Thursday trading starts with another huge sell-off gripping UK markets as investors scramble for safety assets and ditch higher risk shares. The benchmark FTSE 100 index continued to plunge in early trade having fallen to its lowest point in four years when it closed yesterday.
At 9am, the FTSE 100 had slumped nearly 6% at 5,530.86 as the UK implements its ‘delay’ plan in response to the accelerating coronavirus outbreak and the US blocks all travel from mainland Europe for the next 30 days.
That plunge wipes more than £92bn off the market value of the UK’s biggest 100 companies.
The FTSE 250 index fell even harder, crashing 6.8% to 16,153.45.
The pound stayed volatile, up aginst the dollar but losing ground against both the euro and the Japanese yen, while oil prices also fell sharply, with more than 5% wiped off the price of Brent crude to $33.96 per barrel.
Unsurprisingly, safe haven gold prices rallied 0.3% to $1,662.5 per ounce, near record highs.
Rishi Sunak's first budget as chancellor, delivered yesterday, has also had an impact as the Office of Budget Responsibility warned the hike in public borrowing will leave the UK ‘vulnerable’ to recession and changing investor sentiment.
FOUL TRAVEL SECTOR
Corporate news gives investor little reason for comfort, with WH Smith (SMWH) issuing a profit warning and property business Intu (INTU) facing the threat of collapse.
WH Smith saw its share price plunge more than 12% to £13.92 after telling investors that sales and profits will miss expectations because of the impact of coronavirus on its business.
The company said there has been a ‘significant impact’ on its high street while its travel division continues to suffer from lower airports footfall as 1,000’s of flight are cancelled.
In Asia Pacific, which accounts for about 5% of its travel division’s revenue, it said it had seen a ‘significant impact on the business since February’, with a ‘material reduction’ in passenger numbers at airports, even outside of the Asia Pacific region.
Airlines fell sharply in early trade led by British Airways-owner International Consolidated Airlines’ (IAG) 12% fall to 350p, with EasyJet (EZJ) and Ryanair (RYA) also well down. Holidays firm TUI (TUI) also slumped, falling 9% to 423.6p.
Oil company Tullow Oil (TLW) slumped 14% to £15.64 after posting a $1.65bn full year plunge in to the red for the year to 31 December 2019.
According to the results statement, Tullow Oil has free cash flow of $355m and year-end net debt of $2.8bn, pushing gearing to roughly two-times net debt/EBITDA as the company faced slumping oil prices and other challenges.
LAKESIDE-OWNER’S £2BN LOSS
Beleaguered shopping centre owner Intu made a loss of £2bn in the year to 31 December 2019, the owner of Manchester's Trafford Centre and Lakeside at Thurrock in Essex blaming the loss on a 23% fall in property values over the year.
The company said that fixing its balance sheet was its top priority but warned that there is a ‘material uncertainty in relation to Intu's ability to continue as a going concern’.
Earlier this year the company approached its shareholders to ask for more money amid a downturn in the retail sector, before abandoning the emergency fund raising because of ‘extreme market conditions’.
Intu shares lost 15% to 4.84p, valuing the property business at just £66m, versus its £4.5bn of net debt.
Cinema operator Cineworld (CINE) warned that it may have to shutdown cinemas en masse in the battle to stop coronavirus spreading, a move that could see the company breach its banking agreements.
The company said that the downside scenario would involve closing all cinemas for between one and three months, and while it currently thinks this is unlikely, it does ‘indicate the existence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern.’
Cineworld reported a plunge in profits for 2019 to $212.4m from $349m after a relatively lacklustre film slate last year hit admissions.
Cineworld shares have collapse by a third, down 34% at 58p. The stock was trading at 10-times that level barely two years ago.
FRAUD UNCOVERED AT NMC
The independent review into Middle East private hospitals operator NMC Health (NMC) has uncovered evidence of suspected fraudulent behaviour in relation to some of the firm's previous financial activities.
NMC has said it is fully committed to investigating these activities and has notified the relevant authorities in the UK and UAE to determine what action they also consider to be appropriate.
NMC shares remain suspended at 938.4p.
Pharma giant AstraZeneca (AZN) saw its share price plunge 5% to £65.93 after it announced the trial of a potential new medicine to treat patients with sensitive relapsed ovarian cancer had failed to meet its primary objective of improving survival rates compared with chemotherapy.
‘The trial did not meet the primary endpoint in the intent-to-treat population of a statistically significant improvement in progression-free survival with cediranib added to Lynparza versus platinum-based chemotherapy,’ the company said.
Independent rail and coach travel platform Trainline (TRN) saw sales jump 24% in 2019 driven by the launch of new services in international markets.
Group net ticket sales of £3.7bn increased 17% year-on-year, while UK consumer net ticket sales increased 24% on the back of strong mobile demand.
But the shares still lost 15% to 333p amid Thursday’s huge market sell-off.
POSITIVES BEING PUNISHED
In a rare bit of positive news, IT outsourcing supplier Computacenter (CCC) reported a rise in profit as acquisitions and strong performances in France and Germany underpinned performance.
An ‘excellent’ performance in France with organic revenue growth of 15.7% and a ‘strong’ showing in Germany, where revenue was up 5.2%, helped offset weakness in the its UK market, the company said.
In 2019, pre-tax profit grew 30.4% to £141m and revenue climbed 16.1% to £5.05bn, yet the stock fell 9% to £13.24, illustrating the markets’ sell first, think later mind set right now.
Steam systems engineering firm Bodycote (BOY) said it would not pay a special dividend this year as it looked to complete its acquisition of Ellison Surface Technologies. The company also reported a fall in annual profit as revenue and margins declined amid a ‘challenging’ year, leaving the shares 14% down at 552.5p.
International real estate adviser Savills (SVS) reported a 10% boost in revenue in 2019 driven by strong performance in its ‘less transactional’ business lines.
Pre-tax profits at the firm remained stable at £143.3m in 2019, compared with £143.7m a year earlier. Its shares still fell 7% to 929p.
Savills also unveiled the small acquisition of Macro Consultants.
Finablr (FIN), the owner of money exchange platform Travelex, is facing a cash flow crunch as the travel clampdown its bonds downgraded.
The company said it was currently taking ‘urgent’ steps to assess accurately its current liquidity and cash flow position, but shares in the business collapsed 63% to 8.32p with a very real threat to the firm’s survival now hanging over its head.
Men’s traditional outfitter Moss Bros (MOSB) jumped 50% to 20.5p after the board recommended its takeover in a £22.6m deal. Shareholders would get 22p per share.
