Imperial Brands Plc

Imperial Brands Plc (LON: IMB) is a fast-moving consumer business, with operational interest in a variety of fine cut and smokeless tobaccos, cigarettes, papers and cigars.

Recent News
On 27th February 2020, Imperial Brands announced the selection of Stefan Bomhard. Mr Bomhard will hold the responsibilities of CEO (Chief Executive Officer) effective from 1st July 2020.

Credit Facility & Trading Update (as on 31st March 2020)
On 31st March 2020, Imperial Brands announced the signing of a new multi-currency revolving credit facility of EUR 3.5 billion or GBP 3.1 billion. The facility was coordinated by SMBC, Santander and NatWest and is provided by 20 banks syndicate until March 2023 and will also replace existing RCF of around GBP 3 billion. The impact of Covid-19 outbreak is developing at a rapid pace both socially and economically, but the company’s operations are not materially impacted, and trading remained in line with the management forecasts. The group’s primary focus is to ensure the safety and health of its employees. The company’s operations are benefited from the diversified factory footprint and supply chain. The group’s Logista, distribution business, which operates in Spain, France and Italy have increased stock of finished goods in regional distribution hubs and is delivering products to retailers at a constant pace.

Share Price Performance

Daily Chart as of March 31^st, 2020, after the market close (Source: Thomson Reuters)

Imperial Brands Plc shares were trading at GBX 1,496.80 at the time of writing after the market close on 31^st March 2020. Stock's 52 weeks High is GBX 2,651.00 and Low is GBX 1,258.20.

Conclusion
The company expect stronger cash delivery in 2021. Also, the group’s robust tobacco business recorded high margin sales growth and is well-established to handover a profitable growth in the years to come. The group is transforming into a leaner and more agile business as it adapts to a changing operating environment. The group is expected to continue to exploit opportunities in the tobacco arena, where it seeks to deliver high margin sales growth through a focus on its longstanding brand and market priorities. The new revolving credit facility will help the company to operate effectively in the uncertain market environment. Although the group’s operations are not materially impacted by Covid-19 pandemic but its spreading at an increasing rate. The company has beentaking constant review on the situation and will be taking all the required steps to ensure the safety of its employees and business operations.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 1,496.80 (as on 31^st March 2020).

De La Rue Plc

De La Rue Plc (LON: DLAR) is a support services company that works with governments, central banks and commercial organisations to produce banknotes, fight illicit trade and counterfeiting, protect brands and reputations and supply key security components to the identity industry that underpin the integrity of trade, personal identity and the movement of goods.

The group will announce its H1 results on 25^th November 2020.

Trading Update (as on 31^st March 2020)
On 31st March 2020, De La Rue released an update for trading post the FY ending 27th March 2020. The group expect its adjusted operating profit to be ranging from GBP 20 million to GBP 25 million. The company is operating within banking covenants and expect net debt/EBITDA in between 2 times and 2.4 times for FY2019/20. The net debt is expected to be around GBP 105 million for the period, with a good liquidity headroom below revolving credit facility of GBP 275 million. The company is continuously monitoring the impact of Covid-19 and taking required steps to protect its employees and supporting the Government.

Share Price Performance

Daily Chart as of March 31st, 2020, after the market close (Source: Thomson Reuters)

De La Rue Plc shares were trading at GBX 57.00 at the time of writing after the market close on 31^st March 2020. Stock's 52 weeks High is GBX 466.00 and Low is GBX 44.75.

Conclusion
Throughout its international operations, the company faces several risks, both external and internal, which could have a material effect on the De La Rue Plc’s price performance. There are several changes in the market, due to the impact of the rapid changes in the overspill market, volatile buying patterns, and some offset with growth in polymer revenue. The company has already suspended future dividend payments to maintain its rising debt levels. The company will take time in stabilising its management. The company needs some structural changes to survive the competition in these challenging market conditions. The outlook for the company looks bleak as the banknote print market and security features market is becoming more competitive. The company is also facing Pension fund liability which could impact its margins. The group thinks it’s too early to quantify the impact of the outbreak and is taken necessary steps to prevent its employees and customers.

Keeping in mind the risks faced by the company, investors are recommended to “AVOID” taking fresh positions at the closing price of GBX 57 (as on 31^st March 2020).

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