Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Rolls Royce
There’s an interesting trading update out of Rolls Royce [LON:RR] this morning, acknowledging the impact of COVID-19 on its business whilst also noting its worthy involvement in the UK ventilator campaign. The company has been through a series of battles in recent years, but finished 2019 in good shape financially. This could prove fortuitous, given the revenue streams that come by renting aircraft engine use on an hourly basis to many airlines. The company notes however that it currently has some £6.7billion worth of liquidity and the full year dividend payment is also set to be suspended in a bid to further conserve cash. Defence activity remains in line with expectations, but power systems are set to be pressured by the weaker global economic outlook and low oil prices hitting demand from the petrochemicals sector.
MJ Gleeson
MJ Gleeson LON:GLE has also issued a trading update, with the builder of low-cost homes furloughing 76% of its staff on the government scheme. The company is also taking the move to top up these salaries to between 80% and 95% of regular wages. Board members have taken a 30% salary cut and this will be in effect until the end of May. The business is naturally keen to restart sites once it is appropriate to do so, but critically it’s the company’s focus on the lower-priced end of the market that could make this an interesting play once there is some clarity over the economy going forward.
The Restaurant Group
The Restaurant Group LON:RTN is another company publishing an update this morning, advising that there will be no covenant test at the half year point and that Santander have granted the Wagamama brand a further £15m revolving credit facility. Directors have taken pay cuts and waived bonus entitlements for the year and although comments appear about “right sizing” the business, there are few clues as to what the company may look like in a post COVID-19 era. The casual dining sector had been struggling as a result of overcapacity for many years – it’s difficult to imagine that this won’t prove a trigger event for reducing the number of chain restaurants, but TRG is offering no clues yet as to what the business may look like in the future.
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