Imperial Brands slashes dividend, Compass raising £2bn of equity

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The FTSE 100 is expected to open 42 points higher on Tuesday, having closed up 4.29% at 6,048.59 on Monday.

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Tobacco giant Imperial Brands on Tuesday slashed its dividend by a third as it tried to speed up debt reduction and strengthen its balance sheet, although it did not cite the coronavirus as a reason. The interim dividend was cut to 41.7p a share from 62.56p a year ago, implying an annual payout of 137.7p. Adjusted operating profit fell 7.7% to £1.47bn. Imperial said the dividend cut was not driven by Covid-19, “although, the current uncertainties caused by Covid-19, as well as the ongoing regulatory focus on tobacco, further reinforces the importance of a strong balance sheet to underscore the defensive characteristics of our business”.

Compass is raising £2bn of equity from investors to strengthen its finances after the Covid-19 shutdown caused revenue to almost halve in April. The FTSE 100 catering company said the share placing would not give existing investors first refusal and that it had consulted with some of its big shareholders before going ahead. Reporting half-year results to the end of March the company said it traded strongly for the first five months but Covid-19 "changed everything". In April organic revenue fell 46.1% as half its business was shut down.

Micro Focus said on Tuesday that it expects to report revenue of around $1.45bn for the first half ended 30 April, making for a decline of 11% on a constant currency basis year-on-year. The FTSE 250 company the impact of that fall in revenue on adjusted EBITDA was largely mitigated by its management of variable and discretionary costs, as well as a reduction in certain costs as a direct result of the Covid-19 coronavirus pandemic. As a result, its said its adjusted EBITDA margin of about 38% was towards the upper end of its expectations.

Newspaper round-up

Government wage subsidies for disabled and vulnerable workers could be drastically scaled back from August under Treasury plans to wind down its Covid-19 furlough scheme, employers’ groups have warned. Charities and social enterprise employers have been told by the government that its plan to bring the coronavirus job retention scheme to an eventual close this autumn does not currently include an exemption for vulnerable workers. – Guardian

The government is coming under pressure to provide back-to-work support for young people amid evidence that the under-25s have been hardest hit by the Covid-19 economic fallout. In a report published on Tuesday ahead of unemployment figures expected to show the first signs of the pandemic’s impact on the labour market, the Resolution Foundation said younger and older workers were the most likely to have lost their jobs or had their incomes reduced. – Guardian

Energy supplier OVO announced deep job cuts and office closures on Tuesday morning, as lockdown pushes more customer service online and dramatically reduces the need for technicians in the field. The company, which acquired energy giant SSE in January for £500m, said it was accelerating a three-year restructuring plan in to a matter of months. – Telegraph

The private equity-backed operator of the Las Iguanas and Café Rouge chains is set to undergo a painful restructuring after filing a notice of its intention to appoint administrators, which could threaten more than 6,000 jobs. The Casual Dining Group, which also owns the Bella Italia brand, said that the “prudent measure” would give it time to consider its options and did not necessarily presage administration. - The Times

Almost two thirds of fund managers and traders think that they will work from home for at least one day a week after the pandemic, according to a survey by Deutsche Bank that suggests a dramatic shift in City working patterns. The German group, which has a significant presence in the Square Mile, has found that the longer they stay away from their offices, the more comfortable financial services workers are to be working from home. – The Times

US close

US stocks finished firmly higher on Monday, as Jerome Powell said he was optimistic of the US economy's ability to bounce back from the Covid-19 pandemic, and amid positive data from Moderna Therapeutics' second phase clinical trial on a vaccine candidate for the coronavirus.

The Dow Jones Industrial Average was up 3.85% at 24,597.37, the S&P 500 added 3.15% to 2,953.91, and the Nasdaq Composite rose 2.44% to 9,234.83.

It was a day of gains for the Dow, which opened 701.43 points higher, as the blue-chip index attempted to bounce back from its worst week since early April.

The sharp gains came after Moderna said the second phase of clinical trials on its vaccine candidate against Covid-19 had delivered positive results.

The US biotechnology group said the new data reinforced its belief that its mRNA-based vaccine would be effective in preventing coronavirus infections without serious side effects.

It said the third and final phase of trials was scheduled for July, which would then be followed by a biologics licence application to the US Food and Drug Administration, if successful.