EasyJet looks to build cash buffer and Informa goes cap in hand to investors

“European markets appeared to have shaken off the negative economic data which has piled up in recent days, starting Thursday on the front foot,” says AJ Bell Investment Director Russ Mould.

“The FTSE 100 has still not clawed back all its losses from yesterday, with weak commodity prices keeping the index in check, but some comfort can be taken from the fact we are not seeing the sort of nerve-shredding moves in markets posted in mid to late March.

“US jobless claims figures might test investors’ appetite for risk later as a coronavirus-inspired unemployment crisis continues to brew across the Atlantic."

EasyJet

“How do you judge a business in survival mode? One way is to look at how much cash it has left to keep the lights on. On this measure shareholders in budget airline EasyJet appear to have at least some grounds for encouragement after this morning’s announcement.

“A combination of measures, including drawing on the Bank of England financing facility, issuing new debt and selling and leasing back aircraft (if it can) is hoped to top up the coffers to the tune of a little more than £3bn.

“Not forgetting the fact that, amid a spat with founder Sir Stelios Haji-Ioannou, the company has deferred the delivery of 24 new planes from Airbus.

“These and other potential future moves like looking for further state support or deferring maintenance spending could have implications for the company’s ability to regain altitude when the current turbulence is behind it.

“And it is a stark illustration of the industry’s perilous position that even £3bn would only cover it for a nine-month grounding of its fleet.

“What is unpredictable at this stage is what a recovery in the aviation industry might look like, and how business and leisure travellers might adjust their behaviour once the current pandemic is contained.

“There is also the longer term concern over the impact of air travel on the environment. Chief executive Johan Lundgren will need to call on all his 30-plus years of experience in the travel sector if he is to pilot EasyJet through this crisis.”

Informa

“Events firm Informa has been a victim of very poor timing. The company’s 2018 £4bn splurge to acquire rival UBM has left it with significant borrowings heading into a severe crisis which disproportionately affects its line of business.

“Little wonder then that it became the second FTSE 100 constituent to go cap in hand to shareholders this morning, after cruise operator Carnival.

“Events make up more than half of revenue and they just aren’t happening at the moment. The current quarter is being seen as the eye of the storm as lockdown measures and travel restrictions remain in place.

“However, the damage could be long-lasting as often the fortunes of future iterations of events are closely tied to the experience the previous year.

“Also, with the coronavirus accelerating trends like home working and digital connectivity, businesses might question whether the time and costs associated with attending large-scale exhibitions and conferences is worth it.

“A cautious return to business in China looks set to be used as a test case for the rest of the business, offering insight into how events can work in a world where some level of social distancing might well need to remain in place.

“The company’s subscription-led information services division is proving resilient, meaning Informa is at least not in the category of having to survive a period with zero revenue.”

These articles are for information purposes only and are not a personal recommendation or advice.