Investors continued to see the bright side on Thursday morning as the FTSE 100 gained 0.35% in opening trade to 5,874.01, despite more bad economic news.
The Bank of England has warned of the deepest recession on record as a result of the coronavirus pandemic, and said the UK economy is set to shrink around 14% this year based on the lockdown being relaxed in June.
Members of the Bank’s Monetary Policy Committee also voted to keep interest rates at their record low of 0.1%.
Meanwhile a whole host of companies across the FTSE 350 reported news this morning.
BT AXES DIVI AMID PROFIT DROP
Telecom giant BT (BT.A) dropped around 5% to 108p after it scrapped its final dividend and reported a fall in annual profit amid the ongoing coronavirus pandemic.
The company expects to resume dividends in its 2021/22 financial year at an annual rate of 7.7p per share, about 50% below the annual dividend in 2019 of 15.4p.
For the year ended 31 March, pre-tax profit fell to £2.35bn from £2.67bn the previous year and revenue slipped 2% to £22.9bn.
Profit was weighed down by charges of £95m as a result of coronavirus mainly reflecting increased debtor provisions, while revenue growth was held back by the ‘impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments,’ the company said.
Due to the coronavirus pandemic, BT added that it’s not providing guidance for its current financial year.
ROLLS ROYCE WARNS OF ‘SIGNIFICANT DISRUPTION’
Engineering company Rolls Royce (RR.) fell 3% to 285p as it warned of ‘significant disruption’ to the global aerospace industry due to coronavirus, which may take ‘several years’ to recover.
In an AGM statement, the group said it had made better than anticipated progress with a number of actions it had previously announced on 6 April to mitigate the impact on its 2020 financial performance, and now expects cash savings of £1bn this year.
It reported that the cancellation of the final 2019 shareholder payment has conserved an incremental £137m of cash flow, while an additional revolving credit facility of £1.5bn was secured to bolster its liquidity position and a successful syndication process with a larger group of banks has increased this to £1.9bn.
Rolls Royce also warned that the severity of the disruption caused by coronavirus is expected to lead to a smaller commercial aerospace market which may take several years to recover.
BRITISH AIRWAYS OWNER SAYS RECOVERY TO TAKE 3 YEARS
British Airways owner International Consolidated Airlines (IAG) fell 2% to 192.7p as it warned that demand was unlikely to recover until 2023.
In a first quarter trading update to 31 March, in which it swung to a £1.8bn pre-tax loss compared with an £86m profit a year ago, the company said it expected to defer deliveries of 68 aircraft as the level of passenger demand in 2019 was not expected to recover before 2023.
Passenger capacity slumped by 94% from late March with most aircraft grounded owing to the ongoing pandemic, and passenger revenue per available seat fell 3.5% to £5.85.
INTERCONTINENTAL WARNS OF RECORD LOW OCCUPANCY
Holiday Inn owner InterContinental Hotels (IHG) gained 0.5% to £34.50 despite warning of a deeper slump in revenue per room in April after occupancy levels dropped to ‘historic lows’ in March and April as Covid-19 containment measures hurt performance.
In the first quarter, comparable revenue per available room, RevPAR, was down 24.9% after falling 55% in March and was expected to be down around 80% in April.
Occupancy levels in comparable open hotels fell to the low-to-mid 20% range.
‘Following a solid performance in the first two months of 2020, occupancy levels dropped to historic lows in March and April, as social distancing measures and travel restrictions came into effect around the world,’ the company said.
Looking ahead, it anticipates continued disruption to travel in the coming months, and warned forward visibility on the timing and shape of improvements in demand remains very limited.
OTHER COMPANY NEWS
RSA Insurance (RSA) jumped 4.3% to 385p after ‘strong’ first quarter results, with group business operating profit up by double-digit percentages, but it added that claims frequency was down in April and that motor accident lines were ‘most affected’.
Pharma giant GlaxoSmithKline (GSK) gained 0.3% to £17.02 as it said it expected to receive higher proceeds from the sale of its 5.7% stake Indian public company Hindustan Unilever following an appreciation in the latter’s share price.
Defence company Chemring (CHG) soared 6.1% to 311p after it completed the sale of its US subsidiary Chemring Ordnance to Nammo Defense System for $17m after receiving regulatory approval in the US.
Infrastructure company 3i Infrastructure (3IN) increased 2.7% to 260p after it raised its annual dividend and reported a rise in annual income and return.
‘The strength of our portfolio and liquidity position gives us the confidence to set a target dividend of 9.8 pence per share for FY21, an increase of 6.5%,’ the company said.
For the year to 31 March 2020, return grew 11.4% to £224m and income rose to £121m from £115m, while net asset value grew 19% to £2.23bn.
