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“The market mood matched the sunny weather on Thursday with investors determinedly focusing on the positives as the FTSE 100 built on its gains for the week and the recovery from the coronavirus-inspired sell-off continued,” says Russ Mould, Investment Director at AJ Bell.
“A great deal of comfort is being taken from the easing of lockdown conditions, although the time lag between allowing people greater freedom of movement and any spike in infections means the advance for equities still feels provisional – with signs of a resurgence in cases in South Korea illustrating the risks.
“Bubbling away under the surface are issues like the political unrest in Hong Kong, with suggestions of tit-for-tat measures between the US and China as tensions escalate.
“Notably oil prices were lower as US stockpiles increased and gold prices began to tick up, hitting $1,719.81.”
easyJet
“Budget airline easyJet cleared the runway for take-off as it confirmed it would resume flights from 15 June – although within pretty narrow horizons.
“Air travel in this ‘new normal’ will look a bit different – these largely domestic flights will see everyone wearing masks and no on-board meals being served. Presumably the company will not be selling products in-flight either.
“If these measures have to be maintained for the long-term it would likely put a material dent in ancillary revenue which totalled more than £1.3 billion in the last full financial year.
“Today’s update also revealed it would be a more streamlined operator in the future with plans to cut as much 30% of its workforce – a very big proportion even given the turbulent backdrop.
“Additionally the company is trying to secure funds by selling and leasing back some of its fleet of planes and cutting capital expenditure and funding for its recently launched package holidays business.
“These measures are understandable given the scale of the current challenges facing the business. However if, as EasyJet is guiding, there is a recovery in demand by 2023 the firm’s ability to benefit from this recovery will be affected by the decisions it is taking now.
“It can, for example, be easier to cut staff than it will be rehire and retrain them as and when easyJet needs to increase its capacity again.”
Daily Mail and General Trust
“Firms with strong family influence have been highlighted in some quarters as being more likely to maintain dividends and perhaps that’s why Daily Mail & General Trust, 36% owned by the fourth Viscount Rothermere, has upped its payout despite a slump in first half sales.
“Family-controlled businesses are seen as being careful with cash, with the dividend prioritised as it helps to return a regular stream of funds back to the family.
“However, this has a limit. While the company’s robust financial position enabled it to keep the dividend for a period which was largely unaffected by the current crisis, the smoke signals on plans for future dividends suggests they will reflect the reality at the time, which may be more sobering.
“Hard copies of the Daily Mail and its other titles have seen substantial reductions in circulation and advertising has slumped across the board, although online traffic is up and it is worth remembering that the company is more than just a newspaper publisher.
“On the one hand this is positive as the business-to-business subscription arm remains resilient, however its events division has cancelled everything for the remainder of the year and its UK property information unit was hit as the housing market went into deep freeze.”
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