header
search-icon
mobile-menu-icon search-icon

RESEARCH

Clients can browse and search the Peel Hunt research library and archive.

TRADING

A tool for our clients to submit and manage orders with Peel Hunt. 

REGISTER FOR OUR RESEARCH PORTAL

Thank you, your registration has been received.
We will be in contact with you shortly.

I'm interested in (tick all that apply)

SEARCH

PEOPLE
SERVICES
NEWS

Advisory and broking services to UK mid & small-cap companies

Comprehensive coverage of over 350 companies

Investment ideas and execution for institutional investors

Complete UK pricing coverage and worldwide access

Our joined-up approach allows us to consistently deliver value

A wealth of experience, strong collegiate ethos underpinning our joined-up approach

Our principles define the relationship between our people, our departments and our clients

We are committed to making a difference in the communities we live and work in

An environment committed to the development of our colleagues

An internship programme for undergraduates as part of their study

Insight Image

One of the reasons for the UK delaying its implementation of a lockdown was the risk of public fatigue with the measures and the potential for a resurgence before control is established. There are signs that the public’s resolve is beginning to wane. Google’s mobility report shows a marked increase in activity across the country last weekend; this trend will likely continue. Having now achieved capacity for 100,000 tests per day a published exit strategy will not only help businesses plan for their re-emergence, it could also help focus the minds of the population and help achieve the fastest sustainable release from the lockdown measures.

Headlines

• UK total testing capacity has surpassed 100,000;

• Spain’s economy to contract by 9.2% in 2020;

• India extends lockdown for two weeks;

• Boeing issues $25bn bond;

• Protestors in Michigan have stormed the state capitol building;

• Greggs changes plans to open stores;

• FCA to take insurers to courts over unpaid insurance claims.



Company news

Buildings & Construction

Barratt Developments# – “As previously announced, in line with our commitment to health and safety, we took the decision to temporarily close all of our sales centres, construction sites and offices due to the Covid-19 pandemic. All locations were closed safely and securely by 27 March 2020.



Since then, we have developed a detailed set of working practices and protocols so that our construction sites can operate safely and in line with the latest guidance from Government, Public Health Authorities and the Construction Leadership Council. This includes changes to signage, site welfare facilities and compounds, site access and walkways. We have already successfully implemented these measures on one of our sites as a pilot. A nominated Social Distancing Marshal will be present on all sites to ensure policy compliance and we will provide induction, training and support for our employees and sub-contractors.

Work on our construction sites will recommence from 11 May, initially to implement the changes required under our new working practices and protocols. We will then start a phased return to construction, with 180 sites – around 50% of the total – in the first phase.

We do not plan to restart work on our sites in Scotland at this time and will keep this position under review.

On 16 April 2020, we announced that we were in the process of furloughing around 85% of our employees, at their normal pay, until at least the end of May. With the phased reopening of our sites, a significant proportion of our workforce will be able to return to work during May.”

Breedon Group – “Since 26 March 2020 a small proportion of the Group's sites have remained open to service critical supply needs, with stringent social-distancing protocols in place. The majority have, however, remained closed, with more than 80 per cent of our colleagues furloughed in the UK or on temporary lay-off in the Republic of Ireland on full pay.



We have been encouraged by recent announcements from several companies in the wider construction sector confirming their intention gradually to reopen their operations in a number of regions of GB and Ireland. We in turn plan progressively to reopen some of our sites during the coming weeks, where customer demand supports it and where we can do so safely. This includes an anticipated return to clinker production at our two cement plants during the course of this month.

We have taken disciplined action to reduce our cost base and conserve cash, including the restriction of capital expenditure to critical and committed projects only, elimination of discretionary expenditure and tight management of working capital. We have also deferred the 2020 pay increases across the Group, withheld the issue of 2020 bonus schemes and deferred long-term Performance Share Plan awards to Executive Directors and the wider leadership team. We are benefiting from the deferral of VAT payments and the reimbursement of a substantial proportion of the wages and salaries of furloughed and temporarily laid-off colleagues under the relevant government employee retention schemes.

As a result of these measures, cash outflows have been substantially reduced.

Financing and liquidity – The Group's balance sheet remains strong. As at 30 April 2020 we had £79 million of cash and an undrawn committed facility of £222 million, compared with £60 million and £220 million respectively at 25 March 2020, which has enhanced our liquidity headroom. We have also agreed with our banks a relaxation of our 30 June 2020 covenants and a deferral of £35 million of term loan amortisation to April 2022. We continue to explore available sources of government support to further increase our liquidity headroom.”

Financial

Arden Partners – “Compared to the performance in the six months ended 30 April 2019, we anticipate materially higher corporate finance revenues, higher retainer levels but lower equity commissions. The equity trading operation suffered material losses as markets fell in response to Covid-19.

The Board has implemented steps to reduce the company's cost base. As a result, the company's current annual cost base is anticipated to be more than 25% lower than last year. The measures taken include salary and fee sacrifices for all Board members and certain senior employees of in excess of 40% of salary; salary sacrifices for all other employees; the furloughing of a number of staff and the cancellation or deferral of all discretionary expenditure. Arden will also defer the payment of VAT in line with the government's proposals. The Board will continue to take action to reduce costs and minimise the financial impact of the uncertainty caused by Covid 19.

Before taking into account the equity trading book losses, Arden expects to report a profit for the six-month period. After taking into account the equity trading book losses, Arden expects to report a reduced loss for the period compared to the prior year.”

Natwest Markets – “The impact of Covid-19 – Strategy and business resilience



NatWest Markets' focus on customers has continued throughout the crisis, actively engaging with them on their financing and risk management needs and supporting them on a number of significant transactions.

Customer activity was strong during Q1 2020, as reaction to the spread of Covid-19 drove heightened volatility and demand for safe haven assets.

Readership of colour, content and ideas pieces experienced an all-time high as customers looked for expertise to help manage their risk.

NatWest Markets and the RBS Group's Commercial Banking business provided support to 107 customers as at 23 April to facilitate their access to the Bank of England's Covid-19 Corporate Financing Facility (CCFF).

Mobilisation of business continuity plans in line with guidance from respective public health authorities ensured NatWest Markets was able to continue serving customers while protecting and supporting colleagues, which included the vast majority of employees working remotely.

Progress has been made on the refocusing of NatWest Markets and reducing RWAs over the medium term, which was announced in February. Implementation has begun to simplify the product suite, such as announcing that the NWM Group will no longer offer client clearing or execution services for exchange traded derivatives. NWM Group has also identified opportunities to improve efficiencies by working across the RBS Group, including building a common approach to technology. Timing remains subject to market conditions to ensure support continues for employees and customers.

Capital, funding and liquidity – NWM Plc RWAs increased to £35.3 billion, largely due to market and counterparty credit risk volatility brought on as the crisis escalated globally in March, although partially offset by the PRA's temporary approach to VaR back-testing exceptions.

NWM remains well-capitalised, with a NWM Plc CET1 ratio of 15.7%, within guidance of above 15%. Liquidity position remains strong, with NWM Plc's liquidity portfolio of £16.6 billion and LCR of 287%, despite tightening in the market, particularly in relation to USD, and shorter tenors on money market funds. Capital and liquidity have been closely monitored, with increased tracking and scenario testing to ensure balance sheet strength.

Demonstrated progress on reaching NWM's £3-5 billion senior unsecured funding target for 2020, including a €1.0 billion five year EMTN issuance settling early in Q2 2020.

Fair value – Valuation reserves, largely comprised of credit valuation adjustments (CVA), funding valuation adjustment (FVA), bid-offer and product and deal specific reserves increased to £1,020 million at 31 March 2020 (31 December 2019 – £953 million).

The increase in valuation reserves was primarily driven by increases in CVA and bid-offer to £520 million and £163 million respectively (31 December 2019 – £384 million and £138 million respectively), due to the widening of credit and bid-offer spreads.

FVA reserves reduced to £153 million at 31 March 2020 (31 December 2019 – £193 million) as the impact of widening funding spreads was more than offset by a reduction in exposures due to market moves including inflation rates tightening, credit spreads widening and FX movements.

For further information refer to the descriptions of valuation adjustments within 'Financial instruments – valuation' on page 110 of the NatWest Markets Annual Report and Accounts 2019.

The impact of Covid-19

Risk – Risk management initiatives have continued to focus on the safety and soundness of the business in response to Covid-19.

A Covid-19 risk register has been established to track all key risks and risk acceptance decisions, together with regular analysis of the impact of Covid-19 on NWM's risk profile.

Extensive planning and business continuity calls have been held daily to manage and oversee NWM's incident management response. Scenario planning for a worsening situation is underway across NWM's critical services to supplement the existing business continuity plan.

Working practices and processes have been adjusted in some areas in light of new working from home arrangements.

Internal traded VaR for NWM Group increased materially to £21.8 million at peak and £14.8 million average during Q1 2020, reflecting large price movements and increases in volatility across products and regions as the Covid-19 situation developed. Stressed VaR was £196.2 million at peak and £121.0 million on an average basis.

Impairments – Covid-19 will have an impact on the NWM Group's ECL provisioning requirements, reflective of the current impact on society and economic activity. Levels of uncertainty and volatility have significantly increased during Q1 2020, however there is currently limited observable data available to inform a supportable, fully-modelled view on how the economic impacts of the pandemic will affect customers.

The increased risk and uncertainty has been reflected by means of an ECL overlay to current modelled outcomes by leveraging appropriate internal stress analysis. Management has concluded that the value of the economic uncertainty overlay should be increased by £5.6 million to £10.0 million. This revised overlay will be monitored and refined as more observable data on economic and customer outcomes becomes available.”

Princess Private Equity – “The impact of Covid-19 remains unprecedented and the situation continues to evolve rapidly. In order to slow the spread of the virus, governments around the world have implemented sweeping stay-at-home and social distancing measures. These protocols have led to, not only a slowdown in economic activity, but a 'sudden stop' in certain sectors. Government measures appear to be starting to yield results, with signs that the number of new cases in several countries may be peaking, and governments starting to consider a staggered relaxation of restrictions. However, global economic activity has already slowed sharply and is likely to take an extended period to fully resume, with a higher rate of unemployment and a more cautious corporate sector.”

RBS – “The latest outlook for central bank rates to remain at historic lows and flat yield curves will adversely impact the Bank's income generation. As noted above, the Bank's corporate plan assumed a 25 basis point rate cut in 2020 compared with the recent reductions of 65 basis points.

In addition to the impact of ongoing market uncertainty, and in line with the guidance in our 2019 Annual Report and Accounts, we continue to expect that regulatory changes will adversely impact income in our personal business by around £200 million.”

Whilst we remain committed to our £250 million cost reduction target, achieving planned reductions in the current environment is likely to prove more challenging although this will be mitigated by rebalancing of the investment pool and other cost saving initiatives. We now expect strategic costs to be at the lower end of our previous guidance of £0.8-1.0 billion for the year. We retain the longer term commitment to re-shaping the Bank to be fit for the future and driving sustainable success.

In Q1 2020 our impairment loss rate was 90 basis points of gross customer loans. We expect the full year 2020 loss rate will be meaningfully higher than our guidance of below 30-40 basis points. The impacts of Covid-19 and the mitigating benefits of government schemes are uncertain and challenging to forecast accurately. At this time it would be inappropriate to provide full year loss rate guidance.

We expect to achieve lending growth of greater than 3% across our retail and commercial businesses, given the significant increase in lending during 2020 to date.

Given the current uncertainty the level of risk weighted assets (RWAs) at the end of 2020 is very likely to exceed the £185-190 billion range we previously guided to. We do however continue to target a reduction in NatWest Markets RWAs to around £32 billion by the end of 2020 and expect to achieve this with lower income disposal losses than the £0.4 billion previously guided to, subject to market conditions.

RBS Group maintains its capital and funding issuance guidance as set out in the 2019 Annual Report and Account, subject to market conditions and any changes in the 2020 balance sheet profile.

Food, Drinks & Household

Pilgrim’s Pride – “Despite the volatile and challenging markets in Q1, in part due to Covid-19, our strategy has continued to achieve solid results in relative performance to industry competition, and deliver more resilient performance regardless of changes in specific market conditions. Operating results in Europe significantly improved but were more than offset by difficult market

dynamics in the U.S. and Mexico. In spite of the difficult global macro conditions, our results have remained well-balanced, and are the result of our vision to become the best and most respected company, creating the opportunity of a better future for our team members. To support our vision, we are continuing our strategy of developing a unique portfolio of diverse, complementary business models, continuing to relentlessly pursue operational excellence, becoming a more valued partner with Key Customers, and creating an environment for safe people, safe products and healthy attitudes,” stated Jayson Penn, Chief Executive Officer of Pilgrim's.

In the U.S., the market tracked normal seasonality initially during Q1 before wider implementations of travel and movement restrictions due to Covid-19 disrupted retail and foodservice channel demand. The large bird deboning market was especially volatile during the quarter and remained challenging compared to 2019. Operationally however, we continue to improve our relative performance versus the industry across all our business units, including large bird deboning. We also adapted quickly to the change in channel demand by shifting the mix of our production capabilities, supported by our close partnerships with Key Customers, strong focus in execution by our team members, the geographical diversity of our footprint, and our presence across all bird size categories.”

Market environment in Mexico during Q1 was difficult as weak macro conditions persisted longer than expected, contributing to uncertainties in consumer spending. Prices, especially in the traditional markets, were below seasonal expectations before rebounding to reach normal levels by the end of the quarter. Our increased share of non-commodity products, strong execution, and growth in Prepared Foods, have helped to partially offset the weakness.”

Healthcare

Genedrive# – “Announces it has completed the last significant manufacturing milestone in the co-development of the Genedrive® 96 SARS-CoV-2 kit with Cytiva. The PCR-based test has completed its pilot manufacturing runs and yielded high performing multiplexed assays for Covid-19 testing. The overall project plan currently remains on track and the company is targeting CE marking in approximately 3 weeks' time.”



Industrials

James Cropper – “During the current Covid 19 pandemic, the company's priorities are the health and well-being of all employees globally, supporting our customers and managing our cash resources.



Whilst the company was on track to continue growing, the impact from Covid 19 will have a negative effect on product demand in each of our divisions:

Technical Fibre Products is likely to see a downturn as a result of a decline in the aerospace market; however, growth is continuing in clean technology markets such as fuel cell and wind energy. As a result, we expect demand will not be so significantly affected.

James Cropper Paper is likely to be the most affected of our divisions in the short term, as end markets have been directly impacted by the global lockdown. As a niche speciality provider, we expect demand and growth to return to normal levels after markets settle post-pandemic.

Despite the impact from Covid-19, we expect Colourform to grow year-on-year, however not to the levels anticipated initially.

Given the high levels of uncertainty, we are not reasonably able to forecast the impact on our operations and financial performance for the current fiscal year. The environment is subject to rapid change. Nevertheless, at present we are expecting that the course of the financial year will be as follows: the first quarter to June 2020 to incur a large negative impact and it will be loss making. During this period, the company is making use of the Government's Coronavirus Job Retention Scheme to furlough more than 50% of staff in the UK operations. In the next two quarters, to December 2020, we expect still to see a negative effect and to continue to be loss-making, albeit with some recovery evident. For the final quarter to March 2021, we expect progressive recovery towards a more normalised situation and the company anticipates being back into profitability. We continue to monitor new information as it becomes available and progress our planning accordingly.”

Real Estate

Intu Properties – “Since our update on 26 March 2020, we have continued to collect rent and have now received 40 per cent of the rent and service charge for the quarter. We are now offering monthly rents to the end of 2020 and are in advanced discussions with customers representing a further 28 per cent of the amounts due. The remainder of customers are at various stages of discussions regarding revised payment plans. However, there are a very small number of cases where customers are not currently engaging with us to find a consensual solution – these are large, well-capitalised brands who have the ability to pay but have chosen not to. In these instances we are prepared to take more robust action to enforce the legally binding terms of those leases.



Our centres continue to operate on a semi-closed basis with only essential stores remaining open. We have furloughed around 60 per cent of staff in the centres and around 20 per cent at our head office. In addition, the Board have agreed to a 20 per cent salary reduction for the next three months and centrally, we have identified around £3 million of cost savings in the short-term. To support our customers, we have continued to reduce service charge costs and are passing these savings on to them.

We have now received the final regulatory approval for the disposal of intu Puerto Venecia and are working towards closing the transaction in the middle of May.”

Retail

Amazon – “Beginning in early March, we experienced a major surge in customer demand, particularly for household staples and other essential products across categories such as health and personal care, groceries and even home office supplies. At the same time, we saw lower demand for discretionary items such as apparel, shoes and wireless products. This large demand spiked, creating major challenges in our operations network and with our seller community and our suppliers.



While we generally have experience in getting ready for spikes in demand for known events like the holiday season and Prime Day, we also generally spend months ramping up for these periods. The Covid crisis allowed for no such preparation. We took quick action to react to the higher order levels while continuing to provide for the safety of our workforce. We established rigorous safety and cleaning protocols, including maintaining 6-foot social distancing, procuring 100 million masks, tens of millions of gloves and wipes and other cleaning supplies. We began requiring temperature checks across our operations network.

In our Whole Food stores, we added plexiglass barriers between cashiers and customers and reserve special hours for senior customers to shop. We temporarily raised wages and overtime premiums, we funded a new Amazon relief fund, and we allowed employees to take unpaid time off at their discretion. To deal with the unprecedented demand, we hired an additional 175,000 new employees, many of whom were displaced from other jobs in the economy. We took steps to dampen demand for nonessential products, including reducing our marketing spend.

Our network pivoted to shipping priority of products within 1 to 4 days and extending promises on nonpriority items. Our independent third-party sellers, most of whom are small and medium-sized businesses, worked tremendously hard to serve our customers, and we are grateful for their efforts. Third-party sellers continue to see strong growth in our stores as more than half of our units sold are from third-party sellers.

We increased grocery delivery capacity by more than 60% and expanded in-store pickup at Whole Food stores from over -- from 80 stores to more than 150 stores. And other Amazon team shifted their focus to directly helping customers in the overall effort to fight the Covid virus.

AWS has created data lake to assist health care workers, researchers, scientists and public health officials who are working to understand and fight the coronavirus. Many of our AWS products are helping in the government response to crisis and are there for customers who are seeing their own demand spikes. Companies enabling videoconferencing, remote learning and online health services, for example.

Amazon Flex is supporting food banks by donating delivery services of groceries to serve 6 million meals in Los Angeles, Miami, Nashville, Orlando, San Francisco, Seattle and Washington, D.C. with plans to ramp this up to 25 cities across the U.S. And Alexa is helping customers access important CDC guidance and help them evaluate their own Covid-19 risk levels.

How is all this impacting our business? While customer demand remains high, the incremental revenue we are seeing on many of the lower ASP essential products is basically coming at cost. We've invested more than $600 million in Covid-related costs in Q1 and expect these costs could grow to $4 billion or more in Q2. These include productivity headwinds in our facilities as we provide for social distancing and allow for the ramp-up of new employees; investments in personal protective equipment for employees; enhanced cleaning of our facilities; higher wages for our hourly teams and hundreds of millions of dollars to develop Covid-19 testing capabilities.

In Q1, we also had another $400 million of costs related to increased reserves for doubtful accounts. On the flip side, we did see a drop in travel, entertainment and meeting costs as well as lower market has weighted and dampen our demand for nonessential items.”

Support Services

Spaceandpeople – “Following the update on 24 April 2020, the directors are delighted to announce that the £1 million CBIL scheme application has now completed and the funds have been received by the Group.

This funding will allow the Group to trade through the current period of venue closures and ensure that SpaceandPeople is in a position to proactively drive new business for its clients as soon as restrictions are eased.”

Technology

Kromek Group – “In the middle of March 2020, Kromek activated its business continuity plan in response to the Covid-19 outbreak. In order to protect the health and safety of its workforce, some of the Group's employees in the UK and US were transitioned to remote working. Kromek uses virtualised applications and storage on the cloud, which has enabled easier remote working and therefore there has been no significant reduction in the Group's delivery capability for clients. Sales and marketing activities have also adapted to current market conditions.



Furthermore, a number of temporary mitigation measures have been implemented to bolster the liquidity of the business and its financial position. Actions taken include the implementation of some organisational restructuring; ceasing all discretionary capital expenditure; curtailing all travel and non-essential spend; and, securing a short-term rent concession on the Group's leased properties. These measures, along with others in the pipeline, are expected to reduce monthly running costs and cash outflow, generating annualised savings of approximately £3m.

The Group also leveraged its technical and manufacturing skills in response to increased demand for sophisticated medical equipment such as ventilators. It formed a partnership with Metran Co., Ltd. to commence manufacture and sale of medical ventilators in the UK and globally. Kromek is receiving significant interest in the ventilators from potential customers in Europe and worldwide, and it is on track to produce at least 2,000 units by the end of July 2020.

Outlook – Given the evolving nature of the pandemic and the uncertainty over its length and severity, Kromek is working diligently to assess, plan for and mitigate the potential impact on its core markets by using its technical and manufacturing skills to procure other opportunities in the short-term. As a result, the Group is unable to provide accurate market guidance for FY 2020/2021. The fundamentals of the business remain sound, and the Board is confident in the Group's ability to withstand the current situation, maximise the short-term opportunities and deliver on its long-term growth ambitions.”

Transport

Heathrow – “The Covid-19 outbreak represents a seismic challenge for the aviation industry, including Heathrow. Five key objectives guide the actions we are putting in place to safeguard Heathrow's resilience:



Protecting our passengers and colleagues – Keeping people safe remains our first and non-negotiable priority. We continue to collaborate closely with Public Health England to facilitate their work within our terminals to keep the airport safe at all times. Measures implemented include the provision of hundreds of hand sanitiser dispensers, additional cleaning and sanitation procedures as well as signage and floor stickers to remind passengers to socially distance. Our colleagues are also on hand to help manage the queues and ensure safe and adequate spacing between passengers, and have been provided PPE such as face masks to do so safely. We are ready to work with Governments and the global aviation industry to agree a consensus around standardised processes for responding to health crises like Covid-19 in the future. This could include a number of measures such as a health passport, health screening, enhanced cleaning standards and innovation which will reduce physical contact in airports. Common measures across the world would help passengers build confidence in flying so that the personal and economic benefits of global travel can continue after Covid-19.

Keeping Heathrow open – Heathrow will stay open as long as it is safe to do so. The airport will continue to serve the UK by keeping open vital supply lines and helping people get home.

However, given the significantly reduced passenger traffic, we moved to single runway operations on 6 April. In addition, we temporarily shifted passenger operations out of Terminals 3 and 4 into Terminals 2 and 5 in the following weeks.

We are utilising our now available capacity to prioritise cargo flights with medical supplies. The airport is well-placed to receive time-critical and temperature-sensitive medical supplies, such as ventilators, medicines and Covid-19 testing kits.

Supporting Team Heathrow – We are taking steps to support industry partners during this crisis, which include:

• working with Team Heathrow to consolidate residual operations into two terminals,

• supporting the temporary suspension of the 80:20 slot rules to enable airlines to ground aircraft without being penalised,

• maintaining our commitment to the 30-day prompt payment code with our direct supply chain, and

• encouraging our direct supply chain to also maintain their payment terms – an important measure to protect small businesses.



Protecting our financial resilience – Our financial performance will be significantly impacted by this unprecedented crisis. We have already taken immediate actions to safeguard Heathrow's financial resilience.

Various management actions are expected to reduce our operating costs by at least 30% in 2020. Early actions include people initiatives such as cancelling executive pay, a company-wide pay reduction and freezing recruitment in addition to consolidating our operations into a smaller footprint and stopping all non-essential costs. Apart from preserving cash, we are taking steps to permanently adapt our organisation to prepare us for the recovery in the future.

We are reviewing all capital projects in order to protect cash while ensuring we keep Heathrow safe and resilient. We anticipate our capital expenditure will reduce to around £500 million, compared to £1.1 billion initially forecasted in our December 2019 investor report.

Discussions continue with the Government around measures that will support a reduction in our cost base; for instance, a reduction or deferral of business rates, VAT payments or corporation tax and relief on policing costs. We are also utilising the Government's job retention scheme and have started furloughing a number of our colleagues to help protect as many long-term jobs as possible.

Prudent management over the past decade means that we are able to face this crisis with a robust financial position. As at 31 March 2020, Heathrow had £3.2 billion of cash and committed facilities available to the business, designed to maintain at least a 12-month liquidity horizon even under the extreme stress-test of no revenues.

The Covid-19 outbreak expected impact on our cash flows and key credit metrics has been reflected in recent credit rating agencies updates.”

Ryanair – “Due to Continent wide EU Government flight restrictions, Ryanair expects to operate less than 1% of its scheduled flying program in Apr, May & June 2020. Q1 traffic of less than 150,000 passengers will be 99.5% behind the Q1 budget of 42.4m passengers. While some return to flight services is expected in the second (July-Sept) quarter, Ryanair expects to carry no more than 50% of its original traffic target of 44.6m in Q2. For the full year ended March 2021, Ryanair now expects to carry less than 100m passengers, more than 35% below its original 154m target.



State Aid Distorts Competitive Landscape – When scheduled flights return in Europe, sometime in July, Ryanair believes it will take some time for passenger volumes to return. Consumer confidence will be impacted by public health restrictions, such as temperature checks at airports and face coverings for passengers and staff on board aircraft. Ryanair expects traffic on reduced flight schedules will be stimulated by significant price discounting, and below cost selling from flag carriers with huge State Aid war chests (or nationalisation in the case of Alitalia). These lower fares will require aggressive airport price incentives to encourage passengers to travel, and Ryanair continues to call on EU Govts to cut passenger taxes, airport taxes, and departure taxes on an industry wide basis as a better alternative to selective State Aid "doping" for flag carriers.

Examples of State Aid Doping – to date

Lufthansa Group

€12.4 billion plus

AF-KLM Group

€10.1 billion plus

TUI Group

€1.8 billion plus

Alitalia

€1.7 billion plus

SAS

€0.8 billion plus

Finnair

€0.7 billion plus

Norwegian

€0.3 billion plus

Ryanair has repeatedly called for any State Aid to be transparent and non-discriminatory, such as payroll support schemes. This could, for example in Germany, have involved cutting departure taxes or reducing airport taxes in France, which would have benefited all airlines and passengers equally and not just favoured the local flag carrier. In France, the State is refunding aviation taxes but only to "French" airlines where all other EU airlines flying in France (such as Ryanair, EasyJet & BA) must still pay these taxes. This bailout discrimination is clearly in breach of State Aid and competition rules.

Fleet Review – Ryanair is now reviewing its growth plans, and aircraft orders. We are in active negotiations with both Boeing, and Laudamotion's A320 lessors to cut the number of planned aircraft deliveries over the next 24 months, which could reduce our capex commitments, to more accurately reflect a slower and more distorted EU air travel market in a post Covid-19 world.

3,000 Job Cuts and Pay Cuts – Consultations – As a direct result of the unprecedented Covid-19 crisis, the grounding of all flights from mid-March until at least July, and the distorted State Aid landscape in Europe, Ryanair now expects the recovery of passenger demand and pricing (to 2019 levels) will take at least 2 years, until summer 2022 at the earliest. The Ryanair Airlines will shortly notify their trade unions about its restructuring and job loss program, which will commence from July 2020. These plans will be subject to consultation but will affect all Ryanair Airlines, and may result in the loss of up to 3,000 mainly pilot and cabin crew jobs, unpaid leave, and pay cuts of up to 20%, and the closure of a number of aircraft bases across Europe until traffic recovers. Job cuts and pay cuts will also be extended to Head Office and Back Office teams. Group CEO Michael O'Leary, whose pay was cut by 50% for April and May, has now agreed to extend this 50% pay cut for the remainder of the financial year to March 2021.

Outlook – As announced on 3 April, given the uncertain duration of the Covid-19 crisis, and a slower return to "normal" flight services, Ryanair cannot provide any guidance for FY21 (year ended March 2021). The Group expects to report a net loss of over €100m in Q1, with further losses in Q2 (peak summer) due to the substantial decline in traffic arising from Covid-19 fleet groundings. Ryanair expects that its return to scheduled services will be rendered more difficult by competing with flag carrier airlines, who will be financing below cost selling with the benefit of over €30 billion in unlawful State Aid, in breach of both EU State Aid and competition rules.

Ryanair entered this unprecedented Covid-19 crisis with almost €4bn in cash, and we continue to actively manage these cash resources to ensure that we can survive this Covid-19 pandemic, and more importantly the return to lower fare flight schedules as soon as possible, when our customers can look forward to more low air fares as we are forced to compete with flag carrier airlines who have received €30 billion in State Aid "doping" to allow them to sustain below cost selling for months after this Covid-19 crisis has passed, as it certainly will over the coming months.”



Lifting restrictions

• In France, the Government has released a map on which it is basing its strategy for lifting the lockdown. It shows the areas that have been worst-hit by the pandemic and where hospitals are under the most strain. The regions are broken down into red, yellow and green, indicating which have been the worst affected. The ‘green zones’ will be able to lift some restrictions more rapidly.

• South Africa is easing some of its lockdown restrictions today. Some businesses will be allowed to reopen, restaurants will be able to deliver food, and families will be allowed to leave home to exercise. But in some respects, South Africa’s five-week lockdown will remain just as strict as it was before. The sale of alcohol will still be banned. This restriction has helped keep the country's hospital wards empty.



Other

• Japan's Prime Minister, Shinzo Abe, has suggested he might extend the country's state of emergency by about a month.

• India – lockdown extended for two weeks, but it won’t be as restrictive.

India has been implementing colour-coded zones to tackle the coronavirus crisis, and this letter (from 30 April) provides the most recent classifications that will go live from 3 May (when lockdown was expected to end). It provides a breakdown of the designated hotspots/red zone, orange zones and green zones for each district in each state (please see pg 4 – 21 for these tables). This classification is multi-factorial and takes into consideration incidence of cases, doubling rate, extent of testing and surveillance feedback to classify the districts.

Red zone – districts with highest incidence of cases, will see no activity and very strong containment measures.

Orange zone – districts that have not reported a single case in the last 14 days, only restricted activities such as limited public transport and farm product harvesting (essential crops and grains) activities are expected to be allowed.

Green zone – districts which have not reported any cases over 21 days, a few industries falling under the green zone in districts with no Covid-19 case will be allowed to function with in-house lodging facilities for employees or run with limited occupancy ensuring proper maintenance of social distance. Agricultural activities are also set to be allowed with strict maintenance of social distance. Even limited domestic air and train services may be allowed in some sectors.

• The first professional tennis tournament since lockdowns began is set to start in Germany today. The four-day Tennis Point series, in Koblenz, will be played without fans, line judges, ball girls and boys or handshakes, although it will be televised live. Players will sit at opposite sides of the net during changeovers, and there will be no handshakes at the end of the match.

• Spain's government says the country's economy will contract by 9.2% in 2020 although it is expected to rebound by 6.8% next year, Economy Minister Nadia Calvino has said.

•In the UK, Google says it is seeing a clear increase in activity despite the fact that the country's lockdown measures have not been relaxed. The latest Google mobility report–which refers to last weekend–shows a marked increase in activity across the country. It said visits toparks were only10%below normal, while they were around 50% lower at the beginning of the lockdown.

•Paris St-Germain has been awarded the Ligue 1 title after it was announced the season would not resume.

•Greggs has said its planned branch reopenings next week will now begin behind closed doors. The reopenings will only be “to test our new operational safety measures”, and it will not allow customers in. Earlier this week, it announced plans to reopen20 stores in the Newcastle area from Tuesday, on a trial basis.


#corporate client of Peel Hunt