The coronavirus-induced lockdown has been adversely affecting the economy of the entire world that is estimated to go into a deep recession worst of all times. Senior economists believe that the United Kingdom economy could be severely hurt with a decline of ~2.6 percent in GDP for 2020. However, they expect to see a revival in 2021 if the country succeeds to contain the virus and the uncertainties arising due to it.
Given the scenario, let’s skim through the financial performance and the likely impact of COVID-19 on the three LSE-listed companies coming from the diversified sectors. It includes Carr’s Group PLC (Food Producer), Chesnara PLC (Life Insurance), and Highland Gold Mining LD (Mining Sector).
CARR’S GROUP PLC (LON: CARR)
- Company Overview
Carr’s Group Plc is a leading agriculture and engineering group, which provides various services consisting of manufacturing, designing and supplying of customized equipment and machinery that can be handled remotely. It also produces supplements for livestock alongside manufacturing value added products and solutions.
The company’s objective is to become the most popular global business on modernization and technology fronts throughout the agricultural and engineering sectors. Its facility footprint across its two divisions spans the North America, the United Kingdom, and Europe supplying over 50 countries around the world.
- Financial Highlights of H1 2020
On 15 April 2020, Carr’s Group declared their 26 weeks financial result for the first half of 2020 ended 29 February 2020.
Financial Highlights of the company’s H1 2020 in comparison with H1 2019 (Source: Group’s website)
- During the half year ended 29 February 2020, adjusted and statutory revenues of the company decreased slightly by 3.0 per cent to £200.0 million.
- Due to challenging market situations and bad weather impact in Agriculture, and contract phasing in Engineering, the adjusted group operating profit fell by 13.4 per cent to £10.3 million as compared to the prior year. In contrast, the statutory operating profit increased by 3.8 per cent to £11.2 million during the half year ended on 29 February 2020.
- Adjusted profit before tax reduced by 16.0 per cent to £9.6 million as compared to H1 2019 £11.4 million. Statutory profit before tax after including amortisation and non-recurring items was £10.5 million (H1 2019: £10.3 million).
- Adjusted earnings per share decreased by 14.9 per cent to 8.0 pence during the half year. In contrast, statutory basic earnings per share increased by 12.0 per cent to 9.3 pence.
- During the year 2019, the company launched new products in agriculture segments including Pick Block in Europe and FesCool in the USA.
- The net debt without lease reported to £25.4 million as on 29 February 2020, signifying 1.2x of adjusted EBITDA and undrawn facilities of £22.4 million at H1 2020.
- Impact of COVID-19
As per the announcement, there has been ‘no material adverse direct impact’ of COVID-19 on the company but the global uncertainty continues to exist. The Group confirmed of taking significant measures to mitigate the effects of novel coronavirus through a close and constant review by the Board. But given the amount of uncertainties prevailing in the global business environment, the company has decided to defer its interim dividend payment until gaining the complete clarity of COVID-19 effects. The company further downsized its expectation for the current financial year due to risks assessed on its businesses.
- Share Price Performance
Carr’s stock price surged up by 1.79 percent to GBX 114.0 as at 16 April 2020 (11: 25 AM GMT). The stock’s one-year highest price was recorded on 01 July 2019 at GBX 166.00 while its one-year lowest price was reported on 12 March 2020 at GBX 83.53 per share.
CHESNARA PLC (LON: CSN)
- Company Overview
Chesnara Plc is engaged in pension and life insurance policies business across Sweden, the Netherland and the United Kingdom. The company was incorporated in the year 2004 and trades on the London Stock Exchange. The company manages £7.8 billion of funds which includes £2.1 billion of the fund in the Netherlands, £3.2 billion of the fund in Sweden and lastly £2.4 billion of funds in the United Kingdom. It administers around 0.9 million pensions and life policies for the holders.
- Financial Highlights for 2019
On 15 April 2020, the company released its full-year financial result for the year ended 31 December 2019.
- Due to the effect of symmetric adjustment which includes a cash pressure of £24.7 million, the cash generation decreased to £36.7 million during the year 2019 compared to £47.8 million in 2018.
- The group solvency ratio decreased marginally to 155 per cent as at 31st December 2019 as compared to 158 per cent as at 31st December 2018.
- The company’s final dividend increased by 3 per cent to 13.87 pence as compared to the previous year’s 13.46 pence.
- The insurance premium revenue decreased slightly to £268.3 million as compared to £274.9 million during the year 2018. In contrast, the net insurance premium increased to £224.1 million as compared to the prior year.
- During the year 2019, the Profit before income taxes increased significantly to £96.1 million as compared to the prior year due to the valuation improvements in its bond portfolio because of narrowing spreads.
- Group’s total comprehensive income for the year 2019 increased to almost double, i.e. £60.6 million as compared to the prior year’s £23.64 million.
- Impact of COVID-19
Chesnara reported that its head office and other segments are effectively operating despite the ongoing difficult situation. The company has already implemented a business continuity plan during novel coronavirus spread as most of the staffs are working from home. The management further confirmed that based on historical investment decision the business is being able to cope well in this critical time of crisis with prudent, yet progressive, historical dividend payments, operational resilience and a low gearing ratio in place.
Share price performance
Chesnara stock price is currently trading at GBX 309.00, down 1.59% as at 16 April 2020 (11: 43 PM GMT). The stock’s one-year highest price was recorded on 09 May 2019 at GBX 387.46 while its one-year low stood at GBX 200 as reported on 19 March 2020.
HIGHLAND GOLD MINING LD (LON: HGM)
- Company Overview
Highland Gold Mining Limited is a publicly listed renowned gold production company. It has an extensive asset base focused on production, exploration and development of projects. Formed in the year 2002 in Jersey, the company aims to become the most profitable gold mining company in Central Asia and Russia.
- Financial Highlights
On 15 April 2020, the company announced its full-year financial results for the period ended 31 December 2019.
(source: company website)
- During the year 2019, the total gold and gold equivalent production increased by 12 per cent to 300,704 ounces, slightly above the guidance range of 290,000-300,000 oz.
- EBITDA of the company increased by 34 per cent to US$205.1 million during the year 2019. Its EBITDA margin increased to 52 per cent in 2019 as compared to 49 per cent in the prior year.
- Due to the acquisition of Valunisty and its high expense production, the total cash cost increased to US$ 556 per oz compared to the prior year.
- Due to impairment of weak ore at Belaya Gora and Valunisty, supporting capital expenditure increased at MNV, Belaya Gora and Novo, leading to all-in sustaining costs increased by 16 per cent to US$791 per oz.
- Net cash flow from operations increased by 2 per cent to US$138.4 million as compared to the prior year.
- The ratio of net debt to EBITDA ratio decreased to 1.22 as of 31 December 2019 as compared to 1.38 (including Valunisty) at the end of 2018. However, the ratio lies well within the Board of Directors' debt policy, as per the report.
- Impact of COVID-19
As per the company information, the directors have identified some threat with regards to novel coronavirus that requires immediate actions to ensure the reduction of risk associated to staffs’ health, closure of production temporarily or entirely and supply of materials and equipment on time.
- Share price performance
HGM shares are trading in green, up 5.00%, to stand at GBX 235.40 as on 16 April 2020 (12:06 PM GMT). The stock registered a 12-month high at GBX 257.20 on 5 September 2019 while its 12-month low was recorded recently on 19 March 2020 at GBX 150.00.
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