26th Jun 2020 11:23
(Alliance News) - The following is a summary of top news stories Friday.
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COMPANIES
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Tesco said higher volumes and business rates relief in its first quarter only partly offset the costs from kitting out stores to comply with Covid-19 measures and from increasing online capacity. Total sales in the 13 weeks ended May 30 increased by 8.0% to GBP13.38 billion, a 7.9% like-for-like increase. This was most pronounced in the UK and Republic of Ireland, where sales were up 9.2% at GBP12.21 billion and up 8.2% like-for-like. Online capacity increased to 1.3 million slots per week from 600,000, and the current sales run rate online indicates around GBP2 billion of sales growth in its current financial year ending ending February 2021. However, Tesco Bank struggled in the period, with sales down 27% at GBP198 million as activity reduced and its travel money business had to close temporarily, while ATM income was sharply reduced. Furthermore, due to the pandemic and its associated control measures, Tesco had to make "significant changes" to its operations resulting in "a substantial increase in costs" mainly in the UK. Most of these costs are from payroll, including provision of 12 weeks' paid leave to 26,000 vulnerable employees, as well as recruitment of 47,000 temporary workers to cover absence and meet higher demand.
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Gambling firm 888 Holdings said adjusted earnings before interest, tax, depreciation and amortisation for 2020 will be ahead of previous expectations following a strong year-to-date trading performance. Average daily revenue in the year-to-date has been 34% higher than the prior year, the company said, due to increased levels of customer acquisition during the second half of 2019 and the structural shift towards online gaming accelerated by the Covid-19 pandemic during recent months. Gibraltar-based 888 said that despite the encouraging trading momentum it remains "mindful" of possible headwinds in the second half of the year including the potential for a period of prolonged global economic uncertainty that could impact discretionary spending by consumers.
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Engineering firm Weir Group completed the refinancing of its main banking facilities with a syndicate of 12 global banks. The facilities comprise a new USD950 million revolving credit facility which will mature in June 2023 with the option to extend for up to a further two years and a new GBP200 million term loan, which will mature in March 2022. Weir said its covenant terms remain unchanged and noted it continues to be "highly" cash generative and has a "strong" liquidity position - which includes about GBP500 million of immediately available committed facilities and cash balances. Turning to trading, Weir said Minerals business continues to show "resilience" in the second quarter, with aftermarket orders similar to the first quarter. Its ESCO unit has shown "resilience" but has seen customers run down ore stockpiles. In Oil & Gas, Weir saw a "significant" step-down in North American activity levels in during the quarter.
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easyJet signed a sale and leaseback agreement for six Airbus A320neo aircraft for cash proceeds of USD255 million. The aircraft will be sold to leasing company SMBC Aviation Capital and leased back for terms of between 110 and 122 months, the low-cost airline added. The lease obligations is expected to total GBP155 million. Proceeds, which make up part of the expected GBP500 million to GBP650 million in funding from sale and leasebacks announced by the company in May, will be used to maximise liquidity and further strengthen easyJet's financial position.
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Luxury carmaker Aston Martin Lagonda plans to sell new shares totalling up to 19.99% of its current issued share capital in an attempt to secure enough cash to "successfully emerge from the extended Covid-19 lock-down". At its current market capitalisation of about GBP900 million, the share offer could raise up to GBP170 million. Aston Martin completed a GBP536 million rights issue back in April. The price at which the new shares are to be sold will be determined at the close of the bookbuilding process, the luxury carmaker said. "The directors of the company are confident that this additional flexibility will allow the company to pursue its strategy to realise its full potential to operate as a true luxury company and remain focussed on ensuring the company builds the appropriate capital structure for the longer term," Aston Martin added. Yew Tree Overseas has agreed to subscribe for 25% of the placing and Prestige Motor will buy 7.8%. Separately, Aston Martin said its retail sales in the second quarter were hit by the Covid-19 disruption. Wholesales are expected to be lower in the second quarter than in the first quarter and wholesale average selling price will continue to suffer from its de-stocking process.
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MARKETS
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London was seeking a strong end to the week for stock prices, but Wall Street futures were painting a red open, and stocks in Asia returned a mixed session overnight.
"Governments and central banks continue to shield equities from the bad news on fresh spikes in coronavirus and evidence of the economic damage wrought by the pandemic," AJ Bell Investment Director Russ Mould said. "The upcoming second quarter results season could result in a collision with reality as the impact of Covid-19 really hits corporate profits."
The Dow Jones Industrial Average is pointed down 0.3% and the S&P 500 down 0.1%, but the tech-heavy Nasdaq Composite is set op open slightly higher.
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FTSE 100: up 1.4% at 6,234.93
FTSE 250: up 1.0% at 17,278.09
AIM ALL-SHARE: up 0.6% at 888.82
GBP: soft at USD1.2392 (USD1.2405)
EUR: firm at USD1.1225 (USD1.1216)
Gold: higher at USD1,762.50 per ounce (USD1,760.11)
Oil (Brent): up at USD41.50 a barrel (USD40.44)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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The worst of the economic crisis unleashed by the coronavirus pandemic is likely over, European Central Bank chief Christine Lagarde said, warning that the new normal will look very different from what was before. "We probably have passed the lowest point. I say that with some trepidation because of course there could a severe second wave if we learn anything from the Spanish Flu," she said at an online conference. "We are not going to return to the status quo. It's going to be different. The recovery is going to be incomplete and transformational."
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The US Federal Reserve ordered 34 major US banks to suspend share buybacks in the third quarter and limit dividend payments to shareholders. The decision is the first such move since the global financial crisis 12 years ago, and limits how banks can spend their capital amid the coronavirus pandemic that has caused a sharp economic downturn. The announcement came as the US central bank announced the results of its banking system stress tests for the year, along with additional checks in light of the pandemic. "For the third quarter of this year, the Board is requiring large banks to preserve capital by suspending share repurchases, capping dividend payments, and allowing dividends according to a formula based on recent income," the Fed said in a statement. The stress test results varied depending on the severity of the downturn modeled, but Fed Vice Chair Randal Quarles said the outcomes were generally positive.
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The US battled a resurgence of coronavirus cases in a number of states including Texas, while the World Health Organization warned that several European countries were also facing dangerous upticks. The pandemic – which has claimed more than 480,000 lives around the world – continued to pummel Latin America. Brazil, the hardest-hit country in the region, had close to 55,000 deaths and 1.2 million infections, while Mexico on Thursday surpassed 25,000 fatalities. In the US, after hitting a two-month plateau, the rate of new cases is now soaring in the south and west, with the confirmed infection rate nearing levels last seen in April. Texas was among the most aggressive states in reopening in early June. US health officials now believe based on antibody surveys that some 24 million people may have already been infected – 10 times higher than the officially recorded figure of around 2.4 million.
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UK car manufacturing output fell 95% in May, according to figures released by the Society of Motor Manufacturers & Traders on Friday. The SMMT said just 5,314 vehicles were completed in what was the worst May since 1946. A total of 4,260 cars were exported in May, most into the EU, the US and China. With English car showrooms not reopening until June 1, only 1,054 models were built for domestic buyers. In the first five months, UK factories turned out 324,763 cars, representing a decline of 42% on the same period in 2019, a decline of more than 230,000 vehicles. Moreover, the full-year outlook now expected to be fewer than one million units.
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A few weeks before a crucial EU summit, France does not yet see that a compromise on the bloc's post-pandemic reconstruction plan worth EUR750 billion euros is within reach. "We are not there yet," a source from President Emmanuel Macron's office said on Thursday evening. On Monday, the 42-year-old French leader plans to discuss the strategy for overcoming the severe economic crisis caused by the coronavirus pandemic, which also includes the multibillion-euro EU economic and investment plan, with German Chancellor Angela Merkel near Berlin. The EU-wide summit is scheduled for July 17 and 18 in Brussels. The reconstruction fund is rooted in an initiative by Macron and Merkel which for the most part provides for grants to EU member states. It is important to come to an agreement in July, the source at the Elysee Palace said, so that Europe can show that it is efficient and determined to quickly reach an agreement between the 27 EU countries.
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