Unilever still paying dividends, and housebuilders prepare to return to work

“After a fairly decent showing on Wall Street last night, UK, European and Asian markets either held firm or nudged ahead on Thursday. Even the troubled oil market managed to pick itself up and recover some of the lost territory. Brent crude advanced 5.3% to $21.45 a barrel,” says Russ Mould, Investment Director at AJ Bell.

“Helping the FTSE stand its ground was oil producer Royal Dutch Shell, up 2%, various banking stocks and a good showing from the mining sector. These offset weakness in utilities, supermarkets and consumer goods companies.

“The pound strengthened 0.05% against the US dollar to $1.2338 and up 0.18% against the euro to €1.1415.

“Having made plans for £45 billion of issuance in April, the UK Government announced it would issue a further £180 billion of bonds between May and July, illustrating just how much Covid-19 support is costing."

Unilever

“Shareholders will be pleased that Unilever is among the select few companies still prepared to pay a dividend during the coronavirus crisis. It’s all the more impressive that the Marmite maker is doling out the cash given that it failed to grow sales in the first quarter of 2020.

“It has been a game of two halves for the company this year. Sales of household cleaning products have shot up as people went to great lengths to ensure they could disinfect their homes during the pandemic. Sadly this is the smallest part of its business; what really matters is how personal care, beauty, food and drink product sales have fared.

“To some extent its personal care products like deodorants are going to sell whatever is happening in the economy, hence why the business is seen as having defensive qualities.

“Sadly ice cream sales have melted as distributors in tourism-led countries were reluctant to fill their freezers for fear that no-one would be visiting their shores in the near-term, as well as individuals in sunny climates being in lockdown and not out buying treats.

“Perhaps what really matters, in relative terms to how other companies are struggling temporarily, is the fact that Unilever is still managing to achieve significant sales, and ones that aren’t plummeting.

“Interestingly Unilever has dropped its growth and margin outlook for 2020. The business had come under criticism late last year for falling short of its growth target. Coronavirus gives it the perfect excuse to reset expectations and reduce pressure on the business to meet what might have been overly-aggressive goals.”

Housebuilders

“Updates from housebuilders Vistry and Taylor Wimpey today suggest the UK housing market is beginning to be defrosted.

“While it is becoming more apparent there won’t be a return to outright ‘normality’ in the UK any time soon, both companies have outlined plans for a phased return to work in the coming weeks.

“This is good news beyond the sector as any disruption to the country’s housebuilding efforts could exacerbate an already pressing housing crisis.

“In an example of how we might have to live with coronavirus until there is a vaccine or effective treatment, new protocols will be in place to enforce social distancing. For Taylor Wimpey, the exception to this cautious start up is Scotland where Government support is still awaited for a return to work.

“Even through lockdown both Vistry and Taylor Wimpey have managed to sell homes remotely and digitally – even completing on some transactions – giving customers virtual tours of homes and handling all the admin online.

“Somewhat remarkably cancellations account for just 1% of Taylor Wimpey’s order book and this order book continues to grow, showing very resilient demand from purchasers in what are an unprecedented set of circumstances.

“Vistry’s net debt was below expectations and it expects to book £40 million in revenue from completed work over the next two weeks while Taylor Wimpey has access to cash of more than £800 million giving both parties breathing space while they begin the slow grind back to more typical levels of activity.”

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