand, given its revenue and cost bases are mostly foreign currency and local currency denominated, respectively. This places us in a stronger position to navigate through this evolving situation. CEO Fortune Mojapelo continued with his feelings that Bushveld could come out of the crisis stronger than when the went in. “We are confident that the measures we have taken will enable us to build an even more resilient Bushveld Minerals, well positioned to exploit the upturn when it comes.” “We are releasing this announcement later than we would have typically done. This has been necessitated by the need to better understand and so provide clarity on the impact of the pandemic and the fast-evolving environment and regulatory landscape we are operating in. We also expect to be in a better position to disclose more on our renewed plans and capital expenditure requirements in our 2019 full year results announcement, when we believe there will be more clarity on what the rest of the 2020 financial year will hold.”