Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
There’s an update from SSP [LON:SSPG], the operator of retail franchises as rail stations and airports worldwide, out this morning. This is a business which has been hit hard by the COVID-19 outbreak, as passing traffic has simply dried up. Based on the last week like for like revenues in the UK and Europe are some 85% lower than they were a year ago, a picture which whilst not quite as marked is played out in other territories, too. For March alone, this is expected to take £50-£60m off operating profits. The company can take advantage of government support initiatives globally, has arranged a new financing line worth more than £100m with its banks, has suspended the share buyback and is also cutting dividends, but a decision to raise fresh capital has also been announced, possibly in a bid to be at the front of what could be a long queue. Directors and senior managers have collectively pledged £760,000 to the cap raise, which at least shows their confidence that normality will return in the not too distant future.
Housebuilders have had a good run over the last decade but the COVID-19 outbreak has hit the sector too. However with healthy balance sheets and the expectation that demand for new houses will remain, Persimmon [LON:PSN] is battening down the hatches this morning. Work on construction is being wound down, and the interim dividend due next week is being suspended. Given this stock was such a dividend centric play, the short term impact could be quite pronounced, but those underlying reserves seem weighty.
United Utilities [LON:UU] has had a comparatively rough ride over the last month, especially given its defensive play status. Shares have tracked the market lower, possibly with some hints of outperformance, but today’s trading update ahead of the March 31st year-end lays a few points bare. Most notably that revenues are fixed by regulators for the next five years, with any shortfall being recoverable thereafter. Whilst there’s perhaps some very high level macroeconomic risk in the longer term, ultimately shares in these utility companies all too often look more like bonds than stock.
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