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Today came the long-expected announcement that restaurants and pubs will be allowed to reopen in England from 4 July. Coupled with a reduction in the social-distancing requirements, this is one of the biggest changes made since lockdown began, and will be seen a positive change for many businesses. It will be interesting to see what measures of customer protection are followed and enforced, as for many relaxing both of these measures in close succession, having spent the last few months trying to avoid such scenarios, may be seen as too much.

Headlines

• UK reduces social distancing requirements from 2m to 1m+.

• Pubs, restaurants, hotels and hairdressers to re-open from 4 July.

• German regional government re-imposes local lockdown.

• German economy is set to shrink by 6.5%.

• Car sales in Europe to drop by 25% in 2020.

Company news

Financial

1pm – “The Group provides the following trading update ahead of the publication of its final results for the financial year ended 31 May 2020, which are scheduled to be announced on 22 September 2020.



During the year, the Group experienced three quarters of ‘normal’ trading activity and one quarter, 1 March to 31 May 2020, impacted by the effects of the Covid-19 pandemic.

The Group reports a satisfactory trading performance for the financial year as a whole in spite of the significant interruption to normal trading activities in the fourth quarter caused by the Covid-19 crisis and its financial implications.

Business highlights

The inherent strengths of the Group’s strategic market position as a multi-product finance provider to UK SMEs, comprising Asset, Vehicle, Loan and Invoice finance, to a very broad range of business sectors, combined with the risk-mitigating model of being both a lender and a broker, have come to the fore in the current economic conditions and have proven the Group’s commercial resilience.

Effective business continuity plans have also attested to the Group’s operational resilience and have underpinned the continuation of a seamless service for the Group’s customers.

The Group’s ability to develop new lending opportunities despite the business impact of Covid-19 has demonstrated the Group’s commercial responsiveness and agility as a non-bank, specialist finance provider, focused on personal customer service and tailored lending solutions.

New business origination for the financial year was approximately £147.0 million of which approximately £54.5 million (37 per cent.) was written on ‘own-book’ and £92.5 million (63 per cent.) was placed for broker commission income.

As at 31 May 2020, the Group had granted forbearance totalling £0.9 million to customers in respect of leases and loan deals with a portfolio value of £24.9 million, representing 20 per cent of the Group’s receivables. The strength of the Group’s balance sheet, which has now been further bolstered by additional funding in the form of a term loan, as set out below, has enabled this forbearance to be granted without the Group needing to request similar forbearance from its own funding partners. This has enabled the Group to stay open for new business throughout the period.

Ongoing support from funding partners, plus the spread and size of funding facilities available to it has resulted in the Group being well-equipped to maximise the opportunities that will be presented as the economy recovers.

No material increase in bad debt write-offs had occurred as a result of Covid-19 as at 31 May 2020 due to large numbers of UK SMEs being able to access funding through the availability of the Government’s temporary Covid-19 financial support schemes. A decision has been taken, however, to increase the bad debt provision as at 31 May 2020, as set out below, as a prudent governance measure.

As a further consequence of UK SMEs accessing funding through the availability of the Government’s support schemes, over the past eight weeks the Group has received approximately £1.0 million from the early settlement of outstanding lease and loan agreements, which has added to the Group’s cash resources available to redeploy for further lending, in particular under the Group’s accreditation as a CBILS funding partner.

Financial highlights

Revenue for the year expected to be £29.1 million (FY 2019: £31.8 million) of which approximately 80% is from lending activities and 20 per cent from broking activities.

PBTE for the year expected to be approximately £3.0 million (FY 2019: £8.1 million), stated after a ‘one-off’ increase in the bad debt provision of £2.1 million recorded in the fourth quarter of the financial year to mitigate any potential bad debts that may arise in the future from the impact of Covid-19.

A similar level of net portfolio write-offs to the prior year was incurred, representing under 2.0% of the net lending portfolio, but provisions have been prudently increased to approximately 5.2% or £5.1 million (31 May 2019 1.9% or £2.4m).

Net assets at 31 May 2020 were in excess of £55.0 million (31 May 2019: £53.8 million).

Borrowing facilities as at 31 May 2020 were in excess of £180 million (31 May 2019: £167 million) with the blended cost of borrowing maintained at approximately 4%.

Good visibility of future revenue already secured with “unearned income” as at 31 May 2020 of over £15 million.

Cash balances, including the proceeds of new term loan funding, of £4.2 million as at 22 June 2020. In addition the Group has a currently unutilised overdraft facility of £1.0 million.”

St James’s Place – “Despite the continuing challenges presented by Covid-19, gross flows in May were robust. Retention of existing client investments remains particularly strong, providing for a net inflow for the month of £0.67 billion. Funds under management benefitted from both these positive net inflows and the continuing recovery of world stock markets, to end the month at £112.6 billion.



We remain encouraged by the inflows we are continuing to experience and expect June gross inflows to be similar to May, though the short to medium-term impact of Covid-19 and economic volatility on our flows remains uncertain.”

Food, Drinks & Household

Cranswick – “The health and economic implications of the Covid-19 outbreak and its impact at individual, family, cultural, commercial and financial levels were unimaginable just a few months ago. From a business perspective the wellbeing of our colleagues has been paramount throughout. They have performed incredibly in keeping operations flowing at all sites whilst observing appropriate health and safety guidance. This is being acknowledged with a ‘thank you’ bonus for their unstinting and selfless endeavours. The sites in turn have been very supportive in their local communities towards the most vulnerable, care workers and NHS staff on whom we all rely.



From the outset of the pandemic, and in line with Government guidance, we implemented additional measures to protect both the physical and mental wellbeing of our people, including social distancing measures across all of our sites, recommended PPE (Personal Protective Equipment) for all employees in line with Public Health England and World Health Organisation guidelines, including the use of optional visors to provide reassurance to colleagues. We also implemented additional cleaning and hygiene measures to those stringent procedures already in place. We have provided counselling and occupational health services for all colleagues who may be concerned about their health, either whilst they are at work, or from home. Throughout the pandemic we have remained in constant dialogue with the relevant regulatory authorities and we will continue to adapt our protective measures as required.

We have worked in close partnership with our supermarket customers to enable the optimisation of production and in maximising output to meet the surges in demand from consumers.

The ‘Food-to-Go’ sector has been badly hit which has affected production at a small number of sites. Any colleagues affected have relocated to our other local facilities, avoiding any need to make use of the Government’s Coronavirus Job Retention Scheme.

With all livestock sourced from within the UK, including our own pig herds and poultry flocks, supply to the primary processing sites has operated relatively smoothly and enabled raw material flow into further processing to continue uninterrupted. The investment in expanding the Company’s pig herds and increasing our self-sufficiency in this and recent years has proved invaluable.

Business planning and forecasting continues to be rigorously tested to ensure the adequacy of financing facilities from pre-existing arrangements. Our balance sheet and cash flow remain strong and therefore we have had no need for recourse to Government-backed assistance.

We will continue to do all we can to safeguard the health and safety of our colleagues whilst meeting the requirements of our customers and consumers.

Results – Total revenue for the year of £1.7 billion represented an increase of 16.0 per cent on the previous year. Excluding turnover from Katsouris Brothers, acquired during the first half of the year, and that from the more recent livestock acquisitions, Packington Pork and White Rose Farms, revenue on a like-for-like basis was 13.0 per cent higher.

Adjusted profit before tax was £102.3 million, an increase of 11.2 per cent and adjusted earnings per share of 156.4 pence were up by 8.4 per cent year-on-year.

A net £69.4 million was spent on the acquisitions of Katsouris Brothers, Packington Pork and White Rose Farms during the year.

In addition, a record level of investment was made in the Group’s asset base. This year saw the commissioning of the new poultry facility at Eye in Suffolk as well as the expansion of the Group’s cooked meats facility in Hull. Other projects were undertaken elsewhere in the business to improve efficiency, expand capacity and enhance the resources available for product development.

The Group’s balance sheet remains in robust shape. Cranswick has significant unsecured banking facilities, which were increased by £40 million, to a total of £200 million, during the year. At the year end, after a year of record investment and significant corporate activity, the Group’s net debt stood at £146.9 million, including the first-time recognition of £65.9 million of IFRS 16 lease liabilities.

Dividend – The Board is proposing a final dividend of 43.7 pence per share, an increase of 9.3 per cent on the 40.0 pence paid previously. Together with the interim dividend of 16.7 pence per share this is a total dividend for the year of 60.4 pence per share and compares to 55.9 pence per share previously. This is the 30th consecutive year of dividend growth.

The final dividend, if approved by Shareholders, will be paid on 4 September 2020 to Shareholders on the register at the close of business on 24 July 2020. Shareholders will again have the option to receive the dividend by way of scrip issue.

Sustainability – The Company’s ‘Second Nature’ sustainability strategy reflects the ambition to be the leading sustainable meat business and is focused on key areas including food waste, plastic usage, energy efficiency, water usage and carbon footprint. Our industry leading animal welfare standards are reflected in the award of the highest performance ranking of ‘Tier One’ in the global ‘Business Benchmark on Farm Animal Welfare’ for the fourth consecutive year, underlining Cranswick’s position as a global leader in the sector.

Outlook – There has been a positive start to the current year.

Whilst the impact of Covid-19 will be ongoing for some time, we are confident we will continue to meet the challenges it presents.

Brexit negotiations are still to be finalised and trade deals with other countries concluded. Until we see the details it is difficult to assess how well the food industry will be positioned. That said we are hopeful that the Covid-19 experience underlines and reinforces the importance of having a resilient and successful domestic food sector and that this is at the forefront of negotiators thoughts during discussions.

Notwithstanding this, the business has a strong balance sheet, comfortable financial headroom and has made tremendous strategic and commercial progress over the past year. The successful commissioning of the major poultry investment at Eye and the broadening customer base provides a solid platform from which to continue Cranswick’s successful long-term development.”

Healthcare

Sanofi – “Sanofi SA, says it expects to get approval for the potential Covid-19 vaccine it is developing with Britain’s GlaxoSmithKline Plc by the first half of next year.”



Industrials

Aalberts – “Aalberts faced a limited number of Covid-19 infections till now. Our preventive safety actions, installed beginning of March, are working well. Only a few locations in Southern Europe were closed for several weeks, due to governmental instructions. All impacted sites reopened beginning of May.



In the first five months of the year our organic revenue declined with 12% compared to last year, due to Covid-19. Our order book end of May was at the same level as last year. Our net debt (before IFRS 16) is reduced with 15% compared to last year.

Activities in installation technology and climate technology, in the eco-friendly buildings end market, continued reasonably well on a lower level. In Southern Europe and UK we faced more challenging market circumstances due to governmental lockdowns, which affected our distribution channels. From the last weeks of May onwards we see an increase in our order intake and sales. We continued our investments in press technology, postponed building expansions and continued our innovation initiatives.

Material technology, active in industrial niches and sustainable transportation, faced a slowdown in order intake and sales in the last months, due to lower demand and customer site closures. Most customer sites reopened beginning of May, starting up their supply chain step by step. We continued our capital investments in new technologies, reduced our capacity expansions and postponed our building expansions.

Activities in industrial technology showed a mixed picture. Within fluid control, our activities in industrial niches did well, activities in beverage dispense faced difficult circumstances. Gas and cooling regulator applications for sustainable transportation were on a low level, mainly due to customer site closures, reopening beginning of May. Our advanced mechatronics activities for the semicon efficiency end market realised a strong growth compared to last year with a record high order book for the coming months. We continued our operations, CAPEX and service to our customers on a good level.

In all four business segments we focused on cash management and cost optimisations. Parallel, we accelerated our action plan defined in the updated strategy ‘focused acceleration’, presented December 2019. Many projects were initiated to reduce our structural costs and net working capital, which will lead to one-off redundancy costs during 2020. The effect of these actions will partly benefit 2H2020 and fully FY2021, to be explained in our 1H2020 interim results. Our goal is to evolve faster into an even stronger and better Aalberts, realising our strategic objectives.

Our Aalberts people did a great job in continuing our operations in a safe way, serving our customers all over the world. At the same time initiating lots of structural improvements, optimising OPEX, NWC and CAPEX, driving our strategy forward.”

James Cropper – “At the start of the new financial year, we experienced the initial impact of the Covid-19 global pandemic.



Reducing costs

• Cost of living pay increases and bonus payments suspended.

• Planned production temporary closures.

• Employees placed on Job Retention Schemes reducing the workforce to minimum requirements.

• A hiring freeze, a release of agency workers and other operational costs.

• Significant spending cuts in all areas that are not directly related to the production for our customers, and spending cuts that do not affect our ability to grow.

• Capital investment projects for strategic growth programmes postponed.

• Adopting payment suspensions and plans where government and tax authority support is in place.

• Shareholder dividends stopped.



Growth plans – The Company prudently selected a severe framework against which to build and action immediate plans when assessing a pessimistic view of Covid-19 on the business over the next two years. Whilst in the short term costs & cash are managed to ensure liquidity; our objective is to continue and accelerate growth plans.

Outlook – At the start of the pandemic, the Paper business experienced a sharp downturn in orders, aligned to the lockdown imposed around the world and especially in the UK. Much less impact was experienced in the TFP business, with a downturn in aerospace observed, however, continued growth in other markets such as green technology. While the order intake for Colourform has been moderated, year on year growth continues to be achieved. The impact on group sales for the start of the current financial year was approximately 30% less compared to the same period in the prior year.

We expect to fall further during Q2, with growth being experienced in the second half of the year.

Impacts on profits have been less severe due to quick and significant actions taken to reduce costs at the start of the pandemic. While we expect profit to be significantly affected, as a result, we do expect to end the current financial year at least at break-even profit, excluding any impact of pension charges under IAS 19.”

Spirit Aerosystems – “Received a letter from Boeing directing Spirit to pause additional work on four 737 MAX shipsets and avoid starting production on sixteen 737 MAX shipsets to be delivered in 2020, until otherwise directed by Boeing, in order to support Boeing’s alignment of near-term delivery schedules to its customers’ needs in light of Covid-19’s impact on air travel and airline operations, and in order to mitigate the expenditure of potential unnecessary production costs.



Based on the information in the letter, subsequent correspondence from Boeing dated June 9, 2020, and Spirit’s discussions with Boeing regarding 2020 737 MAX production, Spirit believes there will be a reduction to Spirit’s previously disclosed 2020 737 MAX production plan of 125 shipsets. Spirit does not yet have definitive information on what the magnitude of the reduction will be but expects it will be more than 20 shipsets.

The 737 MAX grounding coupled with the Covid-19 pandemic is a challenging, dynamic and evolving situation. During this time, Spirit plans to work with Boeing to determine a definitive production plan for 2020 and manage the 737 MAX production system and supply chain.

Due to the matters described above, Spirit has elected to place certain Wichita hourly employees directly associated with production work and support functions for the 737 MAX program on a 21 calendar day unpaid temporary layoff/furlough effective Monday, June 15. In addition, Spirit will declare an immediate reduction of the hourly workforce in Tulsa and McAlester, Okla., effective Friday, June 12.”

Tricorn Group – “The results of the Group for the six months ended 31 March 2020 (the “period”) were significantly impacted by the Covid-19 pandemic. Whilst the Group had been able to re-open its Chinese joint venture in mid-February, following a brief period of closure, significant disruption, as detailed in the Group’s announcement on 20 March 2020, has been experienced elsewhere in the Group’s facilities.



Both Tricorn’s UK facilities were temporarily closed on 25 March 2020 amidst safety concerns for employees and following serious disruption to supply chains and numerous customer closures. The Group’s USA facilities closed a few days later with similar concerns and challenges. Most of the Group’s UK and US employees were furloughed from the end of March, with the remaining key staff focused on ensuring that the Group’s facilities were in full compliance with the latest Government guidelines to allow an early and safe restart once supply chains and customer demand were re-established.

The Group’s UK and US facilities reopened from 20 April 2020 onwards, albeit with reduced staffing levels and employees continuing to work from home wherever possible.

Revenue and profit before tax were significantly impacted. Revenue at £8.453m for the period was 25.6% lower than the six months ended 31 March 2019 (the “corresponding period”) (2019: £11.348m). Loss before tax was £0.572m (2019: profit £0.511m).

The UK Job Retention Scheme and the USA furlough scheme have, and continue to be, utilised by the Group and £0.55m has also been obtained through the USA Payroll Protection Program. The Group has also secured an additional £1.0m of funding through the UK Government’s Coronavirus Business Interruption Loan Scheme (“CBILS”) facility from its existing bank, HSBC. This loan has a 6-year term with the first year being free of interest and capital repayments and an annual interest rate thereafter of 3.99% over the Bank of England’s base rate. Combined with the other measures taken, this provided the Group, as of 1 June 2020, with cash headroom of £1.8m.

This has been an extremely challenging period, during which our operations worldwide have been significantly impacted by Covid-19. During March, our facilities in the USA and UK were temporarily closed due to issues with customer demand, supply chains and concerns for employee safety.

Throughout, the Board has remained focused on the safety of our employees, supporting our customers, with whom we continue to work closely, and mitigating the impact of the lower revenues on the Group’s profitability and cash flow.

I am pleased to report that all of our facilities were operational from 20 April 2020 onwards. Our Chinese joint venture continues to operate normally, and, trading at our UK Malvern facility has returned to pre-Covid-19 levels. However, whilst demand has started to increase at the UK West Bromwich and USA facilities, it is still at significantly lower levels than compared to earlier in the year.

At this time, as for many businesses, the outlook remains uncertain. We are, however, pleased that as a result of a focused plan of action, as at 1 June 2020, the Company had, as reported, cash headroom of £1.8m. This positions us well to weather these exceptional times and to capitalise on growth opportunities as we move forward.”

Velocity Composites – “Lower levels of customer demand expected to continue for at least the duration of the lockdown and until the OEMs issue longer-term demand schedules to the Tier 1 manufacturers.



Velocity expects that restructuring in the industry as a result of the impact of Covid-19 will present immediate and longer-term opportunities for its cost-reducing service offering.

Strong proposition and pipeline of new business opportunities, totalling circa £30m on a full year basis.

Robust liquidity position with cash balances of £2.2m at 22 June 2020 (no invoice discounting used) and debt facilities of up to £7m, adequate resources to withstand likely modelled recovery scenarios.

Management will continue to take the necessary actions needed to ensure that the wellbeing of the Company’s people is prioritised, its business capabilities are preserved, and cost and performance are optimised.

The Board remains confident in the long-term prospects of the Company.

Financial performance guidance for FY20 and FY21 remains withdrawn, until the Board has greater visibility on market activity.”

Media

OnTheMarket – “On 19 March 2020, OnTheMarket announced a 3 month discount to listing fees to assist agent customers who were facing the uncertainty of the evolving Covid-19 situation. The initial discount period was due to expire on 25 July 2020.



To further help to reduce the cash flow pressure which agents are continuing to face, OnTheMarket is now extending listing fee discounts for a further 2 months to 25 September 2020. The discount will remain at 33% for the first month and will be 20% for the second month. These discounts will be given to all OnTheMarket agent customers who are paying on full-tariff listing agreements.

While revenues will be impacted in the short term, the Group will continue to conserve cash through the careful management of costs. As at 31 May 2020, the Group had net cash of £8.8m, and, excluding deferred creditor payments of £2.3m, no borrowings.

Record delivery of leads to advertisers – In the past 2 weeks and since the partial relaxation of Covid-19 restrictions, OnTheMarket has seen new records for total leads delivered to advertisers. Over 430,000 leads were delivered in the week commencing 8 June 2020 and over 440,000 in the week commencing 15 June 2020. Visits were c.6 million in each week, an increase of over 280% on the weekly low point during lockdown and over 20% up on the first week in March 2020, before the impact of the lockdown on the property market. This has been achieved despite a significant reduction in marketing spend since the lockdown commenced on 23 March 2020.”

Retail

Gear4Music – “The financial performance and trading momentum the business has achieved during the year is testament to our strategic delivery and the efforts of all our staff, and has ensured that the business is in a solid position to increase its market share further in the UK and across Europe.



Covid-19 has brought significant changes to the retail market for musical instruments and equipment, with an accelerated shift away from physical store sales towards online. As a result, Gear4music has seen an exceptional and sustained increase in demand for its products over the first quarter to date.

Looking ahead, the Directors are confident that our customer proposition, operational infrastructure and strong balance sheet will enable the Group to achieve its business objectives during the current financial year and beyond, and are excited to embark on the next leg of our growth journey.”

Shoe Zone – “Digital performance has delivered high sales growth since lock down increasing from around 6.5% of total company sales to 17% of previously forecasted sales for the lockdown period. This has been driven by a very aggressive Buy One Get One Free (BOGOF) promotion on all stock to generate cash as quickly as possible. Although this has been now been amended to BOGOF on selected lines only it continues to have a significant impact on ongoing digital gross margin levels.



We opened all England, Northern Ireland and the Republic of Ireland stores by the 15 June and the Welsh and Scottish stores will open as soon as government guidance allows. We have implemented all published Covid-19 guidelines in stores and head office to ensure the safety of our colleagues and customers. This includes Perspex screens being retrofitted to tills, distance markings on the floor and limits on the number of customers dependent on store size.

Covid-19 will continue to have an unprecedented impact on the UK economy and the retail industry. Whilst the group has taken all possible steps to ensure that the business will survive through the crisis and continue into the future, the impact is likely to continue to be felt for several years.

As a result of this and following an extensive review of the store portfolio Shoe Zone has closed an additional 20 stores during lockdown and will only open 470 when permitted. The Group has also taken immediate action to reduce costs at Head Office and pause all areas of discretionary spend. Negotiations with landlords have also been accelerated and supplier orders reduced, cancelled or deferred as far as possible.

The Head Office rationalisation programme has meant an additional £0.3m has been incurred in redundancy payments after the balance sheet date. We have also undertaken a review of freehold values held resulting in a write down of £0.9m, giving an additional Covid-19 impact, not included in the first half results of £1.2m.

Cash remains the key focus for the business and as stated on the 29 April 2020, the immediate focus will be on rebuilding cash balances to a higher level than previously carried and repaying the debt taken on as part of the CBILS scheme whilst fulfilling other statutory obligations. The Board remain confident that the Group’s current level of funding will be sufficient to secure the future of the business, assuming that sales return to a high proportion of previous sales during the next year.”

Support Services

Gama Aviation – “The Group has continued to follow national government guidelines to safeguard its staff and clients, while taking the steps necessary to ensure on-going service provision. The Group’s management have held regular Global Leadership Team calls to manage and update its policies, procedures and controls in response to the evolving pandemic. The Group has maintained a strong focus on controlling cash flow including reducing discretionary expenditure and close management of outstanding debtors.



Covid-19 has affected the Group’s divisions as follows:

• US maintenance activity stabilised at around 50% of the budgeted level in April and has increased slightly since then. The division received a loan of $5.75m from the US Paycheck Protection Program under the CARES Act and expects to qualify for forgiveness of the majority of the loan. The division has undergone a significant restructuring including elimination of a number of management positions and additional cost reduction measures to provide a more efficient foundation for the resumption of normal activity levels as the impact of Covid-19 recedes.

• In Europe, special mission contract activity has continued broadly as budgeted for UK government customers, and the major transition to in-house operation of the Scottish Ambulance Service helicopter fleet was completed successfully on 1st June 2020. Charter sales continue to be heavily impacted by the lockdown whereas aircraft management charges have been sustained. Maintenance activities have recovered well since the low point in April and recent maintenance bookings for the second half of the year have been encouraging. A modest number of staff remain on furlough in both the Europe Air and Ground divisions.



• In the Middle East, pressure on aircraft management charges and the lack of charter sales have been mitigated by cost reduction measures. The three-month waiver of airport fees and rental charges is coming to an end and the authorities have indicated that flight activity can resume shortly, although the operational outlook remains uncertain.

• The Asia business has had to reduce pricing in order to retain clients during the Covid-19 period, which will affect divisional performance in the medium term. The Group’s CASL associate continues to suffer substantial losses due to the lack of civil aviation activity at Hong Kong airport.

• Outsourced service revenues have continued for FlyerTech and Myairops, while project activity reduced significantly in April before starting to recover in May.

Following his arrival in December 2019 the Group’s new CFO planned a number of initiatives to strengthen and enhance the finance function and the Group’s accounting and financial reporting systems and processes. These initiatives, together with progress on the external audit, have been significantly impeded and delayed by the impact of Covid-19. This has particularly affected the staffing within the finance function, both in terms of recruitment and operating efficiency. The Board remains committed to actively addressing this staffing shortfall as well as enhancing the Group’s processes, procedures and controls as quickly as possible.”

Speedy Hire – “At the end of March 2020, in response to the outbreak of Covid-19 and related Government guidance, we took immediate and decisive action to protect the health and safety of our colleagues and stakeholders whilst maintaining the ability to support our customers, contain costs and preserve cash. We temporarily closed a number of our depots, and furloughed c.1,800 of our colleagues in the UK under the Government’s Coronavirus Job Retention Scheme and in Ireland under the Irish Government’s Wage Subsidy Scheme.



A recruitment freeze was put in place and the annual salary review that was due on 1 April 2020 has been deferred. All Board directors and the leadership team agreed to reduce salaries and fees by 20% for a period of three months from 1 April 2020. All non-essential spend has been suspended and variable operating costs, including IT and vehicle costs, have been reduced.

In April Group revenues were c.35% below the prior year as we continued to trade through our larger superstores servicing customers who were providing essential services. Recently, we have seen revenue increase as customers in England, Wales and Ireland return to work. In June hire revenue in the UK and Ireland is c.17% below the prior year. Whilst c.30% of colleagues remain on furlough, we have started to re-open depots and un-furlough colleagues at a rate that reflects increases in customer demand.

The young age profile of the Group’s hire fleet has allowed us to reduce capital expenditure significantly. In the short term, whilst the uncertainty continues, all non-essential capital expenditure has been suspended with capital expenditure incurred in April and May amounting to c.£0.5m.

The Group has taken advantage of other Government Covid-19 support, including business rates relief, and a reduction, or deferral, in taxes payable. These support measures combined with other measures we have taken give the Board confidence in the Group’s ability to continue to generate cash and operate within its existing debt facilities and covenant tests during a prolonged period of reduced activity. As a result of the measures taken the Group has generated cash for the months of April and May with net debt3 at 31 May 2020 amounting to £67.3m.

As our operations return to normal we will learn from the experiences of the past few months in order to simplify and standardise our operating model. This will allow us to be better placed to address growth opportunities and be more efficient in our day to day operations.”

Technology

Accsys – “As previously announced, the start of the new financial year has been impacted by Covid-19. The impact has included a reduction in our Accoya® sales compared to our previously anticipated levels and a delay in the construction of the Tricoya® plant in Hull, as explained above.



As soon as the likely impact became apparent, we worked to put in place a number of mitigating actions. Management’s priorities have been to ensure the safety and well-being of all our people, to maintain the liquidity of the Company and, as far as possible, preserve the capital raised in December 2019 to enable our current expansion projects to be completed.

Our Arnhem production site has remained operational throughout the entire Covid-19 period, successfully balancing supply with market demand. We have significantly reduced the non-essential staff present at the location and introduced new working protocols. Our London head office has effectively been closed throughout the period with all staff productively working remotely. The Hull construction site saw a reduction in activity levels, as set out above.

The key mitigating actions have included the Board of Directors, the Senior Management team and other senior and mid-level staff reducing their salaries by 20%. In the UK a number of employees have been furloughed, principally those relating to the Tricoya® project in Hull, given the delay in the construction. We have also applied for compensation for payroll costs in the Netherlands under the NOW scheme, with the quantum of this benefit dependent upon the relative reduction in revenue for the first quarter.

In the short term we have also sought to reduce and minimise other third party costs including sales and marketing and research and development costs. We have also frozen non-essential hires and increased focus on managing working capital.

We have not applied for any government backed Covid-19 related loan schemes or tax deferral schemes as we have not yet believed this to have been necessary.

Outlook – Accoya® sales volumes in April were 43% less than April last year with the UK in particular being impacted. In May we successfully completed our annual maintenance stop. While our distributors continued to operate at a reduced capacity, their customers and Accoya® end-users have not been able to; either finding the restrictive working conditions initially put in place too difficult to achieve or finding that there were shortages of other required raw materials. While most regions have been impacted, the severity has varied; for example, orders from North America and Germany have been more resilient.

More recently, we have seen order levels starting to increase in all regions as government restrictions start to be eased and markets start to reopen. Following the annual maintenance stop, our production levels have increased and we are currently operating all three Accoya® reactors. However it remains too early to conclude when customers and end users will return to their normal working levels or if the broader economic conditions and on-going uncertainty will continue to limit the effective demand in the short term. As a result we are working to stimulate and develop new sales channels and opportunities, with a particular focus on USA and mainland Europe where we also believe there remains significant opportunity to grow our market presence.

Given the relative uncertainty that Covid-19 continues to have, we will carry on adjusting our production levels and minimising costs with the intention of maximising EBITDA, preserving the Group’s liquidity and as much of the capital raised in December 2019 as possible with a view to enabling both the Hull construction and further Arnhem expansion projects to be completed. We anticipate increasing expenditure and investment as our order levels increase again to support our commitment to delivering our sustained strategic objectives.

Looking beyond Covid-19 the long-term opportunity for Accsys remains very positive and it is important to drive new growth opportunities whilst maintaining the momentum of our longer term projects.”

Lifting restrictions

• From 4 July pubs and restaurants will be allowed to open both indoors and outdoors if they put in safety guidelines including table service only. Other businesses allowed to re-open will be: • Hotels, bed and breakfasts, campsites and caravan parks

• Hair salons and barbers, but with visors worn

• Playgrounds, museums, galleries, theme parks, outdoor gyms and arcades, libraries, social clubs and community centres





However, nightclubs, spas, indoor soft play areas, bowling alleys, water parks, indoor gyms, nail bars, swimming pools and water parks will not be able to re-open at this stage.

• The two-metre rule in the UK is to be relaxed to ‘one metre plus’ where 2m is not possible from 4 July.



Other

• Mexico has announced a deal to resume sending temporary farm workers to Canada to help with summer planting and harvesting. Canada relies on about 60,000 temporary migrant labourers – mostly from Latin America and the Caribbean – to help with chronic employment shortages in the agricultural industry.

• Saudi Arabia has banned international visitors from making the Islamic pilgrimage, or Hajj, this year. Only a very limited number of people living in the kingdom may take part.

• Authorities in Lisbon have brought back lockdown measures in a number of the city’s suburban districts. Outdoor gatherings are again limited to ten people, shops must close by 20:00 local time and restaurants must stop serving drinks by the same hour.

• Car sales in Europe will drop by 25% this year, according to the European Automobile Manufacturers Association.


• Donald Trump has extended a ban on Green Cards issued outside the US until the end of the year and added many temporary work visas to the freeze, including the H-1B visas, which permit employers to hire foreign workers with specialised knowledge and are used heavily by technology companies and multinational corporations.

• Tokyo Disney Resort operator Oriental Land said on Tuesday that it will re-open its parks on 1 July, with visitor numbers restricted as a coronavirus countermeasure. Visitors will need to book in advance with temperature checks on entry, enforcement of mask wearing and spaced seating at attractions.

• German authorities are bringing back local lockdown measures in a district in North Rhine-Westphalia after the outbreak linked to the Tönnies meat-packing plant in the Gütersloh district. It is the first return of containment measures since Germany began lifting its lockdown in May.

• France’s StopCovid contact-tracing app has reportedly been downloaded by about 1.9m people, or roughly 2% of the population.

• The World Steel Association has released the global production numbers for May. Global production was down 8.7% at 148.8Mtonnes in May, while ex-China the decline was 24.1%. Ytd global production is down 5.2% while ex-China is down 13.1%. China was up 4.2% in May and is up 1.9% ytd.

• Novak Djokovic has tested positive for Covid-19 following the recent announcements that Croatia’s Borna Coric, Grigor Dimitrov of Bulgaria and Serbia’s Viktor Troicki have all tested positive for the virus. They had all been participating in Djokovic’s Adria Tour exhibition tournament in Croatia, where lockdown measures are gradually being eased.

• The German economy is set to shrink by 6.5% in 2020 according to the German Council of Economic Advisers.

• The Treasury has revealed loans to businesses hit by the coronavirus lockdown have totalled more than £40bn up to 21 June, including £28.1bn in bounceback loans, £10.5bn through the coronavirus business interruption loan scheme (CBILS), £2.1bn in coronavirus large business interruption loan scheme (CLBILS) to larger firms and £236.2m as part of its future fund. The full details are in a Treasury release here.


#corporate client of Peel Hunt