2nd Apr 2020. 9.05am
Regency View:
Update
Regency View:
Update
With nearly half the world’s population in lockdown, financial markets are operating in uncharted territory.
The Financial Conduct Authority (FCA) and Financial Reporting Council (FRC) have issued guidance asking public companies to delay the release of Preliminary Results for at least two weeks. As a consequence, several AIM stocks within our portfolio have issued COVID-19 updates including:
Ramsdens (RFX) – closing all stores due to lockdown
Midwich (MIDW) – withdrawing intention to propose a final dividend for 2019
Keystone Law (KEYS) – whilst trading had started strongly and in-line with expectations for full-year 2021, it would no longer be proposing a final dividend payment.
IG Design (IGR) – reiterated that it’s Chinese operations have remained at increased capacity to offset the reduction in output from it’s US, UK and European manufacturing hubs.
Highland Gold (HGM) – stated that they have not seen any disruptions amid COVID-19 as yet and they also announced the first gold pour at their Kekura mine, the company’s premier development project.
Johnson Services Group (JSG) – despite a strong start to the year, JSG’s hotel linen business has been heavily impacted by COVID-19. Whilst their work-wear business has yet to see any impact they are anticipating that this will slow as lockdown continues. They have therefore removed plans for a final dividend payment.
We have however, seen a number of companies ignore the FCA’s guidance and issue trading updates:
Bioventix Bucks the Trend and Increases Dividend
Bioventix (BVXP) stood out from the crowd last week as it confidently increased its dividend pay-out.
The Farnham-based, antibody specialist reported increased first half earnings and said that it expects further progress in its second half despite the Covid-19 outbreak.
For the six-month period to the end of 2019, the biotechnology company posted pre-tax profit of £4.1m, up 26% year-on-year from £3.2m. Revenue was 17% higher at £5.1m from £4.4m.
An interim dividend of 36p was proposed, up 20% from 30p paid the year prior.
The shares have rallied strongly since the results were released and we expect BVXP’s V-shaped recovery to continue.
BVXP 1-Year Chart
Renew Warns of ‘Unclear’ Impact of COVID-19
Infrastructure engineering, Renew Holdings (RNWH) released a trading update in advance of its Interim results for the half year ended 31 March 2020.
The Leeds-based firm expects trading in the first half of the year to be in-line with market expectations, this includes the performance of Carnell, which it acquired for £38m in January.
It reports that “cash generation in the first half of the year has continued to be strong” and that as a result of the acquisition of Carnell, it now has a revolving credit facility provided by HSBC & NatWest of £44.2m, expiring in January 2024.
The second half of the year is expected to be impacted by COVID-19 although to what level the board say is “unclear at this stage”.
The business is still operational across the majority of its sectors, and there is an ongoing demand for the directly delivered maintenance and renewal services which it offers particularly in the designated ‘critical sectors’, which make up 80% of its work.
However, the impact of COVID-19 pandemic has seen a 20% reduction in the salaries of the board and senior management from 1st April, a hiring freeze and a wider cost reduction scheme. The business has said it is also utilising the Government’s Job Retention Scheme.
As a result of the current pandemic, the board has decided to suspend payment of the interim dividend which would ordinarily have been paid to shareholders in July.
RNWH 1-Year Chart
LTG in ‘strong financial position’
Learning Technologies (LTG) reported profits for its 2019 financial year are “ahead of expectations” as recurring revenues surged thanks to its Software & Platforms business.
The e-learning specialist highlighted “good organic momentum” from cross-selling initiatives and product development, as well as a return to growth for its content & services arm.
In a trading update, the AIM-listed firm reported that for the year ended 31 December statutory pre-tax profit was £14.3m, 316% ahead of the prior year, while revenues jumped 39% to £130.1m.
Looking ahead, LTG said its current financial year had “started well” and is in line with management expectations, adding that it has not yet seen any material impact from the coronavirus outbreak on its performance. However, content projects may be impacted as customers managed their own cash positions and new business wins were delayed.
In light of the potential impact of the pandemic, LTG said it was taking “proactive measures to prioritise the strong liquidity and net cash position of the group”, including the postponement of its final dividend payment of 0.5p per share and the payment of director bonuses until market conditions stabilised.
CEO Jonathan Satchell commented:
“2019 was an exceptional year for LTG. We saw excellent momentum in our Software & Platform businesses, and a return to organic growth in Content & Services, as expected. I am particularly pleased to see our investment in product development and cross-selling initiatives supporting organic growth, while we continue to improve margins and cash performance”.
LTG 1-Year Chart
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All content is provided for general information only and should not be construed as any form of advice or personal recommendation. The provision of this content is not regulated by the Financial Conduct Authority.