On Friday’s opening, the FTSE 100 took a slide as markets prepare for the furlough scheme to end and the US President tested positive for coronavirus.
The FTSE 100 fell 0.7% to 5,837 points. European and Asian stocks also opened lower, whilst Wall Street is also expected to open lower amid the news of Donald Trump.
Trump tweeted on Friday: “Tonight, @FLOTUS and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this TOGETHER!”
Fiona Cincotta, a market analyst from City Index, said: “The markets are already fretting about an uncertain election and this just adds another layer of uncertainty.”
Despite reassurances from Trump, many have noted that his age could lead to more severe forms of the disease. Polling day is in a month’s time on 3 November.
Shares on London’s blue-chip index are expected to come under pressure as the furlough scheme comes to an end and one in 10 employees in the UK are expected to lose their jobs.
“The Footsie remains fettered by investor insouciance and bleak prospects for the UK economy as a whole, down 23% in the year to date and seemingly unable to break out of its current narrow band,” said Richard Hunter, who is the head of markets at Interactive Investor.
“Further countries being added to the UK quarantine list alongside targeted local lockdowns have done little to lighten the mood, with the moves piling further pressure on several already beleaguered sectors.
“Large fundraisings announced by the likes of British Airways owner International Consolidated Airlines and Rolls-Royce are further indications of travel industry in turmoil,” he added.
Ravaged by more than 8 million Covid-19 cases, and at least 328,000 reported deaths, Latin America’s virus crisis seldom makes the headlines in the UK media, yet it remains the most affected region in the world by the ongoing coronavirus pandemic.
‘The fear for many is that the region has tried to do too much, too soon’
According to the Turkish-run news broadcaster Anadolu Agency, Latin American countries make up some 28% of the 31.8 million confirmed cases globally, and almost a third of total deaths around the world. Out of the 15 countries with the highest death rate, 11 are located in Latin America or the Caribbean.
Recent forecasts from the International Monetary Fund (IMF) and the World Bank have expressed concern that Latin America and the Caribbean will suffer the most out of all the emerging-market economies worldwide in the post-pandemic recovery period.
In June, the IMF reported on the “steep” economic toll of the pandemic on Latin American countries, estimating that their cumulative economies will shrink by a record 9.4% in 2020, with only a mild +3.7% recovery next year.
Reuters reported this week that a recent projection by the Bank of America outlined a potential GDP decline of 8.2% across the region, which is worse than the predictions for the Middle East, Africa and Asia.
The two largest economies, Brazil and Mexico, have weathered their worst economic downturns since the Great Depression during the 1930s. Brazil is now facing a contraction of between 5-7%, while the Bank of Mexico released an estimate of a GDP drop between 8.8-12% for 2020.
Argentina, having been deep in a crippling depression before the pandemic hit after defaulting on its national debt for the ninth time in history, is expected to see a GDP fall of some 11% according to analysts at Citigroup bank.
So how can Latin America tackle the still-emerging economic impact of the pandemic? With widespread reports of the flouting of social distancing rules and pleas to convince the public to adopt masks in crowded places, the fear for many is that the region has tried to do too much, too soon.
Too much, too soon?
A report by the Washington Post earlier this month described the scenes on the ground in Buenos Aires – the capital city of Argentina – where “clusters of people, many without masks, were strolling and chatting” on the city’s crowded boulevards.
The country’s president, Alberto Fernández, began undoing months of strict lockdown measures in July, when he announced a return to “normal life”.
Despite initiating “one of the world’s strictest coronavirus lockdowns” early on in the year – warning citizens that “you can recover from a drop in the GDP, but you can’t recover from death” – the reception from the Argentinian public was, in some cases, worryingly apathetic.
There were frequent reports of lockdown violations, with some stores staying open during the pandemic, stating that online sales were not sufficient to keep businesses afloat.
The initial success in clamping down on Covid-19 cases quickly started to unravel, and infection rates began to soar again in the summer months.
People were reportedly “on edge” as the pandemic took on distinctly political undertones, with the Argentinian government blaming the rise in cases on lockdown breaches and opposition groups claiming that basic freedoms were being jeopardised.
Cooped-up and frustrated citizens flooded back to Buenos Aires’s streets as the lockdown came to an end. In the two months since the country reopened, Argentina has seen new coronavirus cases triple, now breaching an additional 12,000 every day.
Analysts have suggested that Latin American countries face the same challenges that we so often see in the context of right-wing conspiracy theorists in the United States, with “the same divisive individualism that has hampered a unified coronavirus response” to the pandemic across the pond.
Indeed, in Colombia there were reports of large parties attended by thousands in July, almost undoubtedly contributing to the late summer surge in cases there. A Peruvian mayor came under fire for being caught “going out, getting drunk, then playing dead in a failed attempt to avoid detection”.
Most infamous of all, travellers to Brazil have reported on swamped beaches, packed sidewalks and flagrant flouting of mask-wearing rules.
However, the sudden surge in cases is more than just a public health concern – it is also a big red warning sign that the region’s economic recovery is in peril.
Should public health officials convince governments to impose secondary regional – or even national – lockdowns, the inching progress made in recent weeks towards a healthier economy would grind to a halt, or perhaps reverse entirely.
‘There is a general sentiment that further lockdown measures could dash hopes of a return to pre-Covid economic normality in the near future’
What does the data say?
While the data on economic recovery differs across Latin American countries, there is a general sentiment that further lockdown measures could dash hopes of a return to pre-Covid economic normality in the near future.
The latest IHS Market Manufacturing Purchasing Manager’s Index (PMI) data for Brazil confirmed that the country’s manufacturing sector had been making significant strides in recovery into September, with “near-record expansions in new orders and production, alongside a return to growth of export sales”. Companies also widely “stepped up hiring and purchasing activity, with optimism towards future output also strengthening”.
In fact, the PMI rise from 64.7 in August to 64.9 in September represented “the strongest improvement in the health of the sector since data collection started in February 2006”.
Commenting on Brazil’s data, Pollyanna De Lima, Economics Associate Director at IHS Markit, emphasised that the country had been forced to overcome significant demand and supply challenges as a result of the pandemic:
“There were clear signs that operating capacities came under pressure, among manufacturers and in supply chains. For producers, this was evident from a record rise in backlogs of work, while vendors were unable to deliver purchased inputs in a timely manner. Panellists commented on COVID-19 related workforce shortages at suppliers, as well as a lack of available raw materials”.
Should Brazil’s government opt to implement another lockdown, the supply chain issues which threatened the country’s manufacturing sector during the peak of the pandemic may well rear their ugly heads once more.
33,269 new cases were recorded in Brazil this Wednesday, with an estimate of almost half a million active infections. Reuters reported that the country had seen more than 1,000 deaths in just 24 hours. Meanwhile, speculation mounts if further restrictions are imminent after Rio de Janeiro cancelled its annual Carnival parade for the first time in more than 100 years over social distancing concerns.
‘Where growth was anticipated, however, that was contingent on a gradual recovery from the coronavirus pandemic and softer restrictions domestically and externally’
Mexico’s PMI data followed along a similar line to Brazil’s, with “renewed optimism towards future output and softer contractions in new orders, input buying and employment”, and a marked improvement from 41.3 in August to a six-month high of 42.1 in September.
But, as with Brazil’s encouraging healing arc so far, De Lima warned that Mexico’s economic recovery very much hinges on “softer” measures to combat the new surge in Covid-19 cases.
“Following six months of pessimism, companies on average became optimistic that output will increase over the course of the coming 12 months. Where growth was anticipated, however, that was contingent on a gradual recovery from the coronavirus pandemic and softer restrictions domestically and externally”.
4,446 new cases were recorded in Mexico on 30 September, with some 130,000 active cases currently on health officials’ radars.
What does this mean for Latin America’s long-term future?
‘Latin American countries can seize this opportunity to address long-held socio-economic grievances’
A decade ago, the head of the Inter-American Development Bank, Luis Alberto Moreno, predicted that the 2010s would see Latin American countries finally thrive.
Just last week, however, the same man stated that the region had missed this “rare opportunity”, citing comparatively low investment in infrastructure, high prices and the “dismal” quality of public services, as well as the stagnating quality of education available to aspiring young professionals.
The coronavirus pandemic may not be solely responsible for the setback, but it has certainly jeopardised hopes that Latin America might be able to make the incoming 2020s its success story decade.
A number of countries, including even the region’s economically-strongest – Brazil and Mexico – now turn to face the next decade from a disadvantage, having suffered heavily from lockdown measures and with a full recovery not expected for years to come.
Of course, the crisis does also offer an opportunity to make some changes to ensure Latin America can indeed thrive in the future.
Reuters draws attention to the pandemic’s brutal force as “exposing deep-seated structural problems that now must be addressed with far-reaching and long-overdue reforms in education, healthcare services and the implementation of the rule of law”.
Perhaps Latin American countries can seize this opportunity to address long-held socio-economic grievances – including high poverty rates, subpar infrastructure and poor education – and help to lay the groundwork for a stronger economic resurgence in the coming years.
As with it seems everything lately, the future is all but guaranteed. That being said, Latin America faces a particularly steep uphill battle towards economic recovery.
While it may be tempting to see this as a burden, there is some merit in the view that the coronavirus pandemic could shake up the status quo to the point that the poverty, inequality, and economic instability which have plagued the region since the end of the colonial era can finally start to be undone, and Latin America’s cumulative economies could get a long-awaited chance to shine.
Thanks to fairly positive PMI data, the Dow Jones broke the 28k point mark for the second time in September and only the third time since the Covid pandemic took full force.
The 28k has been something of a blue-skies benchmark ever since the Dow first hit it last November, but its ability to sustain this level (as it did during the August-September transition) is doubtful.
Already surrendering half of its 1% opening gains, the Dow Jones is now sitting on a 0.42% rally, at 27,897 points.
This followed largely positive PMI data, with September manufacturing indicating what IHS Markit (NYSE:INFO) described as “the sharpest improvement in operating conditions across the U.S.
manufacturing sector since early-2019”.
Overall, IHS said growth was supported by production output posting a quick increase at the end of the third quarter, with the rate of growth at its sharpest rate for ten months. A positive upshot of this was the upward pressure on capacity, which forced manufacturers to expand their workforce – leading to the second-sharpest rise in employment since November 2019.
IHS Markit graphic and US PMI data
According to the IHS survey, US manufacturing PMI stood at 53.2 in September, up marginally from 53.1 in August but down on the earlier flash reading of 53.5.
Speaking on some of the risk factors facing US manufacturers, IHS Chief Business Economist, Chris Williamson, stated:
“But it was not all good news. Supply shortages worsened as companies increasingly struggled to source enough inputs to meet production requirements. With demand often exceeding supply, prices rose sharply again across many types of inputs, especially metals.”
“Growth of new orders for consumer goods also waned during the month, hinting at some cooling of demand from households, commonly blamed on Covid-19. Overall order book inflows consequently slowed compared to August.”
“The outlook also darkened, as companies grew more concerned about the sustained economic disruption from the pandemic alongside uncertainty caused by the upcoming presidential election. The sector therefore looks to be entering the fourth quarter on a slower growth trajectory, adding to signs that fourth quarter GDP growth will wane considerably from the third quarter rebound.”
Looking ahead at the future of the Dow Jones, and much like the business confidence indicator within PMI data, a lot will be determined by the outcome of the US presidential election. For now, though, neither the Dow nor business confidence benefit from the uncertainty and political hostility we are currently seeing over the pond.
While a popular, burgeoning sector for tackling carbon emissions, renewable energy has had to continue innovating in order to allay critics’ doubts. First, there was the issue of inconsistent energy supply, which is being tackled by grid-scale storage systems. Second, is the major gripe with electric vehicle engine components. Harmful to produce, and harmful to dispose of, the recent investment by Low Carbon Innovation Fund 2 represents a step towards in these issues becoming a thing of the past.
On Thursday, energy-specialised merchant bank, Turquoise, announced that the Low Carbon Innovation Fund 2 had completed its third deal, investing £350,000 in battery specialists, Connected Energy.
Connected Energy specialises in reusing the batteries of electric vehicles, which typically become redundant after their capacity falls by just 25%. What they do is take these out-of-commission batteries and repurpose them as components of a grid-scale energy storage system, which are needed to smooth fluctuations both in demand by energy users, and in supply by wind and solar farms.
Connected Energy systems currently range from a 300kW behind the meter system, to a 12MW system currently in development, and modular multiples of those.
Speaking on Low Carbon Innovation Fund 2‘s investment in the electric vehicle battery repurposing company, Turquoise Managing Director, Ali Naini, commented:
“Connected Energy helps reduce emissions in a number of innovative ways, such as reducing the cost of electric vehicles by increasing the value of their used batteries, reusing valuable materials in those batteries, and creating energy storage systems that help with the wider adoption of renewable energy. They also have many of the attributes necessary for creating strong investor returns. This makes the company a perfect fit to the remit of LCIF2.”
Given that the Low Carbon Innovation Fund 2 has the UK Ministry of Housing, Communities and Local Government as its Managing Authority, Connected Energy CEO, Matthew Lumsden, says he is excited to strengthen his company’s links with local and national government.
Renewi shares (LON: RWI) soared 18% on Thursday afternoon.
According to the Buckinghamshire-based company, trading between 1 April to 30 September was “materially ahead” of expectations.
“Given the resilience of the group’s trading in the first half, which included a period of extensive lockdown measures in the first quarter, the board now anticipates a performance for the year ending 31 March 2021 which is materially ahead of its previous Covid-19 adjusted expectations,” said the group in a statement released on Thursday.
Whilst the share price surged by 18% on Thursday to 22,90, the price of shares has fallen by 37% this year to date.
“The Board remains suitably cautious about the macroeconomic outlook, including any potential future slowdown in the later-cycle Dutch construction market and potential further measures to contain Covid-19,” said the group on future trading.
“However, given the resilience of the Group’s trading in the first half, which included a period of extensive lockdown measures in the first quarter, the Board now anticipates a performance for the year ending 31 March 2021, which is materially ahead of its previous Covid-19 adjusted expectations.”
“Longer term, whilst the speed and extent of economic recovery will influence our performance, waste volumes have historically been resilient through cycles and the transition to increased recycling will continue to support our business model. The sustainability agenda and the potential for a “green recovery” supported by the EU and national governments are expected to present attractive opportunities for Renewi to convert waste into a wider range of high-quality secondary materials. We remain confident our three strategic growth initiatives will deliver significant additional earnings over the next three years and beyond.”
Renewi shares (LON: RWI) are currently trading +19.72% at 23,25 (1545GMT).
Likely to be a crucial day of results and potentially influential on global equities, the Australian, European, and Asian economies posted their manufacturing PMI data on Thursday, and September’s results displayed various degrees of success across some of Asia fastest-growing economies
India manufacturing moves up a gear
Continuing the boom it began in August, India’s manufacturing sector enjoyed an orders and production renaissance, pushing its PMI to its highest mark since January 2012.
With renewed expansions in export sales and input stocks, and improved business confidence, output rose for the first time in six months, reflecting an uptick in input costs.
IHS Markit (NYSE:INFO) stated that India’s PMI increased from an already-positive levl of 52.0 in August, to 56.8 in September, signalling not just back-to-back growth but its highest reading for more than eight-and-a-half years.
IHS Markit graphic and India PMI data
With reports of loosened Covid restrictions and recovery in demand, Indian manufacturers lifted output by around 30 points in a matter of months – the third quickest recovery in the history of IHS’ surveys.
Speaking on the data, IHS Markit Economics Associate Director, Pollyanna De Lima, added:
“Exports also bounced back, following six successive months of contraction, while inputs were purchased at a sharper rate and business confidence strengthened.”
“One area that lagged behind, however, was employment. Some companies reported difficulties in hiring workers, while others suggested that staff numbers had been kept to a minimum amid efforts to observe social distancing guidelines.”
Vietnam PMI bounces back to green
On a more modest but similar trajectory is Vietnam, whose manufacturing PMI returned to growth in September as Covid concerns somewhat eased. With this, output and new orders regained their footing, while business confidence grew and the rate of job cuts slowed down.
This saw the manufacturing PMI of Asia’s fifth-fastest-growing economy recover from the negative level (sub-50) of 45.7 points in August, and back into the green, at 52.2 points for September.
IHS Markit graphic and Vietnam PMI data
This latest reading marks the first upturn in business conditions for three months, and the most notable improvement since July 2019, according to IHS.
Anecdotal evidence also suggests that control over the pandemic has been a key factor in supporting a recovery in operating conditions, as increasing case numbers had been seen in the previous survey period.
With the recent reduction in cases, client demand increased, leading to a ‘solid’ increase in new orders. Alongside this growth, production expansion was also registered, along with new business from abroad increasing for the first time since January.
Speaking on the positive impact of controlling the virus, IHS Economics Director, Andrew Harker, commented:
“After a rise in COVID-19 cases in late-July and early August briefly threw the sector’s recovery off track in August, the September PMI results were much more positive.”
“With control of the pandemic regained, firms saw an influx of new orders, ramped up production and were at their most optimistic for over a year. As ever though, sustaining these positive trends is dependent on virus cases not picking up again.”
Philippines regains stability
On a more tentative note, Filipino data indicated that operating conditions for manufacturers had returned to something broadly resembling stability.
While at a marginal pace, new orders rose for the first time since February – led by improving customer demand as more part s of the country’s economy reopened due to the easing of Covid restrictions. Similarly, business sentiment improved to its highest point since February, with upbeat forecasts attributed to hopes of rising demand and Covid becoming a thing of the past in the not-too-distant future.
Meanwhile, output fell to its weakest level in three months, though this, also, was only a marginal change. However, unemployment continues to expand at a notable rate, which manufacturers often link to non-replacement of voluntary leavers and sufficient capacity. Further, cost burdens rose as shortages led to higher prices, and respondents only partially passing on higher costs to clients, due to market pressures forcing them to keep prices competitive.
Following a downturn, with 47.3 points in August, September saw a very slight return to positivity, with Philippines manufacturing PMI rising to 50.1. This latest reading represents extremely modest expansion, and its the highest since conditions were last stable in the goods producing sector, back in February.
IHS Markit graphic and Philippines PMI data
Talking on potential improvements in operating conditions, IHS Economist, Shreeya Patel, commented:
“According to firms, the ongoing restrictions related to the COVID-19 pandemic continued to limit the performance of the sector, with some businesses forced to pare back operations.”
“On a more hopeful note, stronger business sentiment and efforts to rebuild stocks suggest panellists are preparing for an improvement in demand over the coming months, although optimism continues to rest on the development of the pandemic.”
Myanmar hampered by a surge in Covid cases
Unfortunately unable to gain traction away from Covid was Asia’s sixth-fastest-growing economy, Myanmar, whose manufacturing PMI suffered as performance indicators were scuppered by a resurgence in new cases.
With factories temporarily closing to combat the spread of the virus in September, both output and new orders ‘declined rapidly’ according to IHS Markit. Alongside these considerations, a deterioration in business conditions, and contraction in workforce numbers, both saw the July-August recovery stopped in its tracks.
As stated by IHS, Myanmar manufacturing PMI fell from a 15-month-high in August, at 53.2 points, to 35.9 in September – representing a notable contraction.
IHS Markit graphic and Myanmar PMI data
This new figure is the second-lowest recorded in the country since the IHS survey began in December 2015, and only above April’s score of 29.0, when the virus was at its peak. Further, the month-on-month decrease of 17.3 points is actually the largest on record, and even more severe than the previous record of 16.3, witnessed between March and April.
According to IHS, four out of five of the PMI indicators had negative trajectories in September, with the exception being suppliers’ delivery times. Output and orders declined at their second fastest rate since the group’s surveying commenced, with these indices both recording month-on-month declines of over 28 points.
Speaking on a bleak month for Myanmar manufacturing, IHS Economics Director, Trevor Balchin, stated:
“The impact has so far been less severe than the record deterioration in business conditions seen in April. But the month-on-month decline in the PMI was the largest on record as it collapsed by over 17 points from August’s 15-month high of 53.2 to 35.9.”
“With a two-week lockdown introduced in Yangon towards the end of September, the trajectory in cases over the coming weeks will be crucial as authorities judge when to ease the new restrictions and enable the manufacturing sector to resume its recovery. The October PMI will provide the first signs of any rebound in activity, or indeed further retrenchment.”
Ocado’s share price (LON: OCDO) has soared 155% since March and the retailer has overtaken Tesco as the UK’s most valuable retailer.
Thanks to its rising share price, the group is now raised at £21.7bn, £0.7bn higher than Tesco.
In the three months to the end of August, sales at Ocado soared 52%.
Neil Wilson, the chief market analyst at Markets.com, commented on the market valuation: “Ocado holds enormous promise but whether it can deliver is quite another matter, the cash burn remains and the payback from all these overseas deals is taking a very long time.”
The retailer “has rocketed this year thanks to the boom in online retail”, but a problem is “setting up fulfilment centres costs a lot and the returns are slow.”
Whilst Tesco controls 26.8% of the UK’s grocery market whilst Ocado has just 1.7%.
Ocado’s share price has particularly taken off since 2017 when the group has landed various deals with Kroger, Sobey’s, ICA Group, and Casino.
Tesco’s online sales have surged over lockdown, however, the share price has remained unfazed due to “worries about price wars”.
“We think that working from home, the collapse of [eating out] represents a step change, not just this year but ongoing,” he added about Ocado’s share price.
Shares in the group jumped after the group switched to groceries from Marks & Spencer. Sales also surged 50% in the third quarter.
Ocado shares (LON: OCDO) are trading -5.17% at 2.602,00, whereas Tesco shares (LON: TSCO) are -1.18% 210,00 (1431GMT).
UK-based soft drinks producer, Britvic plc (LON:BVIC), saw its share price fall on Thursday as it announced the sale of three of its bottling facilities in France.
The company confirmed that having received approval from the French Competition Authority in July, it has now completed the sale of its its juice assets in France to Refresco.
The company said that the sale includes the three juice manufacturing sites, the related private label juice business and the Fruité brand.
Britvic stated that it has retained the ownership of the Pressade and Fruit Shoot brands, which it said would be manufactured by Refresco as part of a long-term partnership.
It continued by saying that this transaction will not impact its Teisseire and Moulin De Valdonne brands, or the private label syrups business, all of which are made at its production site in Crolles.
The company’s statement continued by saying that:
“This transaction supports our stated strategic priority to improve operating margins in our Western European markets, while also enables our teams to focus on growing our soft drinks portfolio of local favourite and global premium brands.”
Following the update, the company’s shares dipped by 6.27% or 51.50p, to 769.50p a share 01/10/20 13:00 GMT. This is shy of analysts’ consensus target price of 880.91p a share, which would represent a 14% upside on its current level.
At present, the Marketbeat community has a 54.23% ‘Underperform’ stance on the stock, with the company’s p/e ratio standing at 13.73, just above the consumer defensive sector average of 13.64.
Bahamas Petroleum Company (AIM:BPC) saw its shares lose the gains it earned the previous week, as its placing of 475 million new ordinary shares diluted the price.
The company noted that the share placing had been a success, with £9.5 million being raised through shares issued at a price of 2.00p apiece.
Bahamas Petroleum stated that the proceeds from the placing would enhance its funding capacity, and would help cover the costs of its Perseverance #1 well. Which, as we previously reported, is set to by spud before the end of the year, with a resource target of 0.77 billion barrels of oil.
The company added that its rational for the recent placing was its continuing effort to optimise its funding strategy, with a push towards lowering the cost of capital, along with less aggregate dilution and greater certainty.
Based on the placing proceeds, existing cash balance, and conditional convertible notes, the company said that it doesn’t expect it will have to draw further on its previously announced £16 million zero-coupon, second ranking convertible bond facility – unless changes occur to the cost of Perseverance #1.
Investor notes
Speaking on the company’s drive to have the sufficient funds necessary to fulfil its technical objectives, Group CEO, Simon Potter, commented:
“Today’s placing is another milestone in the implementation of that funding strategy. The placing proceeds, being certain, immediately available and at a known dilution compared to other existing funding options, give us the opportunity to simplify the capital structure of the business whilst leaving us in a much stronger overall financial position. With the success of the placing we are also able to materially reduce the need to rely on other previously announced financing instruments, without affecting our overall ability to proceed with Perseverance #1 or other aspects of our recently enlarged business.”
“At the same time, with a view to continually seeking to strategically enhance the overall financial and operating capacity of the Company, we continue to consider a wide range of other funding options. Many of these are newly available to us consequent on the broadening of our asset base in recent months.”
Investor notes
Following the placing, Bahamas petroleum shares dipped by 20.98% or 0.59p, to 2.21p apiece 01/10/20 12:00 GMT. This is up from its yearly nadir of 1.20p in March, but far short of its recent high of 3.53p in June.
The company currently has a p/e ratio of -9.33, and was given a 55.65% ‘Underperform’ rating by Marketbeat‘s community.
Connect Group shares (LON: CNCT) jumped over 20% on Thursday’s opening as the group revealed a trading update.
The final quarter of the group’s fiscal year had been stronger than management had anticipated.
Underlying earnings for the fourth quarter ending August 29 came in at £10m. As a result, Connect Group now expects to deliver underlying earnings for the full year of between £38.5m and £39.0m. This is above the top-end of the previous guidance announced earlier this year.
Commenting on the latest trading update, Jonathan Bunting, Interim Chief Executive Officer, said:
“The Group has made good progress in the delivery of its core objectives in the period, continuing to drive efficiencies in Smiths News while completing the strategic review of the Tuffnells business and its subsequent disposal on 2 May 2020. The removal of the drag on profitability and cash, and the alignment to our core expertise, will strengthen and focus the Group going forward. The COVID-19 pandemic will clearly have a material impact on the Group’s performance in the second half of the year, the quantum of which remains unclear.
“However, our markets and business model are well placed to recover as lockdown restrictions ease. In the current environment, we are applying that same focus to our vital role in supplying our retailers and their communities across the UK. Colleagues across the Group have been steadfast in their commitment to these goals; their safety and wellbeing, together with that of our customers, remains our top priority at this time,” Bunting added.
Connect Group shares (LON: CNCT) are currently trading +21.34% at 22,60 (1045GMT).
