600 Group – 8.5p

5 May 2020 – Covid-19 trading update

The diversified industrial engineering company has announced a trading update in response to the impact of Covid-19.  It had already noted in a trading update on 21 February that trading conditions were more challenging.  There was a volatile order intake in both Machine Tools and Industrial Laser Systems, with a number of projects being delayed until the next financial year.  More recently, deliveries during March 2020 were affected and the ongoing restrictions create supply issues.  Trading results for the year to 28 March 2020 are expected to be broadly in line with expectations.  There is great uncertainty over the current year.  A number of cost saving measures have been put in place and there is a stop on all non-critical capital expenditure.  In terms of debt, overall levels remain in line with those at the previous year end and adequate banking facilities are in place.  From the current level we believe the shares are now a SPECULATIVE BUY.

Hargreaves Services – 215p

4 May 2020 – Conditional Contract Exchange and Covid-19 update

Hargreaves Land has announced the exchange of the first major commercial contract on Unity, a mixed use development site located at Hatfield, South Yorkshire.  Unity is a joint venture with regional developer Waystone Limited and consists of 250 hectares of land, of which 60 hectares is allocated for employment and commercial uses with the remainder having planning consent for residential development.  The joint venture has exchanged conditional contracts for the sale of a 32 hectare plot to a national retailer for the development of a 75,000 sq metre national distribution centre and training facility. The sale will realise approximately £25m of revenue for the joint venture on legal completion.  It is conditional upon the grant of planning permission and construction of a new access road, with legal completion currently expected to be around the middle of 2021.  Turning to the impact of Covid-19, all business areas except the Property business are continuing to trade in line with expectations.  The planned residential land sales at Blindwells, which were previously expected to complete in May 2020, will not take place in the current financial year.  A further update on trading is due out in early June following the end of the current financial year on 31 May.  This is a solid business which remains good value.  BUY.

Sainsbury (J) – 198p

30 April 2020 – final results

The company has released its results for the year to  7 March 2020 and these have revealed that underlying pre-tax profit was down 2% to £586m although the second half of the year saw an increase of 8% after a disappointing first half.  Clearly, although these figures look satisfactory the effect of coronavirus on the business has led to increased sales in recent weeks due to panic buying of food and other essentials whilst the uncertainty caused by the pandemic means that any decision on a dividend will be delayed until later in the year.  The company is set to benefit from £500m of rates relief following the latest moves by the government to help business in the wake of the pandemic although the company says that it will incur the same amount of additional costs this year as it has been forced to hire additional staff and pay those that are off sick or in isolation.  At this stage the shares are a HOLD.

G4S – 102.15p

30 April 2020 – trading update

A trading update has been provided covering the first quarter.  Organic growth in revenues was 2.5% but unsurprisingly the company has had to take significant action in response to the Covid-19 pandemic.  G4S’ services have been designated as essential in all of of its major markets and there has been the provision of additional services in some areas.  Some sectors will be adversely impacted by the pandemic so steps have been taken to reduce costs.  Including the annual savings of £20m expected following completion of the sale of the conventional cash businesses, direct and indirect cost savings of around £100m have been identified for 2020.  The US federal social security tax deferral programme is expected to provide a net cash flow benefit of around £50m.  The company remains confident in its long term future.  This is a solid business and deserves a BUY rating at the current price.

Flowtech Fluidpower – 81.9p

30 April 2020 – final results

Results for the year ended 31 December 2019 have been released.  Revenue from continuing operations was broadly unchanged at £112.4m versus £112.1m a year earlier.  Profit before tax from continuing operations slipped from £6.92m to £4.70m and this meant that diluted earnings per share fell from 8.28p to 6.10p.  Dividends have also been suspended.  It is clear that 2020 is almost certain to be another difficult year overall but this is priced in and we keep our BUY rating.

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