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Wednesday Update

Daily Business Live: Rangers; Channel 4; Tesco; Aviva; AG Barr

5.30pm: Rangers prize appeal

Rangers are to front a bid to have the SPFL release prize money to all 42 clubs in Scotland as a matter of urgency.

Full story here

4.50pm: NatWest (aka RBS) pay cuts

Alison Rose

NatWest / RBS Group chief executive Alison Rose and chairman Howard Davies will forgo 25% of their fixed pay for the remainder of 2020, which will be donated to the National Emergencies Trust (NET) Coronavirus Appeal. 

Full story here

4.45pm: Market close

The FTSE 100 index of leading shares spent the day under water following a strong run this week. It closed at 5,677.73 −26.72 (0.47%).

4pm: Channel Four

Channel 4 logo

Channel 4 said it will furlough 10% of staff and implement pay cuts for executives as part of a plan to save £245m during the coronavirus crisis.

The broadcaster warned the TV advertising market was expected to plummet by half in April and May as brands pull their campaigns during the economic downturn.

Directors have taken a 20% pay cut and this year’s bonus scheme has been suspended.

The company said it expected to reduce its content budget by £150m this year.

10.30am: Germany shrinks

Estimates suggest the German economy, the largest in Europe, shrank by 9.8% in the second quarter, its biggest decline since records began in 1970

9.15am: Market open

In the first hour of trade the FTSE 100 fell in line with spread bet forecasts and reversing strong gains so far this week. At 9am it was trading at 5,644.53 −59.92 (1.05%).

7.10am: Tesco raises dividend

Tesco

The supermarket chain says panic buying has now stabilised across the group and more normal sales volumes are being experienced.  It has removed the ‘three items’ restriction on most product lines.

Tesco has stepped up home grocery capacity by more than 20%, and will continue to increase this, but said there is “simply not enough capacity to supply the whole market”.

Between 85% and 90% of all food bought will require a visit to a store and significant changes have been implemented to maximise safety for colleagues and customers. 

“We will continue to try and prioritise home delivery for the most vulnerable in society as defined by the UK Government.”

The size and nature of its workforce means it has experienced a significant absence of colleagues.  Full colleague sickness support is in place and in the last two weeks alone, it recruited more than 45,000 workers.

It said COVID-19 is having a material impact on the operations of the business and it is incurring significant additional costs, particularly in payroll. Dependent on the scenario, the estimated impact on retail cost lines is between c.£650m and c.£925m.

It cannot give guidance, but “if customer behaviour were to return to normal by August it is likely that the additional cost headwinds incurred in our retail operations would be largely offset by the benefits of food volume increases, twelve months’ business rates relief in the UK and prudent operations management.”

Profit before tax for the year fell 18.7% from £1.6 billion to £1.3bn but the company has proposed a final dividend of 6.5p per share, giving a full-year payout of 9.15p per share (5.77p).

Tesco Bank to make a loss

Tesco Bank, which operates as a stand-alone entity, is expected to be impacted by a reduction in income from all its activities, including credit cards, loans and travel money.  

This expected decrease in income, in addition to provisions for potential bad debts, is likely to result in a loss for the Bank in the year ending February 2021. 

Notwithstanding this, the Bank’s capital ratios (Tier 1 ratio: 20.6% and Total ratio: 23.1% as at 29 February 2020) and liquidity are expected to remain strong.

7am: Aviva dividend

Aviva

Insurer Aviva has withdrawn its final dividend and will reconsider any distributions in the fourth quarter of 2020.

The decision contrasts with Legal & General’s decision last Friday to go ahead with its payout.

Aviva said regulatory authorities, including EIOPA, the PRA and supervisors of other Aviva subsidiaries, have responded by publicly urging restraint on dividend payments by insurers to shareholders. 

“In light of the significant uncertainties presented by COVID-19, the board agrees with our regulators that it is prudent to suspend dividend payments at this time.”

It said it remains well capitalised with strong liquidity.  By retaining the final dividend, the estimated group capital ratio will increase by c.7% to approximately 182%.

“It remains too early to quantify the impact of COVID-19 on claims expenses in our life and general insurance businesses, and the potential effect of capital markets and economic trends on our results. 

“Given the change in the economic outlook, we are reviewing all material discretionary and project expenditure.  We intend to provide an operational update for investors in the second half of May.”

RSA and Hiscox have also cancelled dividend payments.

7am: Direct Line

Direct Line, Britain’s biggest motor insurer, will not to pay its final 2019 dividend and said it would make no changes to staffing until at least the autumn as it weighs the damage the coronavirus shutdowns has had on the insurance industry.

There has been a falloff in claims for car accidents as motorists stayed at home, but travel insurance claims were steadily rising, hitting £22 million so far.

AG Barr

Irn-Bru

The Irn-Bru manufacturer said it expects there to be “a material adverse impact to the group’s financial performance due to these fast changing circumstances, however at the current time the quantum of this remains uncertain.”

The company has frozen all new capital projects, as well as scaling back immediate marketing and commercial activity “where sensible” across the Group. 

“In accordance with the Government’s Job Retention Scheme, we have commenced the “furlough” process for a limited number of colleagues at this stage.  In addition the board and senior executive team have agreed to a voluntary 20% salary reduction for a minimum of three months to help support the business through these difficult times.  We continue to take a prudent and vigilant approach to all working capital to minimise risk in the current climate.”

The board is not proposing a final dividend, and will review the dividend position when there is greater visibility of the impact of COVID-19.”

Roger White, chief executive, said:We exited the financial year with improved trading performance and momentum, which continued into the new year however the COVID-19 situation is now materially impacting our business.”

Statutory profit before tax for the year to 25 January fell 16% from £44.5m to £37.4m.

Wednesday 6.30am: Markets

Stock prices in London are set to ease back after a strong week thus far, as investor nerves are tested once again by the Covid-19 situation with record daily deaths in New York and the UK.

IG says futures indicate the FTSE 100 index will open 34.85 points lower at 5,669.60.

Wall Street ended lower Tuesday despite a strong start, with the Dow Jones Industrial Average ending down 0.1%, the S&P 500 down 0.3% and the Nasdaq Composite off 0.2%.

In Asia the Japanese Nikkei 225 index is up 2.3%. In China, the Shanghai Composite is down 0.3%, while the Hang Seng index in Hong Kong is down 0.6%.

Sterling was trading at $1.2323 early Wednesday.

Brent oil was trading at $32.87 a barrel.

5.05pm: Markets

Investors bought equities on the back of growing hope that the coronavirus is peaking. The FTSE 100 index closed at 5,704.45 +122.06 (2.19%)

Tuesday 5pm: Boris ‘a fighter’

Speaking about Boris Johnson’s condition in hospital, Dominic Raab, Foreign Secretary, said: “I am confident he will pull through because if there is one thing I know about this Prime Minister, he is a fighter.”



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