Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Transport operator First Group [LON:FGP] has published a note this morning, responding further to the support which has been offered by the UK government to the sector. This covers a 12 week period starting mid-May and is designed to ensure that plans to socially distance passengers don’t compromise financial performance. Perhaps more interesting however is the note on how the business has performed in April, where cash generated by operations of the Road division and the Group as a whole was positive and ahead of projections for the month.
Airline stocks have soared this week with easyJet [LON:EZJ] being no exception, after equity in the company booked more than a 25% gain since Friday night’s close. An update on capacity and cost structures has been published today, which arguably provides a useful piece of expectation management, noting that capacity in Q4 – August through October – will be 30% of that seen a year earlier, and the recovery will take until 2023. A further £500-£650m worth of cash is set to be generated by the sale and leaseback of aircraft and cash burn is in line with expectations. The protracted pace of the recovery means that staff numbers are set to be reduced by 30%, with consultations starting in the coming days. Flights are set to resume in just over two weeks’ time.
Keeping with transport, Stagecoach [LON:SGC] has also produced a trading update this morning which again shows the industry navigating the public health crisis well. Sales at regional bus operations are currently just 17% of where they were a year ago, and the business acknowledges that COVID-19 will have a lasting effect on consumer behaviour. However, liquidity remains strong and has encouraged the company to increase its capex plans for the year ahead. Uncertainty remains with regard to the outlook, but this is certainly a sector which the government has put its support behind so far.
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