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A test to find out whether people have been infected with coronavirus in the past has been approved by health officials in England. The test, developed by Roche, gave the correct result 100% of the time where someone had the disease, and a correct result more than 99.8% of the time in the case of a negative result. This could be a game changer for the Covid-19 response, by removing one variable in the calculations used to build an exit strategy. This comes with one caveat – no one knows if the antibodies are able to prevent reinfection.

Headlines

• US unemployment reaches 36.5million.

• Public Health England surveillance report & infographic published.

• Lloyd's of London has said it expects coronavirus-related claims to cost it $3bn to $4.3bn.

• OBR expects the UK deficit to reach £298bn as costs rise to £123bn.

• A study of the French outbreak estimates that 4.4% of the population have had the disease with a mortality of 0.7%.



Company news

Buildings & Construction

Cairn Homes – “Our residential sites will reopen on 18 May 2020, on a phased basis under strict new return to work protocols across 15 of our sites. Planned new site commencements are likely to be postponed until later this year;

Cairn continues to introduce measures to support our valued subcontractors and supply partners as construction restarts;

Our closed and current forward sales pipeline is 863 units as of 13 May 2020. Due to our new protocols extending our build programmes, some of our projected 2020 closings, particularly on apartment developments, will move into 2021;

Spring sales launches are postponed until late summer, however through our online sales platforms, we continue to see new reservations marginally ahead of cancellations over this period;

Interest from institutional investors for multifamily private rental sector ("PRS") has remained robust;

We will be in a position to measure demand later this summer, when our customers can re-visit our show complexes aligned with the Governments' phased approach. We are targeting 8 June 2020 for private sales viewings by appointment;

Last week the company concluded a previously planned disposal of a non-core site for €11 million;

Current strong gross cash position of €156 million as at 13 May 2020. Additional costs and cash flow management measures outlined, including Executives Directors foregoing any cash bonus entitlements in FY20; and

Despite the current challenges, Cairn's uniquely strong cash position within the Irish homebuilding industry allows us to also invest significant capital into our medium and longer-term delivery objectives.”

Countryside Properties – “The impact on our results – The timing of the Covid-19 pandemic and the resulting restrictions on movement and uncertainty meant that our half year results were significantly impacted. Revenue and profit were both lower than they otherwise would have been as a significant number of private completions due for the end of March did not take place as planned and land sales were postponed. We have estimated the impact of these items on adjusted operating profit and cash flow below.

We took the decision to close our sales offices, construction sites, factories and regional offices on 25 March 2020 following government and Public Health England guidance as it became difficult to maintain adequate social distancing without adjustments being made to the workplaces.

We estimate that around 184 completions, including 79 private completions, were lost, which alongside the lower levels of construction activity in March and the cancellation of five land sales by the counter-parties resulted in lost revenue of around £116m and associated lost operating profit of around £29m, on an adjusted basis. Our priorities – Our priority through this period has been to focus on the safety and wellbeing of our employees, customers, supply chain and other partners. We have ensured that we have maintained good communication with our employees during what has been an uncertain time for them and their families and we took the decision to maintain pay and benefits for all staff to ensure that they were in the best possible position to resume work when required. Our contingency planning was activated smoothly, allowing our office-based employees to make the transition to homeworking and continue with minimal disruption during the initial lockdown phase. The level of commitment that we have seen from our employees is a real testament to the quality and professionalism of the people we have working for Countryside.

The crisis is impacting the communities in which we operate. We have established a £1m Communities Fund, targeted at helping vulnerable local people, including supporting local food banks and community groups. We also announced that the Board and Executive Committee were reducing their salaries by 20% for two months from April, with these funds being added to the Communities Fund. We have already made good progress in allocating these funds and are working with partners to ensure the most vulnerable people in our communities get help when they need it.

Measures we have taken to manage liquidity – Following the decision to cease construction activity on 25 March 2020, we took a number of steps to conserve cash in the business. This included negotiating deferrals to payments for land and taxation where possible and minimising all other spend across the business. We have chosen not to claim employee costs under the government's Job Retention Scheme, as we do not believe these employees would otherwise have been made redundant in the near future. All staff who were furloughed by the business have therefore been given full paid leave for the period of their absence and all staff are expected to return to the business during May.

We are also seeking to renegotiate a number of contracts, both for the purchase of land and some of our longer-term Partnerships development agreements to defer land payments and provide additional protection against falls in house prices.

As previously reported, we fully drew down on our £300m revolving credit facility in mid-March. On 28 April 2020, our eligibility to access the Bank of England Covid Corporate Financing Facility ("CCFF") was confirmed, and we have put in place a £300m commercial paper facility to access the CCFF should it be required. We have also agreed a relaxation of the Group's banking covenants until September 2022 to ensure that we are able remain compliant in any plausible but severe downside scenario. As a result of the additional financing and the conservation measures taken above, we are confident that we have enough liquidity in the business for the foreseeable future, having considered a range of downside scenarios.

Countryside Ground Rent Assistance Scheme – We recognise that our customers are also going through a period of increased uncertainty and we are doing all we can to help them. In order to further Countryside's commitment as a signatory to the Government's Leasehold Pledge, we have now created the Countryside Ground Rent Assistance Scheme and will seek agreement from freehold owners to vary the leaseholds of Countryside customers who still own homes with a leasehold ground rent that doubles more frequently than every 20 years, to be linked instead to the rate of RPI and reviewed every 15 years. The Scheme is in the early stages of its development and the associated cost of the Scheme is provisionally estimated to be up to £10m. An appropriate provision for these costs will be made in the second half of the year.

Looking through the crisis – The impact of Covid-19 on consumer behaviour remains to be seen, particularly given the use of the Job Retention Scheme by large numbers of companies which has allowed employees to remain employed with at least 80% of their wages intact up to a cap of £2,500 a month. The structural undersupply of homes in the UK has not diminished but the availability of mortgages and valuation of properties will no doubt take some time to return to pre-pandemic levels. Whilst we have continued to take reservations during the lockdown period at pricing in line with pre-pandemic levels, the impact of the pandemic on future prices or sales rates remains unknown.

We commenced a phased restart of operations on around 80% of our sites from 11 May 2020. We have developed a new set of Standard Operating Procedures based on guidance from the Construction Leadership Council, which are designed to allow the safe operation of sites whilst complying with government and Public Health England guidance on social distancing. Measures we have taken include the provision of additional site welfare facilities, car parking and the introduction of Site Compliance Officers to ensure our procedures are adhered to. We have similar operating guidance in place for our factories in Leicester and Warrington.

We have adapted our business model to take into account the fact that life will not return to “normal' for some time. We have increased our online presence with both new and existing customers, which included conducting customer visits by video conference, as well as a number of virtual home tours. In the six-week period to 10 May 2020, these helped us achieve 217 new gross reservations.

Our modular panel factory has recommenced operations and provides us with significant advantages. We have greater security of material supplies, there are fewer people required on site with this build methodology making it easier to adhere to social distancing, and the increased build speed allows us to restart operations and deliver homes more quickly than traditional methods. Whilst we do not underestimate the short-term impact of this crisis on our sector, it is important that we continue to plan for the future and we are progressing our plans for a second, larger modular panel factory during 2021.

In addition, our mixed tenure business model remains robust and provides us with a degree of resilience with only around 40% of our business reliant on the private for sale market. As we recommence construction activity, we will initially focus on homes where customers have already exchanged as well as the construction of affordable and PRS homes, which will allow us to generate profits and cash flow more quickly.

We continue to have a strong pipeline of work with an order book of £1.5bn as at 31 March 2020 of which £1,074m relates to Affordable and PRS sales and £432m to private sales. We continue to have significant growth opportunities through our existing regional businesses as they grow to scale and we will leverage our relationships with local authorities and registered providers to underpin this growth.

Eurocell# – “We are now pleased to announce that, following the latest guidance from the Government, which permits tradesmen to work in domestic dwellings so long as appropriate precautions are taken, we have implemented the first steps towards re-opening the business. On 11 May, we recommenced supply to our fabricator customers from existing stocks and opened six

branches around the country. This is allowing us to test our safe-working practices and begin to assess the level of customer demand.

We are encouraged that trading over the first three days has been robust, although it is not yet clear whether this is a result of pent up or underlying demand. Subject to the on-going results from these activities, and in particular there being sufficient underlying demand, we plan a phased re-opening of the business over the coming weeks. This includes a return to manufacturing when required to ensure continuity of supply to customers.

In the meantime, fit-out of the new warehouse remains on track and we continue to target being operational early in 2021, although this date may still be affected by Covid-19 developments.”

MJ Gleeson – “We will have reopened up to half of our sites for limited build activity by the end of this week and all sites will have reopened by the end of June. Initial on-site activity through May and June will focus on preparing site infrastructure and other ground-level works ahead of building out our forward order book.

We will begin to reopen sales offices this week on a regional hub basis and will have 19 sales offices covering all 67 sites open within two weeks. Visits to these regional hubs will be by appointment only.

The company is undertaking an on-the-ground communications programme with the communities in which it operates, including via social media channels, to keep them informed about the company's working protocols and revised operating procedures. On-site signage will provide a helpline phone number for residents to call should they have any concerns.

We announced on 6 April 2020 that, in line with the Government's Job Retention Scheme, the company was furloughing a total of 456 employees, representing 76% of the workforce. Over the coming weeks we will begin to bring colleagues off furlough in line with the phased return to work. We hope to have all furloughed colleagues back at work by the end of July.”

Persimmon – “As previously announced the Group began a phased return to work on its construction sites in England and Wales on 27 April 2020. This process continues to progress smoothly and to plan. During the week beginning 4 May 2020 c. 65% of production capacity had been restored.



The Group's businesses in Scotland remain in shutdown, pending further guidance on a restart timetable from the Scottish Government.

Trading Update – In the eight weeks ended 10 May 2020 the Group secured 1,351 gross private sales reservations, with a total of 1,300 legal completions being made in the same period. Cancellation levels remain in line with historic trends.”

Safestyle – “In light of the Government's updated guidelines, the Group's senior management are now planning a restart of our commercial operations. The plan is based on a phased and measured return to work for the business and involves a number of temporary changes to our policies and practices to ensure staff and customer safety. As a business, we are confident in our ability to operate in line with the Covid-19 Secure guidelines, as soon as it is permissible to do so.

With the necessary health and safety measures in place, the company is currently expecting to restart operations, including manufacturing, installations, surveying and selling activities by the end of May. Staff working in the company's various support functions will also begin to return to work in line with this phased restart, although the company will continue to ensure people who are able to work from home do so.

Clearly there are high levels of uncertainty around consumer demand for the year ahead, the challenges of selling in home and the competitive environment. The company will seek to adjust to this operating context rapidly. It will continue to utilise the Coronavirus Job Retention Scheme as required through the summer, whilst maintaining tight controls on the Group's cost base and closely monitoring available liquidity.”

Financial

3i Group – “Total return of £253 million or 3% on opening shareholders' funds (March 2019: £1,252 million, 18%) and NAV per share of 804 pence (31 March 2019: 815 pence) after paying 37.5 pence of dividends in the year.

Our Private Equity business delivered a gross investment return of £352 million or 6% (March 2019: £1,148 million, 20%). The portfolio had performed well overall in the 11 months to 29 February 2020 and was on track to generate returns consistent with our strategic objectives before the significant impact of Covid-19 on the portfolio valuation at 31 March 2020. The pandemic has impacted our travel, retail and automotive portfolio companies, while companies in medical technology, personal care products, e-commerce and other specialty manufacturers are experiencing strong demand.

Action traded strongly in 2019 and in the first two months of 2020, but Covid-19 caused major short-term disruption to the business, as it was forced to implement total or partial temporary store closures in a number of countries. As of today, virtually all of Action's stores have reopened and it is rebounding strongly now that lockdowns are being lifted.

Earlier this year we closed the transaction to provide liquidity to investors in Eurofund V from the realisation of the Fund's investment in Action through a sale to the 3i 2020 Co-investment vehicles. This transaction achieved an enterprise value of €10.25 billion and was funded by a combination of rolling LPs, new LPs and 3i, which reinvested in Action to increase its gross holding from 45.3% at 31 December 2019 to 52.6% at 31 March 2020. At 31 March 2020, we valued Action at a level consistent with the valuation achieved in this transaction. This is a step back from the valuation of the investment at the end of December 2019, and is broadly equivalent to using Action's run-rate earnings to March 2020 and reducing the multiple used to c.17x post discount.

In competitive markets the Private Equity team maintained its cautious approach to capital deployment, making three new investments in the year in Evernex, Magnitude and a new bioprocessing products platform, for a total of £413m. We continued to focus on M&A activity by our portfolio companies and completed 13 bolt-on acquisitions in total during the year, most of which were self-funded.

Private Equity realisations (excluding Action) totalled £446 million. Of note, we generated a 4.1x money multiple on our realisation of Aspen Pumps, sold another tranche of Basic-Fit and sold ACR, a challenged legacy investment.

Our Infrastructure business delivered a gross investment return of £(39) million, or (4)% (March 2019: £210 million, 25%). The negative return was driven primarily by the decline in the share price of 3i Infrastructure plc ("3iN") as a result of the broader market volatility in March 2020. Our Infrastructure portfolios have proven resilient to the impact of Covid-19 and most portfolio companies have traded robustly through the pandemic.

During the year, 3iN deployed £376 million in two new investments, Joulz and Ionisos, and generated proceeds of £581 million from the realisations of WIG and the UK projects portfolio. Our North American Infrastructure team completed its second US Infrastructure investment, with the acquisition of Regional Rail and two bolt-on investments for a total of £175 million, funded from our own balance sheet. We also continued to deploy capital in the 3i European Operational Projects Fund, which is now c60% invested.

Scandlines generated a gross investment return of £5 million, or 1% (March 2019: £49 million, 9%). The business continued to perform well and produced solid results in 2019 and a good contribution to portfolio income. The decision by the Danish and German governments to close their borders to stem the spread of Covid-19 had a significant short-term impact on car volumes in particular, however freight continues to flow with good volumes. This is reflected in the valuation at the end of March 2020.

Total dividend of 35 pence per share for FY2020, with a dividend of 17.5 pence per share to be paid in July 2020 subject to shareholder approval.”

Arrow Global Group – “By the end of March 100% of our employees were able to work effectively from home. The Group has begun to see early signs of the Covid-19 virus's impact on cash collections and servicing revenues across its European operations. First quarter IB cash collections of £85.1 million represents 92% of ERC assumptions with the only material shortfall relating to £10 million of delayed collections from two large ticket secured assets in Italy and Ireland. Performance in April remained robust at 93% of ERC, albeit enhanced by the acceleration of cash flows from the restructuring of one of the Group's co-investment portfolios. Excluding this, collections were at 75% of ERC in April – around the mid-point of the Group's range of modelled collections scenarios. Year to date, collections are currently running at 92% of ERC.

While the impact of the European lockdown remains highly uncertain, it is expected to vary depending on asset class and geography. Approximately 40% of the Group's ERC derives from secured portfolios – primarily in Portugal and Italy – where cash collections are often driven either by the local court system or result from the completion of real estate sales. Whilst both of these collection strategies have been directly impacted by the Covid-19 restrictions imposed by European governments, secured portfolios are backed by underlying assets and so cash collections are expected to be mainly subject to a timing delay rather than an ultimate loss of cash flows. Therefore, any impact of delayed cash collections from secured assets on the balance sheet carrying value and on the 84-month and 120-month undiscounted ERC curves might be less material. The majority of the remaining 60% of the Group's ERC consists of unsecured assets – primarily in the UK, followed by Portugal and the Netherlands – where collections are driven by smaller, more frequent monthly cash collections. Here, we are unaffected by regulatory measures introducing forbearance on performing loans but continue to protect vulnerable customers, including those affected by the current situation. Currently, automated collections form around 46% of total Group collections and around 80% of Northern European unsecured collections. Where unsecured collections are not automated they are substantially all paid by remote electronic means. Whilst not directly comparable, our experience of the global financial crisis would suggest that circa 50% of initially lost unsecured collections are collected in subsequent years.”

Bank of Georgia – “The first quarter of 2020 was characterised by two distinct periods for Bank of Georgia. During the first two months of 2020, the Group continued its very strong momentum from 2019 with strong growth and a performance consistent with, or slightly better than, the Group's external guidance and strategic targets. The Covid-19 global pandemic then created economic, medical and social challenges that are unprecedented in modern times. Whilst the full extent of the pandemic is very difficult to assess, the outbreak in Georgia has not been as severe as in many other countries, as the Georgian Government took significant early actions to reduce the spread of the virus, which included early flight bans, and school and business closures. This early action was essential to what has, so far, been an extremely well-managed response to the pandemic throughout the country. We are also encouraged with the Government's recent decision to start easing the lockdown restrictions in Tbilisi, as part of a gradual easing of restrictions, and to plan to re-open Georgia's borders to foreign tourists from 1 July 2020.



Economically, there will clearly be a significant negative impact in all areas of the economy, but, so far, this has been significantly mitigated by the extensive support packages that have been put in place by the Government. The anti-crisis stimulus plan includes a social assistance package for individuals, together with substantial support for businesses, including tax exemptions and various funding mechanisms for businesses. The Georgian Government, which has always had strong relations with the International Monetary Fund (the "IMF") and other development financial agencies, has initiated an approximately US$3 billion financing package from IMF and other international partners – US$1.5 billion is earmarked for the public sector and US$1.5 billion for the private sector. This package will support a substantial economic stimulus in 2020 estimated at 11-15% of GDP. Further details of this package, which ensures that Georgia is very well-placed to manage the economic impact of Covid-19, and other regulatory measures taken to support the banking sector, including an updated supervisory plan of the National Bank of Georgia, are contained on page 22.

While there is considerable uncertainty with regard to the macroeconomic outlook given the impact of falling exports, a complete ban on commercial international flights leading to the halt of tourism inflows, and lower remittances, the impact of this is expected to be largely offset by the international support package, lower import demand and reduced prices for imported oil. Our base case is for Georgian GDP to fall by c.3% in 2020. Along with most global currencies, the Georgian Lari devalued by 14.5% against the US Dollar during the first quarter of 2020, but has since stabilised.

Bank of Georgia's financial strength and business model has enabled us to play a significant role in the response to the emerging challenges. First and foremost, our priority was the health and well-being of our staff and customers, and we implemented a comprehensive business continuity plan to ensure that priority, together with sustaining the long-term stability, strength and profitability of the Group. Throughout the period of the pandemic, all of the Bank's main branches and most express branches have remained open, with employees working in split shifts and, where possible, from home. In essence, we have implemented a number of changes to reduce physical interaction to mitigate the spread of the Covid-19 virus; in particular, the implementation of a three-month grace period on principal and interest payments on all retail loans has significantly reduced the requirement for customers to physically visit branches.”

Permanent TSB – “Business and financial performance remained stable in Q1, albeit with a decline in new lending towards the end of the quarter as the Covid-19 situation unfolded. The pandemic is having an unprecedented social impact on people and businesses in Ireland, and across the world. The resultant economic impact and outlook is challenging with the long term consequences of Covid-19 largely dependent on its severity and, the ensuing timeline over which business activity and employment levels begin to recover.



Throughout this period of uncertainty, we will continue to work closely with the Government, Regulators and other authorities to continue to provide support to our customers whilst protecting the long-term business franchise. In this regard, we will use the strength built up in the Bank's balance sheet and business model to ensure we continue to play our part in supporting our customers and the Irish economy.

The Bank's business model, with its focus on secured lending, gives some protection against an impairment shock. That said, we will continue to monitor closely both the macro-economic environment and quality of the loan book, to ensure we maintain prudent levels of coverage.”

Healthcare

Immupharma – “As part of an overall evaluation of how we might apply our patented technologies to the fight against the Covid-19 epidemic, within our “Autoimmunity' therapy area, we have also been considering the unique way that Lupuzor™ interacts with the immune system and any potential application to Covid-19.

Given the findings of the Atlanta research group, we postulate that Lupuzor™ may help to reduce or perhaps prevent the occurrence of the cytokine storm seen in Covid-19 patients. Further exploratory work is ongoing to assess Lupuzor's™ possible potential and clinical program in Covid-19 patients.”

Sensyne Health# – “Covid-19 has rapidly accelerated the adoption of digital technologies in healthcare systems around the world. Advancing patient care and accelerating the development of new medicines through the fusion of software, data science and machine learning technology with medical science are the very foundations of Sensyne Health.

The company has a proven track record and embedded expert resource in these areas, particularly in remote patient monitoring and clinical AI. Consequently, Sensyne is seeing increasing demand for its products and technology as individuals, healthcare systems and the biopharmaceutical industry adapt to the current situation and make plans for a rapidly digitising healthcare future.

As such, The company anticipates performing in line with the Board's expectations for the full year 2021 and the Board looks forward to the future of the Group with great confidence.”

Industrials

Scapa Group – “The Covid-19 pandemic has impacted all territories and market segments in which the Group operates and, as such, all of the Group's sites are operating under government control measures enforcing mandatory lockdowns. Despite the ongoing lockdowns, all of the Group's operations, with

the exception of India, are open, as both the Healthcare and the Industrial businesses have been classified as essential businesses.

The current restrictions on travel require strong local and frontline management to respond quickly to a very dynamic situation. The collaboration and positive relationships with the Group's employees and their respective representatives have been essential to the maintenance of our ongoing operations. Scapa has proactively implemented strict health and safety measures to ensure that any employee concerns are addressed and the company is safeguarding their wellbeing.

The company is currently executing a well-developed Covid-19 action plan that focuses on immediate, short term (<90 days) and medium term (3-6 months) actions.

Upon the commencement of the lockdown restrictions, the Group put in place a series of cash preservation actions. These included a reduction in the use of contractors within the Group's operations and minimal capex across the Group. Certain members of the Board and Executive management team have agreed to a voluntary temporary pay reduction of 20%, effective from 1 May 2020, and no cash payments in respect of the executive management bonus scheme are expected to be paid in respect of this current financial year. There has also been a deferral of any pay increases.

In addition, the Board has determined that the final dividend, which would ordinarily be paid in July 2020, should be suspended. The Group has also agreed with the Pension Scheme Trustee to defer the bi-annual contributions to the Group's UK defined benefit pension schemes for a set period of time to create additional flexibility.

The Group continues to assess government schemes in each operating jurisdiction that may provide either liquidity or tax benefits. These include the deferral of Canadian tax payments (expected to result in a deferral of c. £1.1 million) and reclaiming the French corporate tax payment of EUR200,000 which was made in March 2020. In addition, the Group is exploring additional liquidity schemes such as UK furloughing and has commenced applications to government schemes in France, Italy and the UK. The Group has been approved in the US under the Payment Protection Program and has received a government grant of c.$5 million; the grant is in the form of a loan which will be forgiven if Scapa's US headcount is not reduced for a period of eight weeks.

Over the medium-term (next 3 – 6 months), management will look to make further efficiency savings across the Group, including streamlining the organisational structure and re-aligning the geographic focus of the Group, re-adjusting the supply chain and re-engineering production capabilities, reviewing the product portfolio, reducing and standardising the Group's SKUs and focusing on e-commerce capabilities.

Covid-19 outlook – The Group has modelled a significant downside scenario ("Covid-19 scenario") that reflects the on-going and potential disruption to its business. Scapa is expecting a period where revenues will be substantially impacted, particularly in Q1 FY 2021 and in early Q2 FY 2021, before returning to more normal levels, and in-line with management's pre-Covid-19 budget, from Q3 FY 2021 onwards. As described above, the company is undertaking a number of cost and cash preservation exercises and is adjusting working capital in-line with its revised revenue forecasts. Under the Covid-19 scenario, the Group is expecting to generate FY 2021 revenue of around £272 million, being approximately 80% of the previously budgeted revenues for the year, generating approximately half of the trading profit that was originally forecast in management's FY 2021 pre-Covid-19 budget.

The Board believe a number of further opportunities will arise in Healthcare. Postponed elective surgeries will be carried out and the currently reduced healthcare consumer spending should return towards more normal levels once the current restrictions are lifted. Many healthcare companies will review their extended supply chains, particularly in Asia, which should benefit Scapa as those companies look to on-shore their supply chain. An increase in technology transfer opportunities is expected as companies look to streamline their footprints and product portfolios, to minimise cash expenditure, and to increase outsourcing in order to leverage partners' resources. Finally, it is expected that there will be an increase in M&A opportunities at more attractive valuations than those experienced recently.

The Industrial portfolio is generally well diversified across both geographies and different industries and has a resilient and non-cyclical portfolio of products. In particular, management believe that Covid-19 will have a minimal impact on its cable segment, which should continue to be strong.

Similar to Healthcare, the Group believes there are a number of key areas within Industrial that could help facilitate a strong trading period post-Covid-19. The re-opening of retail channels and an improvement within the automotive industry will provide a return in demand. In addition, there is an opportunity to benefit from on-shoring of Asian supply chains and from e-commerce where the Group could capture market share from a shift in consumer behaviour.

The Board therefore believe that revenue and profits will recover in FY 2022. It is expected that Group revenue will grow by between 5 and 10 per cent. from the FY 2021 level in FY 2022. Trading profit is also expected to grow significantly from FY 2021 with a return to double digit margins, driven predominantly by volume recovery in both businesses, underpinned by the operational leverage and cost reductions across the Group and on-going restructuring in Healthcare.

The Board believe that, should revenue recover more slowly than anticipated, the company has the necessary levers to protect and drive earnings through further cost optimisation in both businesses, a clear contingency plan that can be implemented and further restructuring, margin improvement and footprint consolidation.”

Leisure

Brighton Pier Group – “In 20 March 2020, the Prime Minister instructed all hospitality and leisure venues to close from that evening and the Group consequently closed to the public all its bars, golf venues and Brighton Palace Pier. These closures are in support of the national effort to maximise "social distancing" in order to control the coronavirus pandemic and thereby ensure that the Group's customers, staff and their families are kept safe.

The Group expects that these closures will materially impact its financial results for the period ending 28 June 2020 and potentially also the subsequent period if mandatory closures or social distancing measures continue into the summer and beyond. Given the unprecedented nature of the virus, it is not possible to forecast the precise length of time that the Group's venues will remain closed and so, whilst its focus first and foremost has been to protect its customers and staff, the Group have also implemented measures that significantly reduce costs and preserve cash until trading resumes.

The Group can now report that all full and part-time staff working in its businesses (and in respect of whom a payroll submission had been made to HMRC on or before 19 March 2020) have been retained. By 1 April 2020, of the 500 staff employed across the Group, 485 were furloughed and 15 remained active; a further five have been furloughed since. Those who remain active include essential maintenance and security teams on the pier, together with senior management across the Group's three divisions. All management and staff have agreed to take pay cuts for the duration of the closures and the Group is also obtaining grants from the Government's “Coronavirus Job Retention Scheme' (which the Government have announced will continue to some extent until at very least the end of October); these measures have significantly reduced the net cash cost of the Group's payroll during the closure period, whilst enabling the Group to retain its workforce.

Other mitigations include:

• 12 months rates free period across all Group venues from the Government's rates holiday scheme

• deferral of the March 2020 quarterly VAT payment to March 2021 using the Government's VAT scheme

• support from landlords to reduce the cash impact of the March 2020 quarter rent period

• support from many suppliers with whom standstill arrangements have been agreed, reducing controllable costs during the closure period to minimal amounts

• support from creditors, who have extended credit terms for amounts outstanding at the date the Group's venues closed

• reduced capex spending to only essential capital repairs during the closure

Claims for losses arising from mandatory closure of the Group's venues have been lodged with its insurers but the amount of any pay-out is not yet certain.

The Group has obtained two new Coronavirus Business Interruption Loans (of £5 million in aggregate) from their principal bank, Barclays. Both term loans are for a period of 2 years and 9 months and are in addition to Group's existing term debt and revolving credit facility. Simplified covenants and a loan repayment holiday on the existing facilities have been agreed to the end of June 2021, which accommodates the loss of revenues during the closures. Formal documentation of these variations and new facilities is being completed over the coming days, but the full proceeds from the new term loans have already been received.

As announced in its interim results, the Group's net debt as at 29 December 2019 was £11.0 million (which equated to 2.0x its EBITDA for the 12 months to that date). The Group continues to adopt a conservative approach to debt and will focus on reducing leverage below 1.5x by the end of FY 2022.

These actions to conserve and raise cash have been possible with the considerable support of the Group's staff, landlords, suppliers, bankers and the Government.”

Marston’s – “As described in our previous announcement, the impact of Covid-19 on our financial and trading performance will depend upon how the situation develops and over what timescale, which remains uncertain. The Government has recently announced a recovery strategy to lift lockdown restrictions in phases, including the potential for pubs to reopen in early July. However, this timing is by no means certain and is, of necessity, subject to meeting targets relating to containing the virus and the ability to meet “Secure Covid-19 guidelines'. We await more detail from the UK Government in due course.

In order to ensure that Marston's is best placed to navigate this period of uncertainty, management has taken additional steps to strengthen its balance sheet to provide additional liquidity headroom and financial flexibility.

We have agreed £70 million of additional liquidity through an increased bank facility, subject to final documentation. We believe that this additional 180 day financing facility, together with ongoing Government support on employment costs, deferred tax payments and rent and rates relief, as well as continued income from beer sales into the off-trade, provide us with sufficient liquidity to meet our obligations beyond the end of the financial year even if pubs were closed until then. We have reached agreement with our banks to amend the company's covenants for September 2020 and March 2021. Separately, as announced on 7 May, the company has convened a meeting of its Bondholders for 29 May to seek a limited number of technical waivers and amendments.

We have made good progress to date towards our debt reduction targets and remain committed to our overall strategy to reduce the company's leverage over the medium term. However, the temporary closure of our pub estate and the additional liquidity described above will impact that trajectory for the time being.”

Real Estate

Grainger – “Our PRS strategy has transitioned Grainger into a stronger business in a resilient sector. We enter our second half of this financial year well positioned and well capitalised. We aim to emerge from this global crisis stronger, having invested in innovation, communication and improvement during the lockdown. Lead indicators in April show that both the lettings and sales market are active, and that Grainger successfully and safely carrying on performing in line with our strategy.

We are prepared to adapt to a new way of life, as the lockdown is lifted, ensuring that we can continue to serve our customers and deliver our pipeline of new homes. As market leader in PRS, with a business model that can deliver income and growth through the cycle, we believe Grainger is well positioned to maintain momentum in the second half as well as in the years to come.”

Sirius Real Est# – “In April, the company achieved rent and service charge collection at 98.8% of the normal level and rent and service charge prepayments received so far in May are ahead of those recorded in April at the same time.

A small number of tenants facing Covid-19 related financial difficulties have requested deferral of rental and service charge payments. These are being addressed on a case-by-case basis and will have a very limited impact on cash flow.

In our first update following the lockdown in Germany on 25 March, the company announced that there had been a 50% reduction in the run rate of core enquiries from new tenants, translating into a 10% reduction in new lettings in March and a 35% – 40% reduction in monthly new lettings throughout April and into May. However, following adjustments to the marketing strategy, this situation has since improved significantly with enquiries in March and April averaging 1,200 per month which in fact represents a slight increase on the same period last year. A similar level of enquiries has been maintained in the first two weeks of May.

This improvement in enquiry levels led to 115 new lettings in April covering 8,025 sqm, which is better than anticipated with our announcement in March. New lettings in March and April have generated future annualised rental value of €1.6m, as and when the tenancies begin over the next few months. Based on early indications, it is expected that May will provide a similar level of lettings to April. There has been no noticeable increase in lease terminations in the corresponding period.

The company is seeing an increase in demand for storage space from both new and existing commercial tenants as well as new self-storage customers. Storage (including the Smartspace storage products) makes up 35% of space in Sirius's portfolio.

The company also announced in March that all meeting room and conference facility hire had been put on hold, resulting in a marginal impact on revenues and cash flows. This part of the business re-opened on Monday 11 May, although naturally we don't expect this to return to pre-Covid levels for some time.

Staffing – Following the recent relaxation of government-imposed restrictions, 85% of Sirius's on-site business park employees have returned to work from the beginning of this week (Monday 11 May) and those working at the head office in Berlin will be increased gradually to 50% (from 25%) from the beginning of next week (Monday 18 May), with the balance continuing to work from home.”

Retail

Watches of Switzerland – “Group revenue1 for the year to 26 April 2020 increased by 5.9% to £819.3 million (FY19: £773.5 million), ahead of the recently guided range of £809.0 million to £812.0 million, driven by strong ecommerce sales. Performance had been strong for the first 46 weeks of the year when the lockdown of stores came into effect, with US stores closed from 19 March 2020 and UK stores closed from 23 March 2020.

52 weeks to 26 April 2020 – The final 6 weeks of the financial year to 26 April 2020 have been significantly impacted by the ongoing Covid-19 outbreak. All stores within the Group's store portfolio were closed as a result of containment measures relating to the Covid-19 outbreak adopted by governments, with US stores closing on 19 March 2020 and UK stores closing on 23 March through the end of the financial year.

During the period following the closure of stores, ecommerce has performed particularly well. Sales from this channel increased 45.8% during the last six weeks of the financial year with a further acceleration during the month of April, when sales increased by 82.8% relative to the same prior year period. In response to the closure of the bricks and mortar network, the online offering has been enhanced by the addition of several brands which the Group had previously only transacted in its stores. These additional brands will continue to be part of the online offering going forward.

The Group has generated additional revenue and cash during the period through enhanced clienteling initiatives in the UK and US, leveraging its strong customer relationships together with its sophisticated CRM tools and leading-edge systems. The Group continues to work closely with its brand partners during the lockdown period and in planning for the post lockdown business environment.

Demand for key luxury watch brands continued to exceed supply throughout the year.”

WH Smith – “In view of the current uncertainty from the impact of Covid-19, we cannot forecast with any certainty the timing of our store re-openings in our Travel and High Street businesses. Nor can we forecast the speed of recovery. At this stage, we are planning on a phased store re-opening schedule across our international territories, UK Travel channels and our High Street business.

Our experience of operating our c.300 stores over the past eight weeks has enabled us to build on and advance our re-opening plans to protect both our colleagues and our customers by:

• Equipping our colleagues with appropriate PPE

• Erecting protective screens at our till counters

• Ensuring appropriate social distancing measures are identified within our stores; and

• Where necessary, restricting the number of customers that enter our stores at any one time.

In Air, we expect a gradual improvement in passenger numbers from Autumn 2020; initially led by an increase in domestic travellers, particularly in the US where c.80% of passengers are domestic, followed by regional, international and inter-continental passengers. In our Hospital channel, although our stores have remained open to serve NHS employees, we have seen a fall in sales as a result of a reduction in visitor numbers. In Rail, we expect a gradual improvement in passenger numbers through Autumn 2020.”

Support Services

Pipehawk – “Covid-19 is clearly having a significant impact on most businesses as we all work to come to terms with a new working normal. Working within key manufacturing sectors, PipeHawk's businesses have continued to operate throughout the Covid-19 pandemic. At the outset of the countrywide lockdown, management implemented a number of processes to safeguard colleagues, suppliers and clients across all group activities. Safeguards include implementing working from home wherever practicable, welcoming essential visitors only, moving to a virtual based contact system with clients and suppliers, enhanced cleaning and disinfection routines within the businesses, implementing new goods in processes to ensure deliveries are segregated and delivery personnel prevented from entering facilities as well as actively implementing safe working practices with the use of PPE where appropriate and practising social distancing through keeping two metres apart.

Whilst some areas of the Group have expectedly seen a downturn in orders as clients within sectors including building services, automotive, aerospace etc. have temporarily shut down activity, other areas have witnessed healthy order intake. In particular, business within both Adien and Thomson Engineering Design has remained buoyant. Adien has continued to service long-term contracts in the defence, telecoms and electricity supply sectors and has won further business from competitors unable to fulfil start dates in line with client expectations. Since the start of the year, Thomson has been working at full speed and has won a number of new international orders.

QM Systems, PipeHawk's main trading entity, has experienced a reduction in order intake over the past two months. However, its sales effort has been focused on areas where industry continues to operate effectively and a number of new and exciting projects are expected to get underway when business starts returning to the new normal. Prior to commencement of the lockdown period, trading at QM Systems was above management's expectations and as such, QM Systems entered the lockdown period with a very healthy order book. QM Systems continues to operate effectively in progressing these orders and has been and continues to be busy. Although the Group has witnessed considerable disruption in our supply chain across its companies, through effective management of these challenges as they occur, PipeHawk has been able to avoid this disruption materially impacting operational activities.”

Wincanton – “Since the announcement of 25 March 2020, the Board has continued to assess the impact of the disruption and uncertainty caused by Covid-19.

Our key priority has continued to be to safeguard the health and wellbeing of our employees and their families, whilst continuing to provide those logistics services our customers need to help the nation to function. Where operations have remained active, we have applied safe systems of working, with appropriate distancing and cleaning measures, and non-operational staff are working remotely wherever possible.

It is too early to fully assess the financial implications of the Covid-19 crisis on the Group's business and there remains considerable uncertainty regarding the levels of demand and business interruption for the remainder of the year. Group revenues in April have been c.15% below the comparable period last year, but with significant variations across our different businesses and segments. The profit impact of volume shortfall is also varied according to contract types, particularly between open and closed book contracts, but as a whole the Group has seen a negative impact to its profitability in the financial year to date.

At the onset of the Covid-19 crisis, we saw an increase in volume and demand from both our grocery and consumer products customers, particularly in March, as they responded to changes in consumer buying habits, including initial “panic buying' in stores. Both areas have now returned to the volumes we would expect at this time of year. The financial impact of these effects was a short-term increase in revenue, although with limited profit uplift due to the commercial models deployed in these customer contracts.

In non-grocery retail we have seen a shift of supply chains from in-store to on-line channels, although many of our larger customers have been able to keep stores open. The picture varies by customer and is developing as our customers modify their in-store arrangements, but in general volumes in April were lower than prior periods as shopping appears to have been more focused on “essential' products. However, the open book nature of most of the contracts has ensured that profitability has some protection in this segment. Our defence business has started this financial year more strongly in both revenue and profit versus last year, with Covid-19 having a limited impact and new business won last year flowing through.

In our closed book two-person home delivery network we were required to cease operations at the end of March in line with safety guidelines. This resulted in a significant negative impact on profitability during the shutdown. Following a change to government guidance the service has now restarted, although a return to normal levels will take time.

Similarly, our construction business has seen major parts of the network closed from early April, due to the voluntary shutdown of many construction sites and builders' merchants. Revenues during April were down by around 70% on the comparable period last year. We have acted swiftly to reduce the variable elements of our cost base with significant reductions in subcontractor and agency labour costs. However, as we operate this business as a largely closed book network, the reduction in revenue has had a substantial impact on its profitability in April. Recent announcements in the housebuilding and construction sectors on the recommencement of operations are encouraging but we expect the pickup in business to be gradual.

Container volumes and Pullman Fleet Services ("PFS") revenues continue to be below expectations, with the container business impacted by reduced traffic from Asia and PFS workshop volumes depressed by general lower demand for vehicle maintenance and repairs as a result of less road activity. Our energy business has also experienced some slowdown due to reduced retail forecourt fuel volumes. We have a blend of open and closed book contracts in this area and there has been therefore some profit impact, however we expect this to reduce as volumes return post lockdown.

Management's actions in response to Covid-19 – As noted in our announcement of 25 March 2020, cash management remains a key focus. In order to maintain liquidity within the business, a number of measures have already been taken.

Across the business approximately 2,500 staff (c.15% of our workforce) have been subject to furloughing arrangements, although we continue to review staffing levels to ensure we can respond to returning customer demand as quickly as possible.

We have also undertaken a forensic review of costs across all operations including the use of agency labour and subcontracted services and achieved significant reductions. All but business critical capex and projects have been put on hold, we have renegotiated payment profiles on certain asset leases and have also taken advantage of HMRC arrangements to defer VAT.

Actions have been taken across the management population in respect of remuneration and are under continued review. The Board and executive management team have agreed to temporary pay reductions of 20%, effective from 1 April 2020, and no cash payments in respect of the executive management bonus scheme are expected to be made in this financial year.

In addition, to retain near-term flexibility, the Board has determined that the final dividend, which would ordinarily be paid in July, should be suspended. The Board recognises the importance of the dividend to our shareholders and will keep dividend payments under review as the year progresses with a view to return to payments as soon as appropriate. We have also reached agreement in principle with the Pension Trustees of the defined benefit pension scheme to defer upcoming deficit recovery payments by twelve months which will improve the Group's liquidity by approximately £6 million. The agreement contains provisions for accelerated payment of deferred contributions if dividends are paid within the deferral period.”

Technology

Ten Lifestyle# – “Ten's business model derives its revenue substantially from service delivery rather than conversion of bookings, as outlined in the Group's trading updates announced on 6 and 30 March 2020. Ten continues to generate revenue by delivering services relevant to its members and corporate clients throughout this period of uncertainty.

Effective communication and dynamic campaigns leverage Ten's continued relevance with both corporate clients and their customers. Feedback from many corporate clients is that they believe the impact from Covid-19 will create additional retention risks and acquisition opportunities with respect to their most valuable customers. This supports our justification for, and our corporate clients' continued investment in, our services.

However, supplier revenue, primarily from Travel bookings, has significantly reduced since March 2020, as previously indicated, resulting in very low revenue from commission payments[7] until global travel begins to recover (H1 2020: £2.5m, FY 2019: £5.5m).

We have taken prudent steps to reduce cost in the business. These actions included, but are not limited to, successful renegotiation with suppliers; a review of projects to focus on the most strategic core investments (including development of our technology platform, where we continue to invest); a freeze on employee bonuses and salary increases; and voluntary salary sacrifice in exchange for share options. Where it has made commercial and operational sense, the Group has also participated in available government funded coronavirus initiatives across all regions. These actions are expected to deliver at least £5m of cost savings in H2 2020 alone.

The flexibility of our service model has allowed us to deliver high service levels in March and April 2020 by offering services relevant to the current conditions in each market. The volume of service requests in March and April 2020 are 17% higher than last year and 13% higher than the H1 2020 average run rate. This has in turn increased corporate revenue in March and April 2020, compared to the same prior year period and the average H1 2020 run rate.

Cash at the end of February 2020 was £9.6m. Cost saving actions taken, increased corporate revenue and prudent cash management have enabled us to broadly maintain cash at this level at the end of March and April 2020. This has been achieved despite very low levels of commission from suppliers[7].

We have responded effectively to the Covid-19 pandemic, to date, although there is no certainty when or how this will end, which creates uncertainty when assessing the outlook. In the months ahead, we will continue to develop relevant service offers for our members, the customers of our contracted corporate clients. In the circumstances, there are likely to be delays to new contract launches but we continue to have positive conversations with many companies who recognise that customer loyalty and acquisition strategies will be vital as the pandemic enters new phases. Commissions are expected to remain low for the rest of 2020 and into 2021. We will continue to drive efficiencies and adjust costs to maintain a robust cash position, whilst continuing investment in the technology platform.”

Lifting restrictions

• The state of emergency has been lifted in most of Japan, after a sharp fall in new infections. The order still applies in Tokyo, Osaka and on the island of Hokkaido. People have been told to keep wearing masks and following distancing guidelines.

Other

• Insurance market – Lloyd's of London has said it expects coronavirus-related claims to cost it $3bn to $4.3bn. The losses could rise further if the current lockdown continues into another quarter, Lloyd's said.

• Taxi firms Addison Lee and Uber have announced new safety measures. Addison Lee will fit perspex partition screens between drivers and passengers across its 4,000 vehicles next week. Uber is paying the AA to install partitions in 400 cars in Newcastle, Sunderland and Durham as part of an initial pilot. Both firms are also distributing free protective equipment to drivers.

• The Federal Reserve chair, Jerome Powell, has warned that America faces “a slow and painful economic recovery without additional government relief.”

• Frankfurt Airport has released its passenger numbers for April. There were 97% fewer passengers for the month compared to the previous year.

• The supreme court of the US state Wisconsin has overturned a coronavirus stay-at-home order issued by the state's democratic governor.

• A test to find out whether people have been infected with coronavirus in the past has been approved by health officials in England.

• The Australian jobless rate rose from 5.2% to 6.2% in April – lower than the 8.3% forecast by economists, equating to the loss of 600,000 jobs.

• The UK Government expects to borrow £298bn this year as measures to protect the economy during the coronavirus crisis are forecast to cost £123bn, according to the Office for Budget Responsibility. • Job retention scheme, net cost £50bn. This assumes that the Government shoulders the full costs of £14bn/month up to end-July, but does not include the potential costs from August onwards, when employers are to share the burden. So it could be an underestimate, e.g by £21bn, if the Government assumes 50% of the cost for the following three months. Note the cost is net of £13bn income tax & NIC receipts.

• Additional public services spending of £15bn. Primarily on health services, also specific measures targeted at, for example, vulnerable individuals and the devolved administrations.

• Income support for the self-employed £10bn.This could rise as no end date for the scheme has been confirmed.

• Small business grants £15bn.

• Business rates relief £13bn.

• Various business loan & guarantee schemes £5bn.

• The scenario also assumes that planned asset sales worth £10.5bn will now not take place.

• An additional 2.9 million US citizens applied for unemployment benefits this week. Bringing the total number of new jobless claims, since the middle of March, to more than 36 million. Amounting to nearly a quarter of the American workforce.

• New York City has placed limits on how much food delivery apps can charge restaurants that use their platforms, this follows complaints about fees charged by tech firms amid skyrocketing deliveries during the lockdown.


#corporate client of Peel Hunt