Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Hollywood Bowl
Hollywood Bowl, the ten pin bowling operator, has announced a proposed placing this morning. The success of the bid to raise £10.9million will be closely followed by many – this is a company that sits squarely in the discretionary spending end of the market and was already using a lot of its debt facility. The company has cut all unnecessary spend and pared back wages, as well as triggered the use of the various government facilities, but with the lockdown extended for a further three weeks and talk of social distancing having to remain in some form until a vaccine is found, is there just too much uncertainty in play here? The market’s response will be telling.
Foxtons
A Q1 trading update from Foxtons notes that performance for the first 11 weeks of the year was in line with management expectations, although there has been an inevitable impact on trading in response to the COVID-19 lockdown. It’s too early for the company to make assessments over the outlook, but commissions in the first three weeks of the lockdown were off by 47% year on year. Given the property market is essentially shut, this could end up looking overly optimistic, however the business is cash positive, has a £5m credit facility and has also announced a bid to raise fresh capital. There’s a concern that if the lockdown lasts until August and the London property market is slow to rebound thereafter then the business could face a liquidity gap. The £22m cash call is designed to pre-empt any shortage there. Again, investor demand will be closely followed, but people will always want somewhere to live…
Covid Corporate Financing Facility
Reassurance from both Whitbread and Associated British Foods this morning, with both companies issuing notes confirming that they qualify for the Bank of England’s Covid Corporate Financing Facility. Neither suggest that they need to tap these funds yet, but such announcements perhaps offer investors some guidance that other options beyond a rights issue are on the table if funding becomes necessary.
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