ITV advertising demand plummets during coronavirus lockdown
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.
Oil shares help lift FTSE 100
The FTSE 100 rebounded on Tuesday in a global risk on rally sparked by optimism around the economic recovery from coronavirus.
The FTSE 100 rose over 1.9% to 5,860 and oil prices jumped with WTI up 14% and Brent up over 10%. Any increase in economic activity has the potential to avert an oil storage crisis and lift prices further.
Oil majors BP and Shell added a significant number of points to the FTSE 100 as they both posted intraday gains in excess of 8% in afternoon trade on Tuesday.
In addition to a strong rally in oil companies, financials and industrial shares posted strong gains in a broad rally with Melrose rising 5% and Barclays 3% higher.
Many countries have begun to reopen their economies or at least laid out plans for a gradual move back to some form of normality.
Any reopening of economies will have a significant impact on demand that’s been obliterated by lockdowns in the world’s leading economies.
However, the optimism in markets came during a raft of poor economic data from the United States confirming coronavirus had caused huge disruption in the manufacturing sector.
Despite the poor data, markets rallied on optimism surrounding a broad reduction in the number of new coronavirus cases and what it could mean for economic data in the coming months.
“If things continue to improve – the number of cases fall and governments reopen economies to some extent – then, while this might be a very deep recession, it might also be a very short one, so there is reason to think that stock prices will look past a short period of very bad economic growth,” said Simona Gambarini, economist at Capital Economics.
Equity markets also shook off negative comments from investor Warren Buffett who has recently sold off all Berkshure Hathaway’s airline holdings saying the economy wouldn’t return to what it was before COVID-19 for many years and airlines would feel it the most.
Power Metal Resources rated ‘buy’ at First Equity
Power Metal Resources (LON:POW) has received a buy rating from city brokerage First Equity.
Analysts wrote in a note that the company’s ‘swift’ expansion of activity in its Australian gold projects as the driver behind the rating.
Power Metal Resources has just made three new exploration applications for its 49.9% JV which would increase the acreage to 714km.
“It was only six days ago that POW first announced its entry into Australian gold exploration with the JV partnership with Red Rock Resources, which now provides investors with a broader exposure beyond African focused battery metal targeted commodities, along with one early stage US gold interest under due diligence,” First Equity wrote in a morning note.
“The new licence applications in Australia gives’ POW a sizeable footprint in a prolific gold mining district, near to the producing Ballarat mine, which currently produces 40,000 ounces of gold per annum at an average grade of 5.6 g/t.”
“POW will be able to analyse and study a wealth of historic exploration data from previous licence holders as part of an extensive desktop study ahead of the new licence applications being approved, to plan its first exploration campaign over the properties.”
Power Metal Resources shares trade on London’s AIM market and have a market cap of £1.8m.
The Royal Dutch Shell share price is still attractive despite the dividend cut
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.
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.
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.
British Honey sanitiser sales ‘exceed all expectations’
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”.
FTSE 100 travel shares crash offsetting gains in cyclicals
Shares in FTSE 100 travel shares fell sharply on Monday as London’s leading index managed to carve out small gains drive by cyclical shares.
easyJet (LON:EZJ) was the FTSE 100’s top faller, down 9.8% going into the close. Peer International Consolidated Airlines (LON:IAG) was also weaker, off by 4.5%. Shares in Cruise operator Carnival (LON:CCL) sunk by 2.6%.
The FTSE 100 was largely unchanged on Monday in a choppy session after the market had the weekend to digest news US-drug maker Gilead’s positive trials of experimental drug Remdesivir.
“We’ve seen a tale of two halves for equities. It started on a strong note but markets fell back towards week-end and are down again today. The initial gains were driven both by the tentative easing in lockdowns now underway in much of Europe and some states in the US and encouraging drug news,” said Rupert Thompson, Chief Investment Officer at Kingswood
“A new trial showed the drug being developed by Gilead to treat seriously ill coronavirus patients is in fact of some use, in contrast to an earlier study concluding it wasn’t. Either way unfortunately, this drug is not really a game changer and the holy grail of a vaccine continues to look very unlikely to be developed until next year at the earliest.”
BP and Royal Dutch Shell were among the top risers and helped the FTSE 100 post gains due to their large weighting in the index.
The FTSE 100 was trading at 5,778, up 12 points just after 4pm on Monday.
Bushveld Minerals sales and production increases despite lockdown
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.”
IG Group CEO interview: ESG, diversity and IG’s Brighter Future programme
In an interview with UK Investor Magazine, IG Group’s CEO, June Felix, discusses IG’s work in the community and how the online trading company is balancing shareholder returns with making a positive impact on wider society.
What steps are you taking to ensure IG’s core business is providing a positive impact to the UN’s SDGs? In line with the UN’s Sustainable Development Goals and our own well-established purpose and values, it’s important that IG shows it is a responsible company. Most notably, we have committed to helping the most vulnerable children in the markets in which we operate by improving their access to a good education and future opportunities. The creation of IG’s Brighter Future programme, the related IG fund and our international partnerships means we can help young people in society to reach their full potential, irrespective of gender, colour, race, sexual orientation or socio-economic background. This work is based on meritocracy, giving people the right environment and the right tools to succeed. This is a core part of our purpose and values as a company, empowering and educating our clients to succeed in executing their trading strategies. One of IG’s key measures is revenue per client, how are you balancing this with the need to facilitate financial inclusion in the community? Our clients are very sophisticated, financially savvy and risk aware, who want access to trade 24 hours a day in 16,000 markets globally on our platform. Our products are not for everyone. We have a very rigorous selection policy for our clients testing them based on appropriateness, market knowledge and if they have the financial means to trade markets. For some potential clients we have to say unfortunately we are not the right platform for you. The key measure for IG is actually delivering the world’s best trading experience because it ensures strong client loyalty and longevity in our relationships. Within the UK, 68% of our revenue is generated by clients who have been with IG for more than three years. Our business model is always aligned with the interests of our clients. For instance, we think it’s important that we execute our client orders first and then we hedge, so we are not on the other side. The establishment of the IG Brighter Future programme and our ongoing partnership with organisations like Teach First reflects our commitment to inclusion. When our employees go into the schools we partner with they are helping build understanding of global markets and economics, improving financial literacy at the grass roots level. IG offers clients synthetic tradable indices such as the Cannabis Index and Crypto Top 10 Index but nothing related to Impact Investing or ESG, what is the thinking behind this? Our traders choose to come to IG to express their ESG views because we offer access to over to 470 ‘socially responsible’ ETFs. All these are listed in full on our public website. Is there more you feel IG can do to boost your ESG credentials? ESG is a powerful discussion in boardrooms globally. Last year we established our Brighter Future programme as part of our overall ESG workstream because we recognise that society, our shareholders and our employees expect us to focus on this agenda. We polled 1,900 IG employees globally on what our initiative should focus on and the overwhelming feedback was on helping the environment, helping improve access to education and to improve social mobility. The launch of the Brighter Future programme was just the start; we continue to address the environmental impact of our offices globally and are working to be a carbon neutral firm in FY2020. Our existing partnership with Teach First is improving the educational opportunities available to the least privileged children in UK communities, particularly by helping to train teachers in “STEM” subjects. I’m also very excited that we’ve hired our first-ever dedicated ESG manager, who joins next IG week, to really drive our ESG agenda and all our related new initiatives. The launch of the Brighter Future Fund coincided with a trading statement revealing higher revenue due to volatility from coronavirus. If the coronavirus crisis had not occurred, how different would the Brighter Future Fund look in terms of size and focus? I’m sure we all wish the coronavirus had not occurred, given how much uncertainty and sadness it has brought. We are all facing these exceptional times together, be that as corporates or individuals, within the wider communities we are part of. The IG Brighter Future Fund reflects our wish to help others in an extreme time of need and on a scale never experienced in our life time. What’s made me so proud has been the work of our colleagues globally, who are doing what they can to help others in this crisis; by raising money to help fight the virus, supporting local food banks or providing medical supplies for staff in their local hospitals. As a leadership team, we knew immediately we had to make a swift and positive contribution but one that also reflected the priorities of our Brighter Future programme. We decided the best way to do this was to launch our fund, and provide support to Teach First and other international partners to help the most vulnerable children deal with the fallout from the virus. Our extended partnership with Teach First will go directly towards the education of upwards of 40,000 pupils in over 100 UK schools most impacted by COVID-19. Only 31% of IG’s employees were female in 2019, up from 30% in 2018. Many of the UK’s major financial institutions are close to a 50/50 split and some banks employ more women than men. Why is IG so far behind? Improving our gender balance is a key part of our internal ONE IG goals, which focus on inclusion, diversity and collaboration. A large proportion of our workforce are in technology roles, which given the proportion of male to females in technology generally, provides the backdrop to our current diversity ratios. We are undertaking several partnerships with external organisations such as Code First Girls and TechSheCan to support women changing careers and encourage more women into STEM subjects at grassroots level. We also have a vibrant and active women’s network, which is integral in how we attract and develop female talent within IG. In the past 12 months we have welcomed several senior women to our key Executive roles in UK, Europe and Asia proving we are tackling this top-down as well as bottom-up. As a female CEO I am proud that 40% of our executive committee members are female, and over a third of our board members too. However, there is always more work to be done to improve diversity in the City, be it gender, ethnicity or socio-economic backgrounds.
RBS profit halves on COVID-19 provision
RBS (LON:RBS) shares rallied on Friday after the UK bank revealed a 49% decline in first quarter profit due to provisions for bad loans related to the coronavirus pandemic.
RBS set aside £800m to deal with the impact of coronavirus meaning first quarter profit fell to £519m, down from £1,013m in in the same period a year prior.
RBS shares rallied despite the sharp reduction in profit with shares up over 2% at 112p in the first hour of trading on Friday.
Investors may have taken heart from the fact that if RBS had not set aside £800m to deal with COVID-19, the bank would have actually had a very stronger quarter and been well ahead of last year’s profitability.
Barclay’s shares rallied in a similar fashion after their first quarter results. The absence of significant PPI provisions were just starting to become evident in bank’s earnings and this combined with strong underlying earnings would have made the banks an attractive prospect.
However, bank COVID-19 provisions have almost wiped out profit for the first quarter so investors will now have to focus on whether there will be further provisions in the second quarter.
Commenting on the operations of RBS, the bank highlighted a successful shift to working from home despite managing to keep 90% of their branches open.
“We remain available to support as required; our systems remain robust and we have ensured that more than 90% of our branch network remains open, alongside our telephone, internet and mobile app channels. Across the Bank, over 60,000 colleagues, including those working in call centres, are now set up to work from home. Additionally, the Bank has committed to support special leave with full pay for all colleagues for six months as required,” RBS said in a statement.
RBS also pointed to increased capital ratios due to the scrapping of the dividend. A CET1 ratio would support the resumption of dividends if this can be maintained through the crisis.
“Following significant capital strengthening in recent years, the Bank is currently in a strong position to deal with a likely significant economic downturn. The CET1 ratio increased to 16.6% in the quarter following the cancellation of proposed dividend payments partially offset by the impact of increased RWAs. The Liquidity Coverage Ratio (LCR) remains strong at 152%.”
NatWest Markets also released a first quarter updated which pointed to disruption due to COVID-19 but largely had a strong quarter with income rising to £385m.