Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Pearson
Educational publisher Pearson LON:PSON has published a trading update this morning. Although the company’s shift to online learning by some accounts should position them well for the COVID19 lockdown, assessments are still conducted at secure test centres. These have also been shuttered until mid-April and each month of closure is expected to take a £25m-£35m toll on profitability. Over the longer term however, this is arguably a company that could be well positioned if the current health pandemic results in significant shifts in behaviour – one of which could be wider adoption of distance learning.
Associated British Foods
Associated British Foods LON:ABF has confirmed that having closed down its Primark shops across the UK, the entire franchise – 376 stores across 12 countries – are now shuttered. Through government subsidies and deals with landlords, the company expects to be able to recover 50% of operating costs during the closure period although suppliers are suffering as no new goods orders will be placed. The company is keen to stress that its balance sheet remains robust and that there has been no material impact on other business divisions, but Primark accounts for well over 50% of profits at ABF, and the division has no online sales capacity, either.
ITV
Broadcaster ITV LON:ITV also updates the market today and although a massive increase in working from home could be seen as being good for advertising revenues, the closure of shops and entertainment venues means that the appetite for promotion is lacking. What’s more, government guidance on working means the ability for ITV studios to produce new work is being curtailed, too. On the plus side, the business does have a variable cost base and also owns a significant library, which is expected to see renewed demand from broadcasters. The uncertainty has however seen the company withdraw its guidance for the full year and is proposing the suspension of dividends.
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