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ASX 200 edges lower, Melbourne enters stage 4 lockdown

The S&P/ASX 200 Index (ASX: XJO) has ended the day down 0.03% to 5,926 points.

COVID-19 updates

There were a number of announcements relating to COVID-19 and associated impacts today.

South Australia reported two new COVID-19 cases and changed some of its restrictions. The number of people who can be at home gatherings has been reduced from 50 to 10 and at licensed premises only seated consumption will be allowed. NSW reported another 13 cases of COVID-19 today.

Melbourne is entering stage four restrictions this week. Abattoir production will be reduced by a third, most retail stores will be closed except for essentials like supermarkets, post offices, convenience stores, pharmacies, and so on. Construction sites will only be allowed to have a small number of people working there.

SEEK Limited (ASX: SEK) cancels final FY20 dividend

The employment business recently paid its FY20 interim dividend but has decided not to pay its final FY20 dividend to preserve capital so that it can fund its long-term growth strategy in this uncertain environment.

SEEK also announced it has been successful at increasing and extending its debt.

The CEO and co-founder of ASX 200 company SEEK, Andrew Basset, said: “The combination of our debt capital market transactions and the decision not to pay a final FY2 dividend increases our funding flexibility so we can continue to invest for the long term, even in this uncertain economic environment. The dividend decision was not taken lightly but we believe it is the right trade-off to maximise returns for long term shareholders. Once economic conditions improve, we intend to resume payment of dividends.”

The SEEK share price fell 2.25% today.

Tabcorp Holdings Limited (ASX: TAH) announces big asset writedown

Tabcorp announced today that after reviewing its balance sheet, it expects to incur a goodwill impairment charge of between $1 billion to $1.1 billion in FY20.

The ASX 200 share said it relates to the wagering and media business as well as the gaming services business. Tabcorp said the impairment reflects the impact of government and other measures to address the COVID-19 pandemic on business operations. It also reflects the economic uncertainty as well as the competitive intensity and structural changes in the industry.

Tabcorp announced that it expects FY20 earnings before interest, tax, depreciation and amortisation (EBITDA), before significant items, to be in the range of $990 million to $1 billion. This is a decline from FY19’s EBITDA of $1.124 billion.

It also expects FY20 net profit after tax (NPAT), before significant items, to be in the range of $267 million to $273 million – down from $396 million last year.

The Tabcorp share price dropped 1.7%.

Rural Funds Group (ASX: RFF) acquisition

Rural Funds, the farm landlord, has announced an acquisition today.

It said it’s contracted to acquire 5,409 ha of sugar cane farms, with the associated plant and equipment), as well as 8,060 ML of water entitlements from MSF Sugar for $81.1 million, excluding transaction costs.

Rural Funds’ manager said it intends to progressively convert the farms to approximately 2,200 ha of macadamia orchards, with a substantial portion of the remaining area able to be used for cropping. Rural Funds is in discussions with several potential lessees and it will provide further details in the future.

Around a quarter of the MSF farms are leased at rates consistent with Rural Funds’ other natural resource predominant assets. Management will seek to lease the rest of the cane farms.

The transaction includes a two-year off-take agreement for the cane produced on the farms, or a reduction in the purchase price.

Rural Funds said the deal includes an opportunity to buy more water rights. Settlement is expected to occur in October 2020 and will be funded from an increased debt facility.

There are no changes to the forecast FY21 distribution of 11.28 cents per unit.

The Rural Funds share price dropped 0.5% today.

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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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