Coronavirus - Saving summer
13 May 2020
The ONS released the UK GDP numbers today, which unsurprisingly didn’t read well. However, they were better than many EU economies due mostly to the delay in implementing lockdown. More worryingly for some European countries, the biggest impact is possibly yet to come. Tourism makes up a significant portion of GDP for many and the important summer season will be very tough regardless of the status of lockdown. It is no surprise the EC has focused on this area, setting out guidance for EU countries to resume tourism. Finding willing travellers may be harder.
• ONS figures show UK GDP fell 2% in Q1.
• India announces $264bn (£216bn) rescue package.
• EC announces guidelines for future travel.
• EU’s industrial production fell 11.3% in March.
• TFL sees 8.7% rise in daily passengers on the underground.
• Lesotho announce first case.
Buildings & Construction
• Ferguson– “In recent weeks the Group has remained focused on three key areas: • Protecting the health and wellbeing of our associates.
• Continuing to serve our customers during the crisis phase of the virus – a critical time of need.
• Protecting and preserving the strength of our businesses for the long-term.
To safeguard the wellbeing of our associates and support our customers we are operating our business in adherence with the recommended Center for Disease Control (CDC) guidelines. Cleaning protocols at all sites are in operation alongside appropriate social distancing measures. Our branches are operating pick-up and delivery only with customers encouraged to order ahead with pick up in store at the curbside and touchless signature at the point of delivery or pick-up location. Associates who can work remotely continue to do so. Our showroom networks have remained closed through April and we have served customers using virtual consultations. In select markets we are starting to book face-to-face consultations with the necessary social distancing measures in place in line with local governmental guidance.
Trading volumes were lower in April as a result of the impact of the Covid-19 virus pandemic. In the US the revenue decline in April was 9.3%. The major impact on volume continues to be highly correlated to the degree of disruption locally which has been variable across US states and localities. Blended Branches revenue was down 15.3% in April and in the major hotspots, where infection rates have been highest, such as New England, New York, Michigan, the Pacific North West and Northern California revenue was down significantly. However, Waterworks grew revenue by 8.5% in April benefiting from fewer restrictions. Standalone eBusiness also grew well with revenue 14.6% ahead in the month as a result of strong consumer demand for home improvement products.
In Canada revenue was down 33.6% in April with widespread lockdowns in place although we expect some improvement in sales per day as some markets including Quebec reopen to construction activity in May. The UK remained very challenging due to the national lockdown severely impacting activity levels with revenue down 60.2% during the month. Cost actions, cash optimization and liquidity – Ferguson has an agile business model and as we have started to see short-term revenue pressure our approach has been to protect our skilled workforce which is critical to the long-term success of the business. We have already taken a number of prudent cost saving measures to minimize impact on short-term profitability. This has included a hiring freeze, reduced overtime and restricting the use of temporary labour. Currently in markets where there has been a decline in revenue we are implementing a combination of reduced associate hours and temporary lay-offs based on business and market needs. That said, we are in the process of taking action across the Group to ensure the business is appropriately sized for the post Covid-19 operating environment.
The Company has also introduced a number of measures to protect its cash position including suspending the $500 million share buy back, pausing current M&A activity, withdrawing the interim dividend and reducing capital expenditure in 2019/20 to around $280-300 million. Ferguson remains in a strong financial position with long-term committed facilities. The Company's net debt, which excluded lease liabilities, at 30 April 2020 was $1.8 billion and the ratio of net debt to the last 12 months adjusted EBITDA was 1.0 times. As at 30 April 2020 the Group had $3.1 billion of available liquidity comprising readily available cash of $1.3 billion and $1.8 billion of undrawn facilities.”
• Fox Marble – “Fox Marble is now processing the paving slabs in order to supply its material in time for its customer to start the installation as soon as the current lockdown provisions in Kosovo are eased.”
• Marshalls# – “Marshalls continues to monitor the impact that Covid-19 is having on the business and the wider industry. Our priority is to ensure the safety and well-being of our employees, suppliers and customers at this time. In line with our sector, we have seen a sharp drop in demand. As previously advised, actions have been, and continue to be, taken to control costs and
maintain our cash liquidity. As part of these actions, the Board and Executive management have agreed to a 20 per cent reduction in remuneration. Senior managers in the business have now also agreed a 15 per cent reduction in their remuneration. Additionally, we are utilising the Government's scheme which allows the deferral of tax payments that would normally have been payable in the period to 30 June 2020. We also continue to utilise the furlough arrangements that are in place.
We have now taken further steps to restructure the Group's operations. We have entered into consultations with employees across the Group as part of a series of restructuring proposals that cover all parts the business. These proposals include selective site closures, changes in shift patterns and proposed changes to the size of and structure of support functions. There are potentially up to 400 positions representing 15 per cent of Marshalls total workforce, that may be impacted as a result of these proposed changes. We are reopening our plants as demand returns. The nature of the concrete manufacturing process means our facilities have low re-start time and cost requirements. This flexibility and our improved efficiency means that capacity will not be materially reduced by the proposed changes and we will continue to satisfy our customers' requirements.
We are taking all appropriate steps to support the long-term interests of the business, its employees and other stakeholders.
Bank Facilities – Further to the announcement on 14 April 2020, the Group has now signed final agreements with each of NatWest, Lloyds and HSBC for an additional £30 million, 12 month committed revolving credit facility with each, with a 12-month extension option. These additional facilities comprise £90 million and significantly strengthen the Group's headroom. Including these additional facilities, Marshalls now has total bank facilities of £255 million of which £230 million are committed. As at 30 April the Group had net debt of £69 million, on a pre-IFRS 16 basis.
In addition, Marshalls plc has been confirmed as being eligible for the Covid Corporate Financing Facility (‘CCFF’) with an issuer limit of £200 million. We have now completed the processes and documentation to establish a commercial paper programme under this scheme and are able to access the liquidity available to us under this facility.
The Board considers that the facilities now available to the Group, both from its enhanced bank facilities and its CCFF commercial paper programme, are sufficient to meet significant downside liquidity scenarios over a prolonged period.
Trading performance – As a result of the impact of the Covid-19 crisis, sales in the first four months through to 30 April were down 27 per cent at £131 million (2019: £180 million). Sales activity took a steep drop in the last week of March and throughout April. However, in the early part of May we have seen daily levels of activity progressively improve and we are currently at circa 50 per cent of our daily revenues compared to the same period in 2019.”
• Taylor Wimpey – “Since our announcement on 23 April which set out our approach to restarting construction, our sales rates have remained stable with signs of increased activity and customer interest over the last week. Cancellation rates have fallen and our order book has continued to grow. During the lockdown period we have sold 408 homes net of cancellations, averaging a net private sales rate of 0.30 homes per outlet per week. Cancellation rates have averaged 27% for the period and represented only
2.5% of the private order book. Our total order book as at w/e 10 May has increased to 11,033 homes (2019 week 19: 10,489), with a value of £2.7 billion (2019 week 19: £2.5 billion).
We have remained in active and open discussion with landowners. As we look forward to future land opportunities and housing delivery, we are also encouraged by new Government guidance on opening up the planning system, including the use of social media to conduct consultation processes.
A phased reopening of sales centres and show homes following updated Government guidance.
Following the updated UK Government guidance, which has come into effect today, removing the restriction on non-essential home moves and supporting the return of activities related to the sale and purchase of homes, we announce today that we will be reopening our sales offices and show homes from 22 May, initially for pre-booked appointments and with strict social distancing measures in place.
During this crisis we have continued to sell homes to new customers and progress purchases remotely each week. We have continued to support our customers during this period and have focused on how to make the process easier for them, and provide reassurance, during a challenging time. We have enhanced our digital offering to allow customers to complete their entire home buying journey remotely, from registering their interest through to completion of purchase. We have also introduced a new series of digital tours so our Sales Executives can complete digital viewings, which we will continue to expand.
We will continue to encourage customers to maintain contact with our sales representatives digitally where possible. However, there are instances where customers are unable to do this and will want to visit us in person or physically view a show home, and the new measures we have introduced will enable them to do so in a safe way.
This decision means we expect to recall the majority of our sales staff from furlough by 18 May and most other staff by the end of the month.
New protocols and revised working practices for sales centres – Having conducted a detailed review of our sales processes and customer interactions, and having regard to the latest Government guidance, we have developed a new set of protocols which include a fully revised set of working practices and staffing arrangements and a new layout of sales centres, with the installation of Perspex screens and marker guides for social distancing. Show home viewings will be unaccompanied, and only one family at a time will be able to view each home. These additional measures will maintain strict social distancing in line with Government and medical guidance and provide additional reassurance and protection for our customers and sales teams. These revised measures meet the Government’s ‘Covid-19 Secure’ principles.
Our first priority remains the health and safety of our customers, employees, subcontractors and wider communities. We have committed that we will not ask any employee to work in an environment where they do not feel safe. We know that each of our employees has different personal circumstances and we are committed to supporting them as effectively as possible. We will not be asking those who are vulnerable or shielding the vulnerable to return to our developments or offices.
Return to construction well underway – On 23 April we outlined our plans for the phased restart of site activities from the week beginning 4 May.
Last week our site management teams returned to the majority of our sites in England and Wales to put in place a series of additional health and safety and social distancing measures to prepare for the gradual return of our subcontractors to sites and the controlled resumption of construction. This is now well underway, with construction activity on over 90% of our sites in England and Wales.
Our employees, subcontractors and suppliers have now formally signed up to the Taylor Wimpey Covid-19 Code of Conduct, which sets out our commitment to deliver a safe working environment for our employees and subcontractors working on site, and our teams will continue to monitor processes on site. Following the Government's publication of safe working practices on 11 May 2020, we can also confirm our revised processes are ‘Covid-19 Secure’.
We believe this phased approach is vital to ensuring we embed the new practices and protocols and we continue to envisage a period of transition before establishing meaningful production capacity from June. We have received strong support for this decision from all stakeholder groups, particularly our employees and subcontractors.
The Government decision to encourage local authorities to extend site working hours will help us to reduce risk and reduce the usage of public transport as we can reduce the number of people on sites at peak times and improve efficiency.
Extended warranty and enhanced support for customers
Each Taylor Wimpey home comes with a two-year Taylor Wimpey warranty and a 10 year NHBC warranty. To give added reassurance and as a thank you to all our customers for their patience and support during this time we will extend our two-year warranty for all customers in warranty, at any point in the lockdown, by two months.
During the lockdown period we have continued to attend any reported home emergencies. We will continue to prioritise these, but we want to do what is right for our customers and fix issues as quickly as possible, as long as we can undertake the work safely and comply with social distancing requirements. Following feedback from customers and consulting with our teams, we have been gradually extending this safely and in a controlled way to support and deal with a wider range of customer issues.”
• ASA International – “The Covid-19 pandemic is impacting all of the Group's clients and staff across the world. Apart from the health and safety risks, the Covid-19 crisis has been disruptive to our operations due to the imposition of lockdowns, curfews, restrictions on movement and congregation of people, and the general fear and uncertainty caused by Covid-19, which has adversely affected the economies and the business activities of our clients in the countries in which we operate.
On March 15, 2020, a lockdown was announced in the Philippines. Within ten days thereafter, the Governments of all our other operating countries, except for Sierra Leone and Zambia, announced lockdowns, curfews or other measures to mitigate the spread of Covid-19.
Based on publicly available data, the spread of the disease in our operating countries does not reflect the explosive growth in confirmed cases and casualties as has been seen in Europe and the United States. At present, the numbers remain quite low, with a much flatter infection and fatality curve compared to the major affected countries in Europe and the United States. Lockdowns in Pakistan, Ghana, Kenya, Nigeria, Myanmar and Sierra Leone have gradually begun to be relaxed, which has allowed our field operations in these countries to begin to reopen, and operating performance in these markets has been in line with expectations.”
• Brewin Dolphin – “In the first half of 2020, we delivered a resilient set of results, notwithstanding the negative impact of Covid-19 on global markets towards the end of the second quarter. We saw a greater level of direct inflows in the first half, with strong demand for integrated wealth management service. We have a strong balance sheet and good cash generation although we need to be mindful of the high level of uncertainty for the remainder of the financial year. We continue to monitor the impacts on the business and maintain strong cost discipline.
With the prioritisation of keeping our employees safe, we were able to move to a remote operating model within days, ensuring business continuity, operational resilience, and sustainability for the foreseeable future. We increased our engagement with our clients, and saw increased demand for financial advice, which we were able to offer remotely. We have continued to focus on the implementation of our infrastructure projects and the integration of our recent acquisitions. We are pleased to confirm we have successfully integrated the people and assets of our Irish business and launched new technology to enhance the user-experience for WealthPilot. We are making significant progress on both Client Engage and custody and settlement system, which we are confident will be delivered in the second half of the year, supporting our growth ambitions and enabling greater efficiencies.”
• TP ICAP# – “ . . . The Group fundamentally re-engineered its operations during lockdown to maintain continuous global client services and liquidity across all asset classes and desks by tactically deploying new digital technology and changing workflows to allow the vast majority of our employees to work from home.
This presented significant technological, management and regulatory challenge coming as it did during a period of extremely high volatility and a sharp increase in volumes but the Group continued to serve clients and provide liquidity in the markets in which it operates effectively.
The Group has not furloughed or reduced any of its permanent workforce, nor has it requested any government aid in any of its global locations as a response to the Covid-19 pandemic.”
Food, Drinks & Household
• Applegreen – “The Group has converted €52.5m of the accordion facility in its existing Applegreen plc banking facilities into its Revolving Credit Facility, which represents an increase to the committed funding available for the remaining term through to October 2023. Applegreen plc’s lenders have also agreed to substantially relax or remove covenant conditions for the tests arising in each quarter up to and including June 2021. There have been no other changes to the terms or cost of this multi-currency facility. We thank our relationship banks to the Applegreen plc banking group for their continued strong support for the Group, and the confidence they have demonstrated in our business model during these unprecedented times. We continue to work
constructively with the lenders of the Welcome Break banking facilities and expect to reach a similar conclusion shortly.
Whilst it is important to have additional headroom in our facilities, we do not anticipate drawing down these additional facilities. We reiterate our view that we have sufficient cash to get us through this cycle based on a scenario where movement continues to be severely restricted to the end of May with the expectation that restrictions will then ease gradually before normalising in Q4. We also expect to have adequate existing cash resources to trade through a downside scenario where the recovery period is more prolonged, to the end of 2021.
All our sites have remained open and current trading levels are ahead of our baseline assumptions for Q2 while the reduction in our working capital levels are consistent with our expectations. We also note that the recent easing of movement restrictions in each of our markets has resulted in increased traffic volumes.
The Welcome Break estate has been the most heavily impacted by the crisis and, as anticipated in our scenario modelling, has experienced a higher rate of cash burn as the UK emerges from lockdown. We are anticipating a gradual recovery in volumes and are in the process of re-opening some of our food offers to meet that increased demand. The core Applegreen estate in the Republic of Ireland, UK and US is performing ahead of our original assumptions at the outset of the pandemic, and we expect to be cash positive from June onwards as working capital levels start to rebuild.
The Group continues to focus on cost reduction and, in addition to the extensive measures previously announced, the Board has agreed to reduce the base salaries for Executive Directors by circa 20% from 1st April 2020 for a period of three months. The Group has also implemented graduated salary cost reductions on a temporary basis for support staff across the organisation.”
• Stock Spirits – “To-date, the Covid-19 pandemic has had minimal impact both on our performance in our core markets and on the Group's overall financial position. However, we are monitoring the situation extremely closely given the uncertainty as to how long the crisis will last. However, we do note that most of our core markets have started to relax their lock-downs in recent days.
Our first priority is the health and well-being of our employees, and we quickly implemented an extensive range of measures to provide them with a working environment that is as safe as possible. These include organising revised shift patterns at our facilities to minimise risks, and taking measures to minimise person-to-person contact. Office-based employees are working from home. We have redeployed staff who usually work in the on-trade to new roles, including supporting off-trade sales activities, online training, assisting on-trade customers navigate government support packages, and digital marketing. We have not laid off or furloughed any employees, and have not sought government assistance of any kind in any market.
We continue to see robust levels of consumer demand for our products in our two core markets of Poland and the Czech Republic (which together represent 83.9% of the Group's revenue). We are fortunate to have had a long-standing focus on the off-trade in both countries, and any impact from the widespread closure of the on-trade (bars, clubs, restaurants and hotels) has been mitigated by the shift to off-trade channels as our products are enjoyed at home rather than in bars or restaurants. Overall, some 85% of the Group’s revenues come through the off-trade channel. We are also under-represented in duty-free channels, and so have avoided any material impact there.
Furthermore, our broad portfolio of local brands covering all price segments stands us in good stead, as consumers have tended to prioritise more familiar brands and products that they trust.
In terms of production, nearly all of our products that we sell within Poland and Czech Republic are sourced and manufactured locally. There has been no disruption to our supply chain, nor to production at any of our facilities, and no impact on our ability to service demand – even in Italy.
We are in the fortunate position of being able to offer real help to governments and businesses in their efforts to limit the spread of the virus. Our facilities in Poland, the Czech Republic and Germany have been manufacturing large quantities of hand sanitiser which has been donated for use by medical personnel, the emergency services, and employees in the food and drink sectors. We are committed to continuing to do everything that we can to help during this hugely challenging period for all our stakeholders.
Our balance sheet remains strong, with financing secure to November 2022. We are prudently leveraged, being well inside our financing covenants, and have significant unused bank facilities. We have used our consistently strong cash generation to raise inventory levels, further ensuring availability of our products during these uncertain times.”
• Warpaint – “Covid-19 has had a significant impact on people, societies and of course businesses and customers, and Warpaint is no exception. At the beginning of the outbreak in China, our initial focus was around the supply of our colour cosmetic products sourced in China, this being the main region of supply to the Group. This has since returned to normal operating levels and we do not expect a material impact on our inventory.
As countries began to lock down first in Europe, then the UK and US, consumer demand switched to essential items and food, and away from colour cosmetics. At the same time many of our customers who are not in the essential services sector have closed down temporarily, resulting in the cancellation, reduction or deferment of their orders. More recently we have seen a gradual improvement in orders from customers in all regions, however, overall performance is still well below our pre-Covid-19 expectations, and it remains too early to provide guidance on the impact of an extended period of lock down on our customer base and any reaction to a sustained period of economic contraction.
The wellbeing of Warpaint staff remains our primary concern, whilst also continuing to trade to support the durability of our business for stakeholders. We have taken significant preventative measures across our business, both to protect the health of our staff and to minimise operational disruption. We have reduced discretionary spend, those staff not working because of the decrease in business activity have been furloughed and with the approval from our landlords we have deferred rental payments. Those staff still working to maintain operations have done so wherever possible from home, and for those staff working in our offices and warehouses social distancing practices have been put in place to ensure their safety.
Our online platforms continue to do business and our products in the UK are distributed from our own facility, and in the US through a third party aggregator. Whilst encouraging that online sales continue they are not significant when compared to the normal level of Group sales. Whilst the Covid-19 crisis continues online sales are increasing significantly in the UK, this allows us to remain engaged through online activities with our consumers.
This is a difficult period for everyone, but we believe that with the actions we have taken and the Group's current financial resources, we are well placed to weather the Covid-19 crisis. We have a global business and the capacity, expertise and strategy to drive our future growth. Before the Covid-19 crisis trading to the end of February 2020 was at the upper end of the board's expectations, with higher sales, better margin, reduced overheads and higher PBT than budget, demonstrating that our business model is strong and that our brands are resonating with customers and consumers. In the short term, Covid-19 will certainly have an impact on our financial performance, however we are well positioned to take advantage of any improvement in market conditions.”
• Aston Martin Lagonda – “The Company took action to manage proactively across its supply chain and business more broadly through the onset of Covid-19, including temporarily suspending production at its UK manufacturing facilities from 25 March.
St Athan reopened on 5 May following public health guidelines; the Company worked closely with suppliers to secure supply aligned to this timing; DBX start of full production scheduled in the next few weeks and operations at Gaydon planned to resume later
The Company has developed and manufactured much needed personal protective equipment (PPE) and is delivering a supply of scrubs and gowns to support the NHS and has also provided vehicle repair and servicing for NHS workers’ cars
Up to 93% of the dealer network was closed or running with limited capacity at points during the quarter. Currently all 18 dealers in China have re-opened and more than 15% of dealers are fully open globally.
In addition to re-phasing costs and investment – Majority of employees are furloughed, and the Company is receiving support through the Government's ‘Job Retention Scheme’. Board and senior management have voluntarily waived a proportion of their remuneration for three months from 1 April.”
• Spirax Sarco Engineering – “All of our production facilities remain open, with most running split shifts to increase social distancing as well as disinfecting between shifts. Across the Group, office based workers not involved in manufacturing are working from home. We are starting to plan for a gradual return of some office-based work as governments ease restrictions. However, the health, safety and wellbeing of our employees has been, and will remain, our utmost priority and we will continue to take all necessary steps to protect and support them.
To date we have not furloughed any of our UK personnel, which account for 25% of our global workforce. In late April we introduced a temporary, voluntary flexible working scheme within the Steam Specialties business to reduce costs and support employees, many of whom are managing child or elder care alongside working. We will continue to review the situation regularly and should further action be needed, in response to any further downturn in demand, we will act appropriately and as circumstances require. In order to help contain costs during the more critical months of demand weakness, the Board and over one hundred senior managers across the Group agreed in March to pay reductions ranging from 20% to 7%. These pay cuts took effect from 1st April for a duration of six months.”
• Vesuvius – “Across the Vesuvius network, we have made changes to our processes where necessary to maintain social distancing and we continue to take all necessary actions to maintain a safe working environment including global sourcing of PPE and facilitating technology-enabled remote working.
As of 1 May we have reopened operations in South Africa, Malaysia, Argentina and India after their temporary closure due to national lockdowns. All of our plants are now operational albeit at reduced levels as we align with weaker demand and operate with re-configured layouts and processes to allow safe distancing between employees. The excess capacity across the Group positions us well for when the market returns to its long-term growth path.
Trading Update – Our first quarter performance was marginally ahead of the previous quarter, reflecting the subdued market environment that has persisted since the end of 2019 and little of the Covid-19 impact. The World Steel Association reported that during the first quarter, worldwide steel production declined 1.4% year-on-year (-4.1% excluding China). During the same period, steel production in the US declined by 1%, while weak demand persisted in the EU28, where steel production declined by 10%. In Foundry, the market environment remained challenging, with most end-markets still showing year-on-year declines with the exception of South America.
In recent weeks, the measures imposed by governments to contain the Covid-19 outbreak have resulted in significant disruption to our business and the wider economy, as reflected in our April 2020 sales, which declined by 28% compared to April 2019. As highlighted in our announcement on 6 April 2020, there remains considerable uncertainty in the trading environment and as a result, we have withdrawn financial guidance for the year. We will provide an update when the outlook becomes clearer.
Mitigating actions announced on 6 April in our ‘Statement on Covid-19’ – In response to the pandemic, we have implemented several cost reduction plans to deliver savings of around £10m per quarter during the crisis, starting in Q2, in addition to the £19.4m of recurring savings from our ongoing restructuring programme which we are targeting to deliver this year. We have also reduced our planned capital expenditures by 30% in 2020 (£20m). These plans are progressing well, and we are fully on track to deliver on our cost reduction programmes.
Increased Liquidity – We have further boosted our liquidity, which stood at £375m at the end of March 2020, by an additional £314m through the issuance of US Private Placement (USPP) notes and accessing the Bank of England's Covid Corporate Financing Facility (CCFF) programme. The USPP issuance is intended to repay the US$140m (£114m) notes which mature in December 2020. Our access to the CCFF programme has further reinforced our liquidity position in light of the financial uncertainty created by the pandemic.
Following repayment of the USPP notes maturing in December 2020, our covenant threshold will increase from 3.0x to 3.25x net debt/EBITDA, further widening our financial headroom. Furthermore, the Group's annualised interest expense will decline relative to the period prior to these fundraisings, predominantly as a result of the new USPP notes being at more favourable rates.
Finally, as announced on 6 April, we also took the precautionary step to preserve cash by withdrawing the payment of the 2019 final dividend of 14.3p per share (£38m).”
• TUI – “Acceleration of our strategy post Covid-19 – It is clear as a result of the Covid-19 crisis, the travel industry will evolve even faster and perhaps more profoundly than many had expected. The world will be different and TUI will be different also.
This evolution will see the launch of our global realignment programme. We are reviewing our activities, every business unit and group companies worldwide to identify synergies and where we can be leaner, faster and more efficient. What is crucial now more than ever is to adapt our structures, and review our investments and presence in both markets and destinations.
To address costs, we will leverage synergies in areas such as hotel purchasing and exploit further potential within our global IT structures. We are targeting to permanently reduce our overhead cost base by 30% across the entire Group. This will have an impact on potentially 8,000 roles globally that will either not be recruited or reduced.
We will be less capital intensive, and we will continue our asset-right strategy in our Hotels & Cruise business which we launched in 2019. We will right-size our airlines and order book, alongside restructuring. We will divest and address non-profitable activities within our business.
Driving digitalisation – we will accelerate our Group transformation into a digital platform business. We will expand accommodation only and seat only products as well as increase dynamic packaging options. For our digital platform within Destination Experiences, we will enhance and prioritise the planned transformation.
TUI is well positioned to adapt to these opportunities. In order to return to the successful development of the past years after the crisis, we will now implement the realignment quickly.
Future TUI will be leaner, less capital intensive and more digital, creating an even stronger and more agile business.”
• Young’s & Co Brewery – “The Company has agreed with National Westminster Bank plc (‘NatWest’) and HSBC UK Bank plc (‘HSBC’) to a new £50 million syndicated term loan facility, to be split evenly between those two banks (the ‘New Syndicated Facility’). Each bank’s credit committee has approved the terms of the facility, which will have an original maturity date falling on the fifth anniversary of the date the facility agreement is entered into. The Company will have the option next year to request an extension of the maturity date by a further year and will then be able to do the same the following year. Once the documentation has been completed, the Company intends to draw down on the facility immediately and repay in full the March 2021 £50 million syndicated facility with the Royal Bank of Scotland plc and Barclays Bank plc (the ‘Existing Syndicated Facility’).
The Company is also in the process of finalising a new £20 million bilateral revolving credit facility (the ‘New Bilateral Facility’) with NatWest. The bank's credit committee has approved the terms of the facility, which will have a maturity date falling on the first anniversary of the date the facility agreement is entered into. The Company will have the option later this year to request an extension of the maturity date by a further six months and will then be able to do the same again next year. Once the documentation has been completed, the facility will be available to be drawn down, as appropriate, to be used for general corporate purposes.
After the Company has refinanced the Existing Syndicated Facility via the New Syndicated Facility and has entered into the New Bilateral Facility, the Company will have in place £285 million of funds and committed facilities from its lending banks, private placement lenders and under the CCFF. In addition to this, the Company has a £10 million overdraft with HSBC.
All the Company's lending banks were supportive of Young's accessing additional liquidity. They were also agreeable to the Company refinancing the Existing Syndicated Facility via the New Syndicated Facility and to the Company strengthening its balance sheet further by entering into the New Bilateral Facility.
In addition, the Company's lending banks have agreed to waive any technical 'cessation of business' breach of the Company's banking facilities as a result of the Group's pubs being closed due to the coronavirus pandemic. They have also agreed in principle to replace the Company's financial covenant tests at June, September and December this year and at March next year with a liquidity test.”
• Ten Entertainment Group# – “2020 began well, with +12.7% sales growth in the 11 weeks to 15th March 2020. Like-for-like sales growth over this period has been +9.3%. However, this run of good growth was prematurely halted by the enforced closure of our sites on Friday 20th March as a result of the worldwide Covid-19 pandemic. We swiftly took action to safely close our sites, with the protection of our customer and employees of paramount importance.
Our focus since closure has been on cash conservation and securing the future of the business, and I am pleased to say that we have had very strong support from our shareholders, employees, business partners, banks and the Government. On 26th March we issued an additional 5% of equity, raising an additional £5m of funds. This, combined with our £25m revolving credit facility with the Royal Bank of Scotland, meant that we began the crisis with just over £30m of liquidity headroom.
We acted swiftly and decisively to reduce our costs in the business. We have taken full advantage of the Government support available, which includes a one year business rates holiday, a Time to Pay scheme with HMRC and placing 99% of our employees on furlough under the Coronavirus Job Retention Scheme (CJRS). At the same time, we have been pleased with the support we have received from many of our critical business partners, and we have negotiated for long term contracts to be placed on hold. Landlords have been supportive with rent deferrals during this period of closure and wherever possible we have moved to monthly payment schemes. We have ensured that these discussions have been collaborative rather than unilateral in order to secure continued support for when we reopen our business.
The result of these swift actions is a reduction of 70% in our monthly cash consumption to around £1.4m per month. This means that the business could continue to run closed and we believe puts us in a strong position not only to ensure our longevity but to enable us to open our doors to customers on a positive footing when the time comes.
Looking further forward, we are confident that with more normal trading conditions we will build an even stronger business for the future. The leisure market has been in consistent growth and our business offers a broad entertainment offering for the whole family at good value, making it ideally positioned to benefit, even in straitened economic times. Our strategy is proven, and while these are very uncertain times in the market, we are ready to open our entertainment centres to our customers again as soon as we are allowed to.”
• Anglo Asian Mining – “The Government of Azerbaijan (the ‘Government’) implemented various strict restrictions starting from early March 2020 to contain the spread of the coronavirus. All international land borders were closed to passengers (but not to freight) and all scheduled air flights in and out of the country together with domestic flights were suspended. Domestic travel around the country and the movement of people were also severely curtailed.
The Government suspended the operation of many of Azerbaijan’s industries but metallurgical companies were not required to close. Gedabek continues to operate and our office in Baku remains open. Gedabek is fortuitously in a fairly isolated location and most of its operations do not require the close gathering of many people. No cases of Covid-19 have so far occurred in Gedebek. The health of our staff is paramount and many measures have been taken to ensure their safety including carrying out an extensive education programme and implementing many hygiene measures. Operating during the Covid-19 health emergency has not added significantly to our costs.
Gold doré is usually shipped to Switzerland by scheduled air flights which have been temporarily suspended. However, the Company continues to ship gold doré by chartered aircraft. The refineries in Switzerland were temporarily closed in March and early April but have since reopened with initially limited operations.”
• BlueRock Diamonds – “As previously announced on 7 April 2020, the impact of Covid-19 on the Company's operation has been twofold. Firstly, the Company's ability to operate has been dependent upon the stance taken by the South African Government in dealing with the pandemic. Secondly, whether BlueRock can operate profitably will depend on when and how the global diamond market responds/recovers and returns to a point where the Company can sell its diamonds again profitably.”
• Lamprell – “In early 2020, international businesses such as Lamprell were faced with the dual impact of the Covid-19 virus and a plunging oil price. The health and wellbeing of our employees are key for us and we have taken major ‘self-help’ steps to protect our workforce and the business against these threats. While many functions have been working remotely, our yard activities have continued to operate in accordance with the UAE regulations, including measures such as testing, contact tracing and isolation facilities. The impact of the virus has affected our productivity to some extent and increased our costs. In response, we have temporarily reduced salaries, placed some staff on reduced working hours or released them to cut costs.
Bidding activity continues in both of our end markets of oil & gas and renewables but we are seeing signs of deceleration and some delays in awards. We are well positioned for new projects but, faced with a new reality in 2020 of the epidemic and deterioration in the global economic situation, the Group's financial position remains very challenging, driving the urgent need to conserve cash (see assumptions in the going concern statement below) and take further 'self-help' measures to ensure that our organisation is fit for purpose. Crucially we are also actively pursuing future funding arrangements to improve the liquidity position facing the business. The steps will allow us to implement our strategy and convert the available opportunities in our pipeline.”
• Airtel Africa – “In the countries where we operate, the spread of the Covid-19 has lagged the rest of the world. The situation is rapidly evolving, and in the last few weeks several governments in Africa have taken decisive actions to reduce the risk of contagion, including banning all commercial flights, closing educational facilities and in some case all non-essential establishments, limiting social gatherings and encouraging social distancing and working from home.
During these unprecedented times, governments have recognised the telecoms industry as a critical and essential service. We are working closely with them to keep people connected and the wheels of the economy turning. Our performance during the month of April has been resilient despite customers behaviour being impacted by lower disposable income and restrictions on movements. The business continued to deliver constant currency revenue growth, although at a lower rate. Increase in data and mobile money revenue growth more than offset revenue decline in voice.
We are constantly monitoring how the situation is evolving to identify key risks and take immediate action to put in place adequate mitigation plans to minimise any potential disruptions from the pandemic to our business.
GOVERNANCE: We have a dedicated executive Covid-19 committee mandated to regularly identify risks, agree on action plans and monitor their execution. As an outcome of the committee's role, the CEO and CFO have regularly updated the Board on the risks and actions identified. This ensures a direct channel between local management and executive and non-executive directors to ensure actions are agreed and executed quickly.
SAFETY: Our priority is the health and wellbeing of our employees, outsourced partners and customers, and we are making every effort to ensure that our OpCos have taken all necessary steps to ensure their safety. All offices have an agreed policy in place for remote working, working in shifts and social distancing practices, depending on the critical needs of individual functions. All full-time employees have medical insurance, with additional provisions being made in case there is a need to help with medical costs over and above insurance cover.
The outsourced staff in our call centres have all been given the option and equipment to either work from home or, if necessary, from the office following strict social distancing practices. Safety protective equipment and hand sanitisers have also been made available to all our outsourced partner staff in shops.
The safety of our customers is paramount to us. We have executed various social educational digital campaigns explaining best practices during the Covid-19 outbreak, and the importance of being safe. We have also made a number of sites across our businesses accessible free of charge to give students continuous access to quality education.
In addition, we have implemented a number of initiatives to support our customers, including zero transaction fees on money transfers, free text messages, extra bonuses on data bundles through Airtel Money subscriptions, and increased availability of home broadband products to support working from home.
NETWORK: In these challenging times, our network remains the main source for many people for social interactions, work and entertainment. We have already seen an increase in data traffic, and our priority is to keep our 110m customers connected to the network. We implemented key business continuity plans to ensure that both active and passive maintenance services can be safely carried out even when the movement of people is restricted. We have also identified key spare part components and made them available at different strategic locations across our markets. All of our Network Operations Centres can be operated remotely if needed.
DISTRIBUTION: Continuous and increasing lockdown measures may have some impact on our ability to both expand our distribution system and keep adequate levels of stock. So, we have increased stock levels of SIM cards and recharge vouchers by 30% to 50% to ensure availability in our shops over the next few months. We are also encouraging customers to use more digital methods of recharge, including through SMS, bank portals, our app, Airtel Money and E-Recharge to minimise the impact of any possible disruption to our distribution network. For example, Airtel customers in Nigeria can now recharge their phones using SMS through their credit cards or bank account details.
CAPITAL EXPENDITURE: The current pandemic may affect the timely deliveries of capital goods. Our capex deliveries are planned ahead of time, and as a policy we carry a deployable stock of network active equipment in our warehouses. Currently we have around $280m of capital work in progress and $250m of capital commitments which are expected to be fulfilled, so we have enough deployable materials in our warehouse to ensure timely rollouts across our markets.
Our strategy of diversifying our sourcing across four major providers is also protecting us from a company- or country-specific supply chain risk.
MOBILE MONEY: As a result of the actions taken by governments to reduce the risk of contagion, the mobile money business has been affected by social distancing measures and non-essential service closures, reducing the ability of customers to deposit and withdraw cash. Several governments have also asked mobile money operators to waive fees on certain transactions, including person-to-person and merchant payments. We have engaged with governments and regulators to allow certain mobile money outlets to be classified as essential services so that customers can fully access mobile money services. Mobile money represents 9% of the Group's gross revenues.
LIQUIDITY: We enter this period of high volatility with a strong financial position. Free cash flow more than doubled in the last 12 months to $453m, and with a 44.3% underlying EBITDA margin we benefit from strong profitability. Our net debt to underlying EBITDA ratio continued to improve to 2.1x at the end of this financial year. Our cash balances in conjunction with up to $814m of committed undrawn facilities ensure we can meet our financial obligations. We have $2.3bn in long-term debt with the first repayment of €750m due in May 2021. The next major debt repayment of $505m is due in March 2023.
We have agreed to extend the maturity of $254m of debt facilities loans due to mature in December 2020 and January 2021 by an average of 18 months to two years, further improving our liquidity.
We have identified other ways to conserve cash, reduce costs and mitigate risks from Covid-19. We have conducted a review of our operating expenses, and discretionary spend has to a large extent stopped. There is a travel ban across the business which has resulted in significant savings. We have also deferred the salary review for management and employees until there is more clarity on the Covid-19 impact. This will be now reviewed by the Remuneration Committee in June and, if required, again in September.
We intend to continue to invest in our network and spend our planned $650m to $700m of capex in the next financial year, in line with our guidance. A detailed analysis of this planned capex indicates that, in a worst-case scenario, we would be able to reduce it significantly without compromising network quality by prioritising expenditure.
After considering the uncertainty caused by the Covid-19 pandemic the Board has recommended a final dividend of $3 cents per share. This means the total dividend will be $6 cents per share or $226m, amounting to 50% of free cash flow.”
• Sage Group – “With Sage's focus on high quality recurring and subscription-based revenues, and strong liquidity position, the Group has entered the Covid-19 pandemic in a strong operational and financial position.
Our response to the pandemic has been to ensure the health and wellbeing of our colleagues, to continue serving and supporting our customers and partners, and to remain focused on our SaaS transition strategy.
We have put in place a range of measures to support our customers and partners, through local online advice hubs and expert customer service, and by working with governments to help our customers directly access the financial support available, facilitating the application process through our software.
We saw the early impacts of Covid-19 on Other Revenue (SSRS and processing) towards the end of March, as software licence and professional services implementations were affected.
We have now started to see the broader effects of the sharp economic downturn caused by the pandemic, with some customers deferring purchase decisions, leading to a slowdown in new customer acquisition.
In April trading, reflecting the above, new customer acquisition was roughly half the level previously expected. We have also seen a slight increase in customer churn.
In the context of a more challenging growth environment, we are implementing a range of mitigating actions to manage costs and cash in the near-term.
At this point, Sage does not intend to make any redundancies in response to the economic environment. We also do not intend to furlough any colleagues or make use of government support programmes.
We will continue to invest for the long term, repositioning the Group strategically and reshaping the portfolio, supported by our resilient balance sheet.
Despite the near-term uncertainty, we remain confident that we have the right strategy to support our longer-term vision to become a great SaaS company.
Outlook – While the Group has performed well in the first half, it is too early to quantify with confidence the impact of the pandemic on Sage's financial performance for the full year. We continue to expect, as we indicated in our trading update on 6 April, that organic recurring revenue growth will be below the previously guided range of 8% to 9%, and that the decline in other revenue (SSRS and processing) will accelerate significantly in the second half, with an associated impact on margin.”
• Connect Group – “The Covid-19 pandemic and subsequent UK and international lockdown has significantly impacted the newspaper and magazine supply chain, however, we are taking appropriate and responsible action to maintain service and protect the long-term interests of the Company.
The Group is proud that Smiths News has been able to continue operations, overcoming significant logistical challenges to meet its service KPIs for customers and communities across the UK. Our colleagues have been designated as key workers and we pay tribute to their unstinting commitment to customers, their wider communities and each other.
Performance will nonetheless be impacted by the contraction of the UK economy and further headwinds in the newspaper and magazine market in particular. Approximately 10% of our customers' retail outlets have closed, including high-volume travel point and high street retailers. Consumer demand at retailers which have remained open has also been impacted by social restrictions on movement and consequently reduced number of visits to local stores for regular and impulse purchases.
Prior to the recent announcement on the gradual easing of restrictions and moves to reinvigorate the wider UK economy, combined sales of newspapers and magazines were down by 25% over the period of the lockdown. While there has been some transfer of sales to smaller retailers and an increase in home delivery, this has not been sufficient to compensate for the absence of high-volume outlets at which sales are driven by customer traffic flow. The deferment of the UEFA European Football Championships and the Olympics will further impact sales of stickers and associated publications in H2, although we would expect to see a compensating transfer of these sales to FY2021 which were not otherwise forecasted. It should be noted that due to the revenue mix of Smiths News and the mitigating actions already taken the impact on net margin is considerably lower than a linear flow through of these lost sales.
Thanks to the close cooperation of our supply chain partners we have revised in-bound delivery times to ensure service KPIs for our customers can be met and the need for any re-runs and further additional costs minimised. The physical operation is, however, incurring additional costs from necessary changes to working practices to comply with social distancing guidelines and ensure the health, safety and welfare of our colleagues. There have also been additional costs in customer services following the lockdown in India which temporarily impacted our outsourced service centre operations. While these costs have been mitigated by savings elsewhere the overall cost per copy delivered has risen as a consequence of reduced sales.
In response to the unprecedented events, we are taking responsible measures to reduce non-essential costs without impacting our distribution capability or damaging the long-term interests of the Group. These include changes to routing, the restructure of contractor and staffing arrangements, and the deferment of service improvement and longer-term cost initiatives that can be restarted at a later date. Approximately 500 colleagues in roles not critical to the physical operations have been placed on furlough to date.
The operations of DMD and InStore are operating with only skeleton staff and limited services until trading in those markets returns to more normal patterns – colleagues who have not been redeployed elsewhere have been furloughed. It is not yet clear how the lifting of restrictions will impact the future of these ancillary businesses.
The full impact of the Covid-19 pandemic on the Group will depend on a variety of factors including the length of time the restrictions on social movement are in place and the extent to which further measures are required.
Meanwhile, the Group continues to stress test a range of scenarios that consider the length of current restrictions, the lifting of these and any additional measures which may be necessary, and differing levels of recovery against pre-lockdown volumes over varying time periods.”
• DP Aircraft – “Further to the Company's announcement of 9 April, the Board of DP Aircraft I Limited provides the following update regarding its discussions with its two lessees, Thai Airways and Norwegian Air Shuttle, and its lending banks.
Thai Airways – As adverted to in the Chairman's Statement contained in the Annual Report for the year ended 31 December 2019, which was published at the end of last month, the Company has agreed a rent deferral arrangement with Thai, commencing on 29 April 2020. Pursuant to this arrangement, lease rental payments representing approximately US$3.4m in aggregate are being deferred, with the deferred amounts to be paid back in twelve equal monthly instalments, along with interest accruing thereon, by November 2021. This is subject to signing of final documentation. The Company's debt repayment obligations in respect of the assets leased to Thai remain unchanged; and the Company's lending banks in relation thereto have given their approval to this deferral arrangement.
Thai Airways made its first lease repayment for the adjusted amount in respect of April on its due date.
Norwegian Air Shuttle – As has been widely reported, Norwegian Air Shuttle has been offered financial support by the Norwegian government in an amount worth up to NOK3bn (approximately £230m) subject to certain pre-conditions, among them agreement from Norwegian's bondholders and lessors to swap their debt and lease payment rights for equity in Norwegian. The Board and its advisers have been in negotiations with Norwegian regarding this proposal, and have agreed to the equity swap on the following basis:
• All of Norwegian's payment obligations until 30 June 2020 are to be waived to the extent that they have not already been met; and from July 2020 to March 2021 a 'power by the hour' arrangement will instead apply. Under this arrangement, Norwegian will only pay lease rentals in respect of the two assets which it has leased from the Company to the extent that they actually operate them.
• The ‘power by the hour’ arrangement will come to an end on 31 March 2021. Thereafter Norwegian will make monthly lease payments to the Company again, at a reduced rate to that which has applied to date, reflecting the downward pressure on market rates for lease rentals that is widely anticipated in the aftermath of the Covid-19 crisis.
• In addition to monthly lease rental payments the Company will receive equity in Norwegian, with the number of shares to be calculated by reference to the monies which are being waived and/or forborne by the Company as a result of the ‘power by the hour’ arrangement and the reduced monthly rental amount from April 2021. The shares are to be provided to the Company in two tranches over the coming twelve months, with the first tranche expected to be allotted later this month and the second tranche in April 2021. The first tranche of shares will have lock-up dates attached allowing partial sales in August and October 2020, with the Company free to dispose of all such shares on any date falling on or after 9 December 2020.
• The shares in Norwegian will be pledged to the lending banks for as long as loan deferrals are outstanding, and accordingly any sale of shares during that time will require the prior consent of the banks.
Norwegian is now in the process of finalising approval from its shareholders, bondholders and lessors for implementation of the proposed debt for equity swap. Norwegian received formal approval from three of its four bondholder groups for the proposal at a bondholder meeting held on 1 May, and has subsequently reached agreement with the other group; a further and final bondholder meeting is now expected to be held on 18 May. Norwegian has also confirmed that it has received sufficient support from lessors for the swap to satisfy the condition relating thereto in its proposal to bondholders. An extraordinary general meeting of Norwegian's shareholders on 4 May overwhelmingly supported the debt to equity proposition, with over 95 per cent. of votes cast in favour of the proposal. The arrangements agreed between the Company and Norwegian as described above will not come into effect until final bondholder approval has been given on 18 May.
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