Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
There’s a Q1 trading update out from Unilever [LON:ULVR] this morning, with the company acknowledging a dramatic change in the operating environment as a result of the COVID-19 pandemic. However headline Q1 sales are unchanged and the company intends to pay a quarterly dividend in June. By sector, the Home Care division has put in the strongest performance, whilst perhaps surprisingly the Food & Refreshment division has contracted, although it was the “sell-in for out of home consumption” category that caused the disruption here (distributors didn’t want to commit to buying ice cream stock). Changing demand patterns like this will pose a challenge for the business, but its multi-sector diversification and strong balance sheet should offer some support.
Compass Group [LON:CPG] has published a COVID-19 update which contains some interesting information. The business is currently 45% open, with divisions such as healthcare, offshore and defence still running at full capacity. Dividend payments have however been suspended and the amount of debt being carried by the company may be a case for concern by some. The business does have a strong credit rating and has already tapped the Bank of England’s CCFF. Again diversification, this time across so many industries, could prove to be the company’s salvation, but it’s the speed with which many operations come back on-line that will be most keenly followed by investors.
Meggitt [LON:MGGT] has also published a Q1 trading update to the market, noting that whilst performance was ahead of expectations, the impact of the COVID-19 pandemic is now starting to be felt. Civil aviation operations are likely to be impacted in the medium term as demand for air travel slumps, although the company’s exposure to defence – which accounted for 36% of revenues last year – is seen as providing some valuable diversification. Headcount has been reduced by 15% and other cost saving measures are also being deployed. The company notes that it had £668m of liquidity headroom at the end of the quarter.
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