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FTSE climbs out of red but Whitbread plunges on cash call

21 May 2020

The FTSE 100 has climbed out of the red, buoyed by the US market open, but shares in Whitbread remained mired at the bottom of the index.

Update (15:15): The FTSE 100 has climbed out of the red, buoyed by the US market open, but shares in Whitbread (WTB) remained mired at the bottom of the index on news of the Premier Inn owner’s £1bn cash call.

The UK blue-chip index was trading at 6,074, seven points higher on the day and up from a low of 6,008 earlier in the session. In the US, the S&P 500 opened 0.2% lower.

Rolls-Royce (RR) topped the index, up 6.9% at 292.5, continuing yesterday’s rally on the aircraft engine maker’s cost-cutting plans.

Shares in Whitbread were down 12.7% at £24.84 as investors digested the large rights issue at a heavily discounted £15 per share launched to help the company weather the coronavirus crisis.

‘Whitbread entered the crisis with its balance sheet in reasonably good shape, partly thanks to the sale of Costa Coffee last year, so today’s move highlights just how much pressure the leisure sector is under,’ said Emilie Stevens, equity analyst at Hargreaves Lansdown.

‘For Whitbread lockdown has wiped out accommodation and food and beverage revenues, which were down 99% in the last seven weeks - so alternative sources of cash have never been more important.’

EPIC hope

Ediston Property (EPIC ) slipped 0.9p or 2.2% to 41.2p after interims showed the real estate investment trust still reeling from the Covid-19 shock with net asset value down 8.9% & dividends cut in the half-year to 31 March. In its statement the company expressed hope that its out-of-town retail parks should reopen first and do well when the lockdown finally ends.

Sentiment improved towards BMO Commercial Property (BCPT ), up 8% or 5p to 66.5p to be the fastest riser on the FTSE 250. Stablemate BMO Real Estate (BREI ) gained 4.9% or 2.6p to 55p.

Real Estate Credit Investments (RECI ) rallied 5.3% or 6p to 119p, while RDI (RDI ) real estate investment trust rose 7.2% or 4.1p to 61.2p.

VPC Specialty Lending (VPC ) advanced over 7% or 4p to 60p after the heavily discounted investor in consumer lending platforms said it would offer shareholders opportunities to sell some of their holdings at close to net asset value if they voted for the company’s continuation next month.

UK smaller companies trust Strategic Equity Capital (SEC ) slipped 4.7% or 9p to 181p while Standard Life Private Equity (SLPE ) retreated 4.4% or 13p to 282p. 

(10:28) FTSE falls on Trump’s China rant

Poor export data from Japan and US president Donald Trump’s latest bout of anti-China rhetoric has sent the FTSE 100 lower.

The UK blue-chip index fell 49 points, or 0.8%, to 6,018 weighed down by weak Asian export data overnight, with Japan reporting a 21.9% plunge overnight, the steepest fall since the financial crisis.

Trump’s renewal of attacks against China also weighed on stock markets. The US president accused the country of ‘trying desperately to deflect the pain and carnage that their country has spread throughout the world’.

The US government published a 20-page report detailing China’s alleged ‘malign activities’, ranging from economic policies to human rights violations. 

Whitbread (WTB) was the biggest faller on the FTSE 100. The shares fell 14.7%, or 420p, to £24.23 after the Premier Inn owner announced a surprise £1bn rights issue to shore up its financial position. 

Interactive Investor analyst Richard Hunter said a rights issue was ‘traditionally seen as a call for financial help in a distressed situation’. ‘The additional surprise in Whitbread’s case is that there had been no obvious signs,’ he added. 

The biggest riser on the FTSE 100 was Easyjet (EZJ), which jumped 4.9% to 577p, after announcing it would resume flights in the UK and France next month. The low-cost airline, which was the target of a cyberattack earlier this week, said it had implemented a number of safety measures to allow safe flights, including the use of face masks on fights. British Airways owner International Consolidated Airlines (IAG) rose 2.6% to 204p.

The ‘mid-cap’ FTSE 250 index broke a four-day winning streak, dropping 0.5%. Pets at Home (PETS) was the biggest faller, down 10.9% at 204p after the group warned of falling demand, saying it would ‘not be immune to the challenges’ posed by coronavirus. 

Shore Capital analyst Greg Lawless said Pets at Home would be a ‘retail survivor post-Covid, allowing it to leverage its market-leading position’.

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