Coronavirus - Shutting the stable door
12 March 2020
Last night the US restricted travel to all EU Schengen area countries. Given the proliferation of the disease across the US, this measure is likely to have minimal success in reducing its spread. In Europe, several countries are shutting schools and banning mass gatherings as governments begin delay phases. While this won’t eliminate the virus, it could reduce the peak of the disease and push it back to summer when health services are better positioned to cope. These delay phases could be vital given the NHS is expecting a ‘several-fold’ increase in intensive care capacity requirements, according to NHS England’s strategic incident director.
Cases - 7,241 Deaths - 331
Cases - 126,394 Deaths - 4,627
Countries - 122
#Corporate client of Peel Hunt
• Trainline – The trading environment has become more challenging in recent weeks. Trading softened significantly in Italy in February following an increased number of COVID-19 cases and demand has since weakened across the rest of International. UK demand has remained more resilient, although growth has slowed particularly from inbound travellers. The COVID-19 situation continues to evolve and at this time its ongoing impact is difficult to fully assess. As you would expect, the group is monitoring the situation closely and will continue to take mitigating actions as appropriate.
• Finablr – “Is currently taking urgent steps to assess accurately its current liquidity and cash flow position, which has been adversely impacted by a number of factors: travel restrictions imposed to limit the spread of COVID-19, which have reduced demand for its foreign exchange and payment services and has restricted the movement of physical currencies that the company needs to operate its businesses; the recent credit downgrade of Travelex's bonds; a liquidity squeeze at both group and operational business level; and adverse perceptions in the market that the circumstances surrounding NMC Health PLC are relevant to Finablr, which have exacerbated current levels of stress on the company's cash flow position. These factors place significant constraints on the company's access to the daily liquidity the company needs to manage its business effectively and its ability to negotiate longer-term financing. Due to the fast-moving nature of the events and circumstances referred to above, the company is urgently seeking to complete its assessment of its liquidity and cash flow position and negotiate the steps that are necessary to address its short- and longer-term financing needs.”
• WH Smith – “Asia Pacific, which accounts for approximately 5% of travel's revenue, we have seen a significant impact on the business since February. In addition, over the last two weeks, the group has started to see a material reduction in passenger numbers at airports outside of Asia Pacific in the UK (approximately 60% of Travel's revenue), the US (approximately 25% of travel's revenue) and in Europe. The group is managing the business to protect profitability and is taking all necessary action to reduce costs. Based on current trading and modelling, the group believes that the effects of COVID-19 will result in a reduction in our expectations for revenue and profit across the travel business for the second half. Today, the company is therefore providing guidance on the impact on full-year results of COVID-19 based on an assumption of a challenging third quarter and a modest normalisation in the fourth quarter. For UK travel, we expect revenue for the six months to be down approximately 15% on expectations, which includes airports, our most affected channel, down 35% in March and April. On the same basis, including significant reductions in March and April, second-half revenue in the US is expected to be approximately 20% lower than our expectations. The rest of our International business is also expected to be approximately 20% lower. Clearly, the position is evolving fast and the group will provide a further update at its interim results on 22 April 2020. While the group is currently not seeing a significant impact on its High Street business, it recognises that COVID-19 could result in reduced high street footfall. As a result, the group currently estimates an adverse impact in the financial year ending 31 August 2020 of between £100m and £130m on the group's revenue and between £30m and £40m on underlying group profit before tax.”
• Cineworld – “We have not observed any material impact on our movie theatre admissions due to COVID-19 . . . we continue to see good levels of admissions in all our territories. Although the release of the new Bond movie has been postponed . . . studios have advised us that in the countries in which we operate, they currently remain committed to their release schedule for the coming months and remainder of the year. In the downside scenario analysis performed, the board has considered the potential impact of the COVID-19 outbreak on the group's results. In preparing this analysis, the following key assumptions were used: the impact of a total loss of revenue across the enlarged estate for between one and three months, no fixed costs reductions should sites be closed, run-rate combination benefits of c$133m expected to be achieved as part of the Cineplex acquisition, forecast capital expenditure reduced in 2020 by 90%, and cessation of dividend payments from 1 July 2020. This analysis does not take account of the fact that in the case of widespread site closures the films scheduled to be released during this period of closure could be moved to later in 2020. These downside scenarios are currently considered unlikely, however it is difficult to predict the overall outcome and impact of COVID-19 at this stage. Under the specific downside scenario, however, of the group losing the equivalent of between two and three months' total revenue across the entire estate, there is a risk of breaching the group's financial covenants, unless a waiver agreement is reached with the required majority of lenders within the going concern period.”
• Berkeley – “Proposed £455 million increase in shareholder returns to be postponed until there is greater clarity of the operational impact of coronavirus (COVID-19) on UK economic activity . . . Today's announcement is made in the context of the current increased macro uncertainty, which has been uniquely impacted by the global spread of coronavirus. While there has been no noticeable impact on Berkeley's business to date, the ultimate impact on UK business is unknown. There is no recent historic precedent and for this reason it is absolutely right for any responsible business to approach the next six months with a reduced risk appetite and heightened sense of caution.”
• Novacyt – “Due to the high level of interest in the Primerdesign COVID-19 test and evolving nature of this outbreak, the company cannot predict sales with any certainty as the pipeline continues to change daily. However, it is clear that the demand for, and interest in, the company's tests remains very high and the directors’ key focus is on ensuring Primerdesign can service the demand from as many customers as possible.”
• Foxconn – Resumption of production at Chinese factories is “exceeding expectations”.
• Go-Ahead# – “In recent weeks, passenger revenue has been impacted by reduced travel due to adverse weather. We also believe coronavirus has affected travel on some of our services, particularly impacting areas most exposed to tourism. While it is unclear how the coronavirus situation will evolve in the coming weeks, travel patterns are likely to be impacted in the second-half of the year.”
• Funding Circle – “Trading for the year has started well. We continue to assess the possible impact of COVID-19 on borrowers and investors. We have not seen an impact of the virus on recent trading, but we are monitoring the situation closely.”
• Eurofins (leader in testing and laboratory services) – “Announces that two of its clinical diagnostic testing laboratories in the United States now offer testing or evaluation of COVID-19”.
• Ikea – Temporarily closing all 21 stores and two shopping centres in Italy.
• Azul (Brazilian airline) – Reducing international capacity by 20-30%. Suspending new deliveries of aircraft. The company has also suspended its earnings guidance for 2020.
• LV Insurance – “In light of the impact that coronavirus (COVID-19) is having globally, we’ve made the difficult decision to pause the sale of travel insurance to new customers. We considered a number of options, such as excluding cover or increasing prices for new customers, but we believe temporarily pausing the sale of new policies and focusing on our existing customers is the right decision.”
• Carnival Princess Cruises – Will suspend all operations for two months, affecting all of its 18 vessels.
• SAS – CEO has said there has been double-digit percentage fall in bookings.
• Accor Hotels – Has seen a strong acceleration of decline in the activity across Europe. The net decline in activity due to COVID-19 has had a €20m impact on EBITDA.
• Burford Capital – The company is anticipating a delay in the release of its fiscal year results by two-to-three weeks. The company has also closed its New York office.
• New York has postponed its annual St Patrick's Day parade.
• NBA suspends its season after a player tested positive.
• La Liga football competition has suspended all matches for two weeks.
• The ATP has announced a six-week suspension of the men’s professional tennis tour including ATP Tour and ATP Challenger Tour events.
• Miami Open tennis tournament has been suspended.
• Norway’s armed forces have cancelled a NATO exercise involving soldiers from nine countries because of the spread of coronavirus.
• Russian Space Agency and European Space Agency postpone launch of Mars research mission until 2022.
• Boys Scouts’ Essex International Jamboree has been cancelled. The event due to take place in early August expected 9,000 participants from across the world.
• Series Mania, a leading European festival featuring upcoming streaming and TV series, due to take place in the northern French city of Lille on 20 March has been cancelled.
• Fallas festival in Valencia has been postponed.
• MLS, the US soccer league has suspended its season.
• US announced travel restrictions to Europe. The ban applies to travellers from countries that are members of the Schengen border-free travel area affecting 26 countries. The UK and Ireland are exempt.
• A “containment area” has been ordered for New Rochelle. Schools and other buildings in the city, the centre of the state’s outbreak, will be shut, and the National Guard will help distribute food and clean.
• India has announced it will suspend most visas until 15 April. A minimum 14-day quarantine has also been announced for all incoming travellers – including Indian nationals – arriving from or having visited China, Italy, Iran, South Korea, France, Spain and Germany after 15 February.
• Italy has increased the restrictions in place, closing nearly all shops, bars, hairdressers, restaurants and cafes until 25 March. Pharmacies and supermarkets are exempt.
• Denmark has shut all schools and universities for two weeks. It took the decision after a sharp rise in cases, with 514 now confirmed.
• Republic of Ireland closes all schools, colleges and other public facilities. Further, indoor public gatherings of more than 100 people and outdoor gatherings of more than 500 people will be cancelled.
• Norway closes all schools and kindergartens.
• La Liga football competition has suspended all matches for two weeks.
• UN human rights council suspends sessions from Friday until further notice.
• Singapore is closing all mosques for at least five days for deep cleaning.
• Amazon workers will be able to take unlimited sick days this month – but will not be paid unless they test positive for the new coronavirus.
• Disney pulls the red carpet event for Mulan premiere.
• Slovenia – All educational institutions will close and those forced to stay at home will be paid 80 percent of their salary.
• Lithuania closing all schools, universities and kindergartens for two weeks.
• Tom Hanks and his wife, actress Rita Wilson, have tested positive for coronavirus in Australia.
• Slovakia is closing its borders to non-residents and shutting down international airports to prevent travel to and from the country.
• Frankfurt airport – Passenger numbers down 40% in the first week of March.
• The Philippines has locked-down its capital Manila. Cancelled domestic land sea and air travel to and from the city. Bans on mass gatherings and a month of school closures.
• Justin Trudeau is self-isolating after his wife suffers symptoms.