Today we continue our hunt through the stocks we have picked in the past for any whose very survival may be at stake in the extraordinary economic circumstances in which we find ourselves.
Most in danger are businesses that operate in an area badly affected by the virus crisis (airlines and restaurants spring to mind) and that have a lot of debt.
We have tipped two airline stocks: easyJet and Dart Group. We intend to cover the former in a separate column so the first stock we look at today is Dart.
三级成人视频As the owner of the Jet2 airline the company is obviously facing the full force of the crisis. It is not just a travel company – it also owns the Fowler Welch logistics business – but the former dominates so we have to expect the group’s sales and profits to be very heavily affected this year.
However, while it has debts of £981m and lease liabilities of another £219m, only £151m of debt is due for repayment within two years and management has prudently husbanded a £1.7bn cash pile, although some of this represents customer deposits that may have to be refunded.
三级成人视频The firm also has £1bn available to it in financing facilities. These safety buffers should enable it to stay afloat until we reach better times.
Keith Ashworth-Lord, manager of the SDL UK Buffettology fund, said: “Dart has probably the strongest balance sheet in the airline industry. We believe it will come through this crisis not just intact but with a strengthened market position and pricing power.
三级成人视频“However, in the short term it is hunkering down with much of the fleet grounded and this lies behind the savage share price falls seen in recent days. We have not sold any of our holding and may well turn buyers again when we see light at the end of the tunnel.” Hold.
We have also tipped Gama Aviation三级成人视频, which provides services such as aircraft maintenance. This month it sold a stake in an American associate for $33m (£28m) and is sufficiently confident to say it will use the proceeds to invest in its remaining businesses. Hold.
After the failure of Carillion and near-disaster at Interserve it is natural to be worried about contractors in the current climate. We have tipped Capita and Costain in the past.
Capita三级成人视频 raised £700m from investors in 2018 but margins are still skinny and it is taking longer than hoped to turn the company around. It must repay debts of about £200m in each of 2020, 2021 and 2022, against just over £400m of cash on hand at the end of 2019.
But it is still targeting a £160m cash inflow from operations in 2020 and has further facilities worth £600m available from its banks. That should see it through but the company is complex and still heavily indebted so further borrowing wouldn’t be ideal, even if necessary.
More cash could be needed if the turnaround falls further behind but Capita’s survival does not seem in doubt. In the current climate, as we said yesterday, our priority is to sell those firms that may not make it through the crisis. Hold.
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Shares in Costain have fallen severely, partly because its plan to ask investors for up to £100m represents heavy dilution for existing holders. However, the firm already had net cash and said the new funds reflected a wish among clients to deal with businesses with strong balance sheets. Its ability to survive the crisis seems assured. Hold.
Aston Martin三级成人视频’s share price had already suffered badly before the virus and has continued to slide, partly as a result of the impact on demand in its key Chinese market. But Aston Martin too is raising new money to the tune of £536m, which should shore up its finances nicely. Hold.
Investment trust bargains
In light of the developments of recent weeks we have taken the decision to concentrate on those investments at risk of imminent failure. Investment trusts do not, fortunately, fall into that category so we have not covered them this week. The column will return next week.
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