ITV – 54.42p

3 April 2020 – COVID-19 Update

 

Having announced a number of measures to reduce  costs and manage its cashflow in response to the COVID-19 pandemic on 23 March, ITV provided a further update on 3 April.  The Directors and Management Board are taking a 20% pay cut and bonus payments have been scrapped.  ITV has put in place a recruitment and salary freeze across the company.  We believe that the shares now look very cheap and rate them as a BUY.

Saga – 16.08p

2 April 2020 – trading update

The specialist provider of products and services for those aged over 50 has announced a trading update for the 12 months ended 31 January 2020 and an updated assessment of the potential impact of COVID-19.  In terms of the 12 months ended 31 January 2020, underlying profit before tax is expected to be £110m, in line with the target range of £105m to £120m.  The debt ratio (excluding Cruise) is 2.4x, with £109m of short term net bank debt.  Good progress has been made against the business priorities set in April 2019 and positive momentum has built in the cash generative Insurance business with 320,000 three-year fixed-price policies sold and 57% of new business volumes written on a direct basis.  Spirit of Discovery was successfully launched and financial performance in the first six months of operation was in line with a full year objective of £40m of EBITDA.  As at 31 January 2020, forward Cruise bookings for 2020/21 were at 80% of the full year target and this was ahead of internal expectations.  Insurance goodwill to be impaired by £370m, primarily relating to an increase in the post-tax discount rate from 8.55% to 10.7%.  Audited results for the year ended 31 January 2020 and the 2019/20 annual report are expected to be published on 9 April 2020, a week later than initially planned, due to a request by the Financial Conduct Authority.  Significantly, the dividend to be suspended.  This leads us onto the potential impact of COVID-19 and although the Insurance business should be resilient, a number of scenarios for extended suspension of Cruise and Tour Operations have been considered, including full cancellation of all travel departures over six months, followed by a slow recovery.  Based on this analysis, action has been taken to protect the balance sheet and increase near-term liquidity.  There has been a precautionary £50m draw down of the revolving credit facility, with available cash resources at the end of March of £92m.  Operating expenses have been reduced, with run rate cost savings of £15m from actions that were implemented in February.  This will be partially offset by an expected £10m of redundancy costs in the current year.  Amendments have been agreed to banking covenants.  Disruption arising from COVID-19 may also delay delivery of Saga’s second new ship, the Spirit of Adventure, currently due to commence operations in August 2020. This has been considered within planning scenarios and is not expected to significantly change the overall financial position.  Risks remain but there is scope for considerable recovery.  The shares are a SPECULATIVE BUY.

Journeo – 50p

2 April 2020 – final results

Results for the year ended 31 December 2019 have been released by the information systems and transport technical services group.  Revenue slipped to £11.4m (2018: £12.6m) and despite a gross profit of £4.5m (2018: £4.8m) an underlying loss before tax of £0.8m (2018: loss of £0.1m) was suffered.  This translated into a diluted loss per share of 1.08p versus earnings per share of 0.15p a year earlier.  Cash and cash equivalents at the year end were £0.7m (2018: £0.5m) with the company having raised £1.2m before expenses via a share placing in December 2019 to strengthen the balance sheet and provide additional working capital.  This was fortunate timing given the current situation.  Although the shares are inexpensive there a probably better opportunities at the current time and we feel that a HOLD rating is sufficient.

Norcros – 129p

1 April 2020 – trading update

In light of the rapidly changing developments regarding COVID-19 the supplier of bathroom and kitchen products has issued a further update on the potential impact on its performance for the year to 31 March 2020 and the measures it is taking to manage the associated risks.  Until recently the company remained in line to meet market expectations but this is now no longer the case.  The South African Government issued a directive on 23 March 2020 requiring a 21-day national lockdown, effective midnight 26 March 2020 to midnight 16 April 2020 in order to contain the spread of the COVID -19 pandemic. Trading in the country has therefore ceased for now.  In the UK, trading has been minimal.  The company has suspended manufacturing and assembly operations in the UK in a controlled way to safeguard workers and to ensure an efficient resumption at the appropriate time.  Underlying operating profitfor the year to 31 March 2020 is now set to be approximately £31m compared to the previous consensus forecast of £35m.  All of this reduction is attributable to the COVID-19 situation.  The balance sheet is in good shape and debt is well under control.  However, the final dividend has a serious question mark over it.  We feel that the shares have fallen far enough and put forward a BUY recommendation.

LPA Group – 73p

1 April 2020 – COVID-19 trading update

The high reliability LED lighting and electro-mechanical system manufacturer has reported an update on the impact of Covid-19.  A number of UK and export customers have temporarily suspended operations.  In response to this LPA Group is reducing current production capacity to match demand, reduce costs, conserve cash and utilising government support initiatives.  All three business units will remain open. Flexible working has been introduced to accommodate childcare.  Where practical staff are working from home.  Staff segregation and self-isolation precautions have also been introduced.  A significant proportion of the staff have been furloughed.  Output, which had been expected to accelerate through March to the end of the year, will now be scaled back.  Orders received have comfortably exceeded sales during the first half, so the order book has continued to grow and remains at record levels.  We rate the shares as a LONG TERM BUY at the current level.

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