Coronavirus - Trojan horse
1 June 2020
Since January, the race has been on to try and identify just how many asymptomatic cases are out there. A study of the Theodore Roosevelt aircraft carrier in March suggests that as many as 58% of cases were asymptomatic. Similar numbers were seen on the Charles de Gaulle and Diamond Princess. This shows why the government’s initial strategy of asking those with symptoms to stay at home was ineffectual. It also shows why the new track and trace system will be vital in controlling the virus over the next few months as people will be told they must self-isolate after contact regardless of whether they are feeling any ill effects.
• Spain’s PM wants to extend the country’s lockdown until 21 June.
• A number of European countries are lifting restrictions further.
• Manila ends the world’s longest lockdown.
• Italy's top tourist attractions re-open.
• US supplies Brazil with two million doses of hydroxychloroquine
• Mattioli Woods – “Unlike many wealth managers, the Group’s revenues are primarily fee-based and hence less sensitive to volatility in investment markets. We have seen sustained demand for advice from clients set around the complexities we are all facing, but as anticipated, the impact of the Covid-19 pandemic on financial markets has resulted in a reduction in the Group’s income streams linked to the value of clients' assets and its banking revenue. As a result, we now expect total revenue for the year ended 31 May 2020 will be marginally ahead of the prior financial year.
However, in light of the unprecedented trading conditions we have pre-emptively implemented a number of mitigating actions to contain costs and protect our strong financial position. These have included all plc Board directors reducing their basic salary or fees by 50% and our CEO reducing his basic salary to zero until 30 June 2020, with executive directors' salaries being temporarily rebased from 1 July 2020 to create an annual saving of over £0.4m. At the same time, we have confirmed we will maintain other employees' basic salaries, with both these positions to be reviewed at 30 November 2020. As previously indicated, remaining staff bonuses and all directors' bonuses relating to the financial year just ended will not be paid.
We have also reviewed our administrative expenses, with close management of our fixed and discretionary spend expected to achieve further cost savings of £0.4m over the next 12 months. Due to the material impact of our decision not to pay bonuses, coupled with those cost savings already achieved to date, we anticipate the Group's profit for the year ended 31 May 2020 will now be circa 20% ahead of expectations.”
Food, Drinks & Household
• AB Foods – “As a result of the rapid spread of Covid-19 in our markets, all Primark stores were closed over a 12-day period from 11 March. As previously advised, this resulted in a loss of sales of approximately £650m for every month that all stores were closed.
We took a number of actions in Primark to substantially reduce the cash outflow resulting from this loss of sales. These mainly comprised cancellation of future orders for goods where the handover date from the supplier was after 17 April and a range of measures to reduce operating overhead while the stores are closed. The most significant contributor to the reduction in overheads has been access to government employment retention schemes across Europe, assisted by a temporary voluntary reduction in salaries for all Primark employees not covered by a government scheme. We continue to make progress in our discussions with landlords to renegotiate some of the terms in our lease arrangements. In April and May, we exceeded our previously advised estimate of a 50 percent reduction in Primark overheads.
As European governments have begun to ease restrictions on clothing retailing we have been able to re-open stores. Safety has been our highest priority in our detailed preparations to welcome our customers and employees back to stores. We are following government safety advice in all markets. Importantly, we will apply the valuable experience gained from more than 100 stores which are already open as we open the remainder of our estate, including stores across the UK. Social distancing protocols, hand sanitiser stations, perspex screens at tills and additional cleaning of high frequency touch points in the store are among the measures we are implementing. Personal protection, including masks and gloves, are being made available to all employees. These measures are designed to safeguard the health and wellbeing of everyone in store and to instil confidence in the store environment. Feedback from customers and employees in those markets where the stores are open has been positive.
Arabian Food Industries – “Throughout the year and up to this moment the company, like all companies, went through extraordinary circumstances that changed the Fundamentals of traditional management and forced everyone to change a lot of its plans and goals. The year 2020 started weaker than expected January and February were low sales same as most sectors/categories due to weak purchasing power. Sales started to recover significantly with the beginning of the Corona crisis in mid-March, especially in the cheese segment, which achieved massive growth rates due to the consumers panic stocking in the beginning of the crisis. On the other hand, sales of baked products and juices declined in general as a result of the closure of schools and universities. Despite all of the above the company was able to achieve a total growth rate of 13%, which is higher than the growth rate of the Egyptian FMCG market hence reflects the company's big opportunities to grow through diversified portfolio/ product range.
Cheese Category: After the decline in the third and fourth quarters of 2019 due to some policies that proved not to be very effective. We were able to restore sales figures & credit goes to the successful launch of the Yellow Cheese which was perceived highly by the consumers hence the company achieved a growth rate of 7% in direct retail, wholesale and organized trade/Modern trade, consequently restored the market share that was lost (2 % in the cheese segment) over and above the company is operating with its maximum production capacity in mozzarella cheese waiting for the commencement of the new line by the end of the second quarter as we faced a shipping delay a result of the current conditions.
Juice Category: The Company managed to achieve a growth rate of 5%, which is more than the market that fell by more than 5%. We were able to increase our market share to 8% in Cairo hence being the third biggest player nationwide.
Bakery Category: The Company was operating at 100 % capacity utilization by the end of January with an increasing demand right before schools closure.”
• De La Rue – “The Covid-19 pandemic has to date had only a limited impact on the Company's operations.
The Company has implemented the relevant protective, regulatory and safety procedures for all employees, including home working, and there has been limited impact on its global service, support and operations activities.
De La Rue has seen the timescales for a small number of Government Revenue Solution contracts become somewhat extended, which has been more than offset positively by the contract wins above. Its factories have run continually throughout the period, except for an eight-week shutdown of the Sri Lanka facility, which returned to full production this month and is working to make up the production shortfall. The Company has experienced no material problems regarding raw material supply, while there have been minor delays to the transportation of finished products that are expected to be resolved shortly.”
• Hollywood Bowl – “Our initial focus was on closing and securing our properties and reassuring our team, a team I would like to take this opportunity to thank for their incredible hard work and dedication over the first half of our financial year. On the 20 March, all of our centres were closed at 7pm following the Government announcement that hospitality and leisure venues should close. We put in place a detailed closedown procedure in every centre, including deep cleans and stocking up on long life product for when centres are permitted to reopen.
1,922 of Group employees (98.6 per cent), were placed on furlough, whilst all discretionary spend was suspended, including pausing the new builds in York and Rochdale as well as the refurbishments that were on site.
Alongside participation in the Coronavirus Job Retention Scheme ("CJRS"), the Group is implementing a three-stage salary strategy to financially support employees, retain top talent and save cost. This includes a staged deferral of 20 per cent of salary for all working salaried staff, including executive and non-executive directors, and further reductions in the event that centres remain closed beyond August.
In response to the Covid-19 crisis, the business secured a new £10m revolving credit facility through the CLBILS, suspended the payment of the interim dividend and placed an additional 7,500,000 shares (raising net proceeds of £10.5m), all combining to raise the liquidity to remain in a strong financial position during this crisis and emerge well placed to continue on our growth trajectory.
Subsequent to our centre closures we have also taken the following steps to ensure our team members remain focused and engaged with the business:
• All of our team members received full pay for the first four weeks of lockdown.
• After the first four weeks, all hourly team members received the furlough claim amount.
• All furloughed salary team members received full pay for March, April and May, including all of our management trainees.
• Weekly video remote training for our management teams has been introduced focused on team wellbeing and our re-opening operational plans.
• A re-opening framework and associated protocols have been developed with detailed operating procedures that comply with social distancing guidance, ensure team member health and safety whilst also maintaining a fun and safe environment for our customers to enjoy.
We have also temporarily paused our refurbishments programme, construction on new builds, and having made payments to landlords for the March 2020 quarter, entered into negotiations with landlords to help maintain our strong financial position. Given the strong relationship with our landlords they have been very supportive, which will result in a significantly lower rent payment being made in the June quarter, with minimal amounts being deferred.
As a result of the above actions, the Group expects a monthly net cash burn of approximately £1.2m whilst centres remain closed.”
• Capital & Counties – “Whilst Covid-19 has had a significant impact on the Group's customers and business in the near term, the Capco Board continues to believe in the resilience and long-term fundamentals of prime central London and in particular the West End.
The Investment represents a unique opportunity to acquire a significant stake in an exceptional mixed-use real estate portfolio.
Similar to Capco's world-class estate at Covent Garden, Shaftesbury’s portfolio in the heart of London's West End has been characterised by careful strategic assembly and creative asset management over time.
Sizeable stakes in such portfolios in central London are rarely available and the Investment represents a unique opportunity.
Attractive investment and entry price relative to historic levels and the Board’s view of the future long-term prospects for prime central London
Whilst the impact of Covid-19 has put downward pressure on share prices and the likely trajectory of property valuation levels across the central London real estate sector, the price paid represents:
• A discount of 44.9% versus Shaftesbury’s last 12 month share price high of 979.5 pence on 23 October 2019.
• A discount of 45.0% versus Shaftesbury's last reported EPRA NAV per share of 982 pence as at 30 September 2019.
The Board believes the Investment is at an attractive valuation, with an implied price of approximately £1,200 per square foot and a yield of 3.3% based on Shaftesbury's 2019 total dividend of 17.7 pence per share.”
Sirius Real Estate#– “COVID-19 UPDATE AND OUTLOOK
April collections within 98.8% of normal working practice and May collections in line with April.
Enquiries continuing at normal levels of a monthly average of c.1,200.
130 new lettings in May 2020 covering 11,282 sqm (April 2020: 119 lettings/8,166 sqm).
Of €6.8 million of annual income (108,000 sqm) up for renewal in Apr/May 2020, 74% have renewed (April/May 2019: €7.4 million (125,000 sqm) 74%).
Less than 10% of on-site business park employees working remotely since Monday 11 May.
Employees working at head office gradually increased to 50%.
Sirius will continue to use its platform across Germany to work with tenants throughout the current 'back to work' phase of the Covid-19 pandemic
In light of the on-going uncertainty with regards to the impact of Covid-19 in the current financial year, the Board does not consider it prudent to provide full year financial guidance but will continue to monitor the situation and update the market in due course.
The Board remains confident that the Company is well placed to meet the challenges ahead and continue to deliver attractive and sustainable returns for shareholders in the future.”
• Marshall Motors – “As previously announced, in recognition of the vital role our aftersales operations play in supporting essential vehicle mobility, the Group kept 62 of its aftersales operations open across the country to support the emergency services, commercial vehicle operators, vulnerable customers and key workers throughout the Covid-19 national emergency. Whilst these operations were run at a small loss, the Board believed it was appropriate for the Company to continue to offer these services to support the country, particularly in light of the various Covid-19 Government support schemes provided to businesses through this period.
In line with the gradual lifting of lockdown restrictions and Government guidelines, in the past week, we have expanded our aftersales services being offered, reopening all of the Company's aftersales facilities for all customers and for all services. Whilst still early, initial demand is encouraging as we start to ramp-up our aftersales operations.
In terms of maintaining our retail presence and supporting our customers, the Group put in place a variety of measures to ensure that we continued to provide a high level of customer service. We remained open online and on the telephone to receive and manage customer enquiries. Customers have been able to browse, enquire about and order new and used vehicles via our website, by video chat and by telephone. We also retained our fleet teams to handle and process fleet enquiries and orders.
In the past week, we have begun the process of fulfilling both vehicle orders taken during the closure period and those vehicles sold in March 2020 but which could not be delivered before the closure of our retail sites.
Trading during showroom closures
Trading during the closure period has inevitably been severely impacted. The SMMT reported that new vehicle sales declined by 97.3% in April 2020 compared to the prior year. In addition, with only 62 of our aftersales operations open for a limited categories of customer, aftersales performance has also been significantly impacted.
Since 23 March 2020 we have taken orders for over 3,700 new and used vehicles, including from both retail and fleet customers. As expected, given the closure of our physical showrooms during this period, order-take was significantly down on the comparable prior year period during which c.19,000 new and used vehicle orders were taken.
In terms of retail customers, in line with the wider market, orders taken during the closure period have been heavily weighted towards used vehicles. One of the principal reasons for this, we believe, is that a large proportion of new vehicle sales are associated with expiring financing agreements which have typically been extended by vehicle funders during the current crisis. We, therefore, expect to see some level of pent-up demand for new vehicles being released over the coming months as those extended financing arrangements come to an end, albeit we expect consumer confidence to be generally subdued as the economy gradually recovers from this crisis. Over the last couple of weeks, we have seen demand for used vehicles pick up significantly.
In aftersales, we have seen encouraging signs of demand as we have been re-opening our aftersales facilities to all categories of customers. Booking levels have been positive, albeit again we expect some of this to represent pent-up demand for aftersales services which, in the light of strong Government advice regarding essential travel only, customers have elected not to access until now, along with the deferral of MOTs.
Colleague arrangements during closure period – During the temporary closure of our physical retail showrooms and many of our aftersales centres, the Group furloughed around 90% of our 4,300 colleagues across the business. The Group acknowledges the welcome support provided by Government through the Coronavirus Jobs Retention Scheme (CJRS) which has enabled the Company to support its furloughed colleagues.
The Group has worked hard to support its colleagues during this period of uncertainty. During the furlough period, the Group has supplemented the support provided by the CJRS, enhancing colleague pay to 100% for March, 90% for April and 85% for May and not imposing the CJRS cap of £2,500 per month. In addition, whilst they continued to work throughout the closure period, the Board and other senior members of the management team voluntarily reduced their pay in line with the reductions for furloughed colleagues. The Board will continue to review remuneration of both Board members and other senior members of the management team as the business begins the process of returning to a more normal trading environment and furloughed colleagues return to the business. Other colleagues working during the closure period continued to receive 100% of normal pay.
In addition to providing financial support to colleagues and recognising the importance of ongoing communication, bi-weekly management briefings have been issued to all furloughed colleagues via video message from members of the executive committee and other members of the senior management team. This has enabled the Company to stay in touch with furloughed colleagues and provide updates on the actions the Company has been taking during the closure period.
Furloughed colleagues have been encouraged to complete modules of the Company’s bespoke training programme via its online learning platform. As well as ‘business as usual’ training programmes relating to financial services and data protection compliance, all colleagues will have completed a mandatory formal training and assessment programme on our revised operating procedures and social distancing guidelines before returning to the workplace.
The feedback from colleagues on our communications during this period has been extremely positive, demonstrating why, in May 2020, the Company was once again confirmed as being a ‘Great Place to Work’ by the Great Place to Work Institute. This was the tenth consecutive year that the Company has been so recognised and the sixth consecutive year that it has been ranked.
Re-opening of Showrooms from 1 June 2020 – As announced on 26 May 2020, the Board welcomed the confirmation from the Government that car showrooms would be permitted to re-open from 1 June provided they have taken all necessary steps to ensure they were Covid-19 secure in line with current Health and Safety legislation.
All our 117 car showrooms and all other operating units will therefore be open with effect from today, operating in accordance with our revised operating procedures. Initially, the number of colleagues returning to our businesses will be limited, both to ensure that we are able to safely operate in accordance with social distancing guidelines and to enable the Company to match resource to consumer demand. Therefore, we will be operating with approximately 50% of colleagues returning to work. The health and wellbeing of our colleagues and customers remains our priority.
We expect the return to a more normalised trading levels to be a gradual process over the coming months.”
• Ted Baker – “The impact of the coronavirus pandemic is rapidly evolving which creates material uncertainty across many of the Group’s markets. Public policy and government responses have differed across each market and the Group has adopted measures designed to best serve employees, customers and wider stakeholders across its trading markets.
The Group has responded dynamically to the challenges presented by the coronavirus pandemic, including taking a series of self-help steps to reduce costs and protect cash flow and ensure the wellbeing of its teams. During the course of the coronavirus pandemic, all of the Group's retail stores, outlets and concessions have been closed at times and as at 2 May 2020 approximately 390 retail stores and concessions remain closed in line with relevant government guidance and a gradual re-opening of stores, outlets and concessions is taking place in several European markets including Germany, France and the Netherlands.
Footfall in China and Hong Kong following re-opening was considerably lower than prior to closure and management expects that also to be the case in other jurisdictions. As the Group re-opens its stores, it is taking strong precautions to ensure the safety of its customers and employees. Social distancing measures are being adhered to, with floor markings in local languages. The stores are thoroughly cleaned every day and hand sanitiser, anti-bacterial wipes, disinfectant and gloves are available in its stores. The stores are also initially limited to one shift a day. The Group is also adhering to local regulations in regards to the coronavirus pandemic where applicable, such as mandatory face masks and holding returns in a designated area for one week before resale.
The Group has furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading markets. In addition, the Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. The Group will also benefit from a 12 month business rates holiday in the United Kingdom (which is expected to save the Group £5.8 million in Financial Year 2021). This cash preservation programme is expected to deliver permanent cash flow savings of £138.4 million (of which £88.2 million relates to savings from the reduced purchasing of stock and recent stock liquidation, £20.4 million from improved payment terms, £5.8 million from a 12 month business rates holiday,
£17.2 million from the furlough schemes, £6.5 million from putting all discretionary capex on hold and £0.3 million from Board and executive management pay cuts) and defer £10.9 million of cash payments (of which £3.4 million relates to employee tax and VAT deferrals for three months, £4.5 million from negotiated rent holidays and deferrals and £3.0 million on discretionary capex deferrals).
The e-Commerce distribution channel continues to operate for customers as normal and is a channel the Group is intensively managing during this period of store closures, including holding a two week mid-season sale which was deeper and wider than normal to drive sales. The e-Commerce channel has proved much more resilient with sales in the first fourteen weeks of the financial year up approximately 50.3 per cent on last year (49 per cent on a constant currency basis), with an increase of 77 per cent on a constant currency basis in the first six week of the lockdown in the United Kingdom, albeit at much lower gross profits due to heavily discounted sales for part of the period of up to 60 per cent.
The coronavirus pandemic has created unprecedented challenges for companies given its widespread and adverse global economic, social and operational impact, the effects of which are continuing to unfold. The Company's confidence in the adequacy of its action plan to rectify the Group's working capital shortfall is accordingly based on the following assumption relating to the impact of the coronavirus pandemic on its operations:
A 100 per cent reduction in the Group’s physical store revenue (own, outlet and concessions) until early September 2020, followed by a partial recovery to a reduction of approximately 35 per cent for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and a 25 per cent reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020);
An approximately 75 per cent. reduction in the Group’s trustee, other wholesale and licence income until early September 2020, followed by a partial recovery to an approximately 50 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 20 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020);
An approximately 20 per cent. reduction in the Group’s ecommerce revenue until early September 2020, followed by a partial recovery to an approximately 15 per cent reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 20 per cent increase in the year ending 29 January 2022 (compared to the year ended 25 January 2020).
All store employees being furloughed while the Group's physical stores are closed and store payroll costs reduced by approximately 95 per cent. until mid-June 2020, with government support for payroll costs within the United Kingdom-and similar programmes in certain other markets in which the Group operates-for so long as the Group’s physical stores are required to be closed (to early September 2020 under the Company's reasonable worst case scenario). Between mid-June 2020 and early September 2020 the Group anticipates a reduction in payroll costs of approximately 70 per cent. (compared to the corresponding period in the year ended 25 January 2020) as a group of store employees will return to work to prepare to reopen the Group’s stores. Following reopening in early September, the Company anticipates a reduction of store payroll costs (before redundancy costs) of approximately 25 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 15 per cent. reduction thereafter (compared to the year ended 25 January 2020).
An approximately 35 per cent. reduction in the Group’s central payroll until early September 2020 and a reduction (before redundancy costs) of approximately 30 per cent. thereafter for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 30 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020;
A bad debt driven increase in the Group’s overhead costs, excluding property costs, of approximately 20 per cent for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and approximately 20 per cent reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020).
An approximately 25 per cent. reduction in the Group’s property costs until early September 2020 followed by a reduction of approximately 20 per cent for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 5 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020).
A 100 per cent reduction in the Group's concession rent and service charges paid until early September 2020 followed by an approximately 25 per cent reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 10 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020).”
• Balfour Beatty– “Balfour Beatty had a strong first quarter of the financial year, building on the positive momentum from 2019. Thereafter the impact of Covid-19 and the resulting lockdown have had a material impact on financial performance across all divisions.
Nonetheless, the Group has achieved important successes through the determination and dedication of its people. Acting as principal contractor, Balfour Beatty converted Glasgow's Scottish Events Campus (SEC) into the NHS Louisa Jordan hospital providing 1,300 beds for patients requiring treatment for Covid-19. In Pennsylvania, the Pavilion at Penn Medicine project opened 120 patient rooms 15 months ahead of the facility's planned opening, with Balfour Beatty employees working around the clock for 17 days to deliver 122,000 square feet of space in the emergency department.
In Construction, the majority of Balfour Beatty’s projects have remained operational throughout the period with the trend now improving week to week. In April, 78% of the Group’s sites, across the UK and US, were open. In May, whilst 83% of sites were open and 17% were closed, of those open 17% experienced significant disruption due to the availability of employees, subcontractors or materials.
The most affected areas in the UK have been Scotland, where the devolved Government administration required the closure of all non-essential construction works, and London where public transport availability has been a significant challenge. In the US, the most affected areas have been Washington State and Florida. In Hong Kong, there were minimal site closures and the business has largely returned to normal, albeit operating below optimum productivity.
In Support Services, many of the Group's employees were designated as key workers. Whilst still somewhat negatively affected by Covid-19, Support Services has shown good resilience with limited closures, and in some circumstances an opportunity to accelerate maintenance works on road, rail and power assets. In Infrastructure Investments, operations in the UK have continued as normal supported by the Government advice that PFI contractors should consider themselves to be part of the public sector response to Covid-19. In the US, Balfour Beatty Communities continues to work with its partners to support military families. Employees are working to social distancing rules, as agreed with the military, which restricts access to properties and thus maintenance activity.
Given current market uncertainty, and the strong liquidity position of the Group, in the first five months of the year, the Group has not disposed of any material Infrastructure Investment assets. In line with its strategy to maximise shareholders’ returns the Board will only resume disposals when market conditions, which are expected to be favourable in the medium term, return to more normal levels.
Outlook – On 27 March 2020, the Board announced that it was suspending all forward guidance until such time as the overall impact of Covid-19 became clearer. At this time, therefore, the Group remains unable, as yet, to reinstate financial guidance.
The key driver of performance for the rest of the year will be improving current productivity, which will depend on the availability of employees, subcontractors and materials, whilst maintaining social distancing rules and ensuring satisfactory contractual resolution on projects impacted by Covid-19.
Whilst working in the ‘new normal’ will present challenges, it will also offer opportunities for innovation and efficiencies. Last month, the Group established a New Normal Taskforce that has generated over 450 ideas from across the business through an employee engagement campaign. These ideas are being taken forward for implementation under four strategic themes (working environment, new markets and capability, digital enhancement and rapid return to work) and will be incorporated to deliver operational and financial efficiencies.
Despite the difficulties faced at this time, Balfour Beatty continues to demonstrate to its employees, customers and supply chain partners that the Group is well positioned financially, operationally and culturally to weather the complex and evolving situation and deliver on its market leading strengths.”
• Cloudcall – “Further to the Group’s final results for the year ended 31 December 2019 that were published on 8 April 2020, the Group began the year well, with key elements of its strategic growth initiatives making positive progress, with early signs of a strengthening sales pipeline. However, it quickly became clear that the unfolding Coronavirus (Covid-19) pandemic would have a near term impact on the Group’s operations.
As previously reported, to preserve cash the Group proactively adopted a more prudent approach to its investment plans, which alongside several temporary cost reduction actions, has seen operating cash burn reduce to around £250k per month at current revenue levels. The Group's immediate cash preservation actions are all firmly now in place and the Board remains highly confident that the Group has enough cash to fund it through this period of macroeconomic uncertainty.
The Group has continued to see ongoing challenges within the broader marketplace with CloudCall's prospective customers reducing non-critical additional spend, which has had a near term impact on the sales pipeline. However, this effect is now stabilising following careful and proactive management by the Group.
The Group’s continued focus on marketing activity has encouragingly kept year to date lead-flow running at around 70% of the volume achieved over the same period last year. Overall sales bookings from new customers for the year to date are running approximately 28% less than the same period last year, and whilst larger sales prospects continue to defer their purchasing decisions, new sales bookings from smaller prospects have continued reasonably well.
Existing customers, who typically purchase more users and upgrades on a regular basis, are less inclined to do so given the challenging market backdrop, and this is reflected in a 35% reduction in existing customer sales bookings for the year to date when compared to the same period last year.
Underlying churn levels, expressed as lost monthly recurring revenue (MRR), pleasingly continue to run at normal historic levels. The Group has also received a number of specific Covid-19 related requests for temporary relief from some customers and permanent churn from others. To-date, CloudCall's customer services teams have processed Covid-19 related requests amounting to approximately 7% of MRR. However, half of this is for temporary support, and as we currently stand, only approximately 3.5% of the MRR reduction is expected to be permanent, with the remainder anticipated to return over the coming months.
The Board continues to monitor the ongoing environment closely and whilst the Group’s customer base remains largely stable, the Group will maintain a prudent approach to managing cash until the broader macro-economic outlook becomes clearer.
At this point in time, whilst the Group remains confident in its ability to successfully navigate the current disruption, the Board continues to withhold its guidance as previously announced. The Board hopes to be able to provide further information on its outlook within the interim trading update due to be issued in July 2020.”
• Metro Manila emerged from lockdown today, which began in mid-March. The city has moved into a state of general community quarantine (GCQ), which will allow more people to return to work, some shops and factories to reopen, and public transportation to run at a limited capacity. However, public facilities like gyms, cinemas, karaoke bars and nightclubs will remain shut – and authorities have reiterated the need for the public to stay at home if they can.
• Moscow is allowing people outside for walks for the first time in nine weeks, under a rota system based on their neighbourhood. Car dealerships, dry cleaners, shoe repair stores, bookshops and launderettes are also set to open today.
• Primary schools reopen in Greece, as well as some hotels, open-air cinemas, public swimming pools and golf courses.
• Restaurants, cafes and museums open in the Netherlands.
• Bars have begun serving customers again in Norway.
• Portugal’s cinemas and theatres open their doors.
Bulgaria has further eased lockdown restrictions to allow restaurants, bars and cafes to fully reopen from today.
• South Africa has today partly lifted one of the world’s strictest lockdowns, letting people outside for work, worship, exercise or shopping after two months, and allowing mines and factories to run at full capacity.
• Turkey will re-open restaurants, cafes and parks and lift inter-city travel restrictions today as the country further eases its lockdown. The Grand Bazaar and Fatih mosque reopen in Istanbul.
• The Colosseum in Rome is once again allowing visitors.
• Spain’s prime minister, Pedro Sanchez, has said the country needs 15 more days of lockdown until 21 June ‘to finish with the pandemic once and for all’, and that he would ask parliament to approve a final two-week extension to the stay home rule.
• The US has supplied Brazil with two million doses of hydroxychloroquine – despite medical warnings about the risks associated with the controversial drug. The WHO had days ago suspended testing the drug in Covid-19 patients due to safety concerns.
• Airlines (including BA, EasyJet, Jet2 and Ryanair) have sent ministers a list of the 45 nations that they want to be exempt from the 14-day quarantine requirement.
• A children’s commissioner in the UK has suggested summer schools should be set up to help pupils catch-up on work missed during the lockdown.
• Eighty-six crew members in one of American Seafoods’ fish processing vessels have tested positive for Covid-19, the fishing company has said. The number of people on board the boat is not known, but the American Dynasty has a carrying capacity of 142 people. The crew is now being quarantined in its home port of Seattle.
• Wuhan reported no new asymptomatic cases on Sunday, according to Chinese health officials.
• Emirates President Tim Clark said today it could take the airline four years to rebuild its network that has been decimated by the virus.
• The Championship League snooker event is to be staged behind closed doors at the Marshall Arena in Milton Keynes starting today.
#corporate client of Peel Hunt