• Marks & Spencer is cutting 7,000 jobs.
• Opening match in French football Ligue 1 postponed.
• Hong Kong: bans flights from India.
• France: face masks mandatory in all shared workplaces.
• Over 90% of cases in Victoria, Australia, linked to one source.
Buildings & Construction
• Northern Bear – “The Group has continued to trade well since publication of the preliminary results on 13 July 2020, with a further increase in site activity levels. The forward order book remains strong and should support a much improved level of operating performance in the coming months. This is, of course, subject to the wider economic climate in which we operate and, in particular, no further major impact on our operations from any resurgence of Covid-19 cases.”
• Persimmon – “Total revenues for the first half of the year were £1.19bn (2019: £1.75bn), with new housing revenues of £1.10bn being 33% lower than the prior period (£1.65bn). The Group completed 4,900 new homes (2019: 7,584) in the first six months at an average selling price of £225,066 (2019: £216,942).
4,029 of the Group's completions (2019: 5,963) were to private owner occupiers at an average selling price of £246,208, an increase of 1.4% (2019: £242,912). 51% of our private completions were across our northern businesses (2019: 56%). The Group’s Persimmon brand completed 3,655 new homes (2019: 5,470) and the Charles Church brand completed 374 homes (2019: 493) in the period.18% of the Group’s new home completions (2019: 21%), at a value of over £110m (2019: over £196m), were delivered to our housing association partners in the first half with an average selling price of £127,266 (2019: £121,413).
The Group’s new housing gross profit for the first half was £345.2m (2019: £555.5m) generating a new housing gross margin of 31.3%1 (2019: 33.8%). The 2.5% reduction in margin includes the impact of delays to both the legal completion of sales and development site build progress, incurred as a result of the operational disruption caused by the Covid-19 response measures. To allow the introduction of new safe operating procedures, the Group began an orderly shutdown of its sites from the end of March with work focused on making all developments safe and secure and completing homes for customers who would otherwise have been left in a vulnerable position.
The total cost impact of this Covid-19 disruption was £11.3m, £9.9m of which is included in the Group’s work in progress balance representing the direct costs and site overheads incurred in completing site development. This treatment is consistent with prior reporting periods under the Group’s accounting policies where we have suffered build delays under various circumstances, for example during instances of particularly bad weather. This consistent treatment is currently estimated to reduce the Group’s future gross margins over the remaining current active site cycle by c.17 basis points. In the ordinary course of business, we will seek to mitigate this future gross margin erosion.
The strength of the Group’s new housing gross margins is supported by high quality consented land holdings with land cost recoveries of 14.1% of housing revenues (2019: 13.9%). At 30 June, the Group’s cost to revenue ratio for its owned land holdings of 70,208 plots (2019: 75,444 plots) was 12.5% (2019: 13.1%).
The Group has seen a c.1% increase in build costs in the period compared with the last six months of 2019. The Group’s off-site manufacturing capabilities mitigate the impact of supply chain and build cost pressures. Tileworks, the Group’s own concrete roof plant, began supplying roof tiles to our sites in March 2020.”
• TBC Bank – “Georgia continues to manage the Covid-19 crisis effectively. The number of new cases remains very low and Georgia has been recognized by the EU as one of 13 epidemiologically safe countries outside the EU. International flights are expected to resume gradually starting from August, though a substantial recovery in tourism inflows is expected only in 2021. At the same time, remittances increased by 17.8% in June and exports have demonstrated much stronger dynamics than expected. The recovery in the domestic demand also appears strong, judging from the June imports rebound and rapid macro and sector indicators such as the increase in consumer spending and remittances. Based on initial estimates, GDP declined by 7.7% in June, while it dropped by 16.6% and 13.5% in April and May, respectively. For the full year 2020, we maintain our earlier projection of around a 4.5-5.5% contraction of the economy and expect it to mostly recover to pre-crises levels in 2021.
Government policies play an important role in mitigating the impact of the crisis. An updated state budget was approved in June with the 2020 deficit planned at 8.5%, mostly financed by additional external borrowings of about USD 1.6 billion. These additional funding would be sufficient even in case the performance of the economy is worse than assumed in the baseline scenario, part of which would be allocated to create a fiscal buffer of around 5% of GDP. Together with the fiscal stimulus, the monetary and the financial sector supervision policies have also been supportive. The NBG has continued to intervene to stabilize the currency rate during the pandemic. In addition, the NBG gradually cut the monetary policy rate to support GEL lending, while keeping a close eye on the inflation rate in the light of current uncertainties. The confidence in the banking system, as well as increasing capital and liquidity levels, continue to support the recovery.”
Food, Drinks & Household
• Tasty – “The Board confirms that the process of significantly reducing the workforce by more than 30% is substantially complete.
The phased reopening schedule has continued, principally to take advantage of the Government’s ‘Eat Out to Help Out’ scheme and reduced VAT. The Board expects to have up to 48 sites trading in August, which will represent approximately 86% of the estate. Most of the remaining restaurants are not planned to re-open for the foreseeable future and some of the restaurants which are currently open may need to close again should they not reach expected trading levels.
The Company has experienced a positive level of sales this month to date, temporarily supported by the increase in people staying in the UK this summer, Government initiatives and pent up demand following the relaxation of lockdown restrictions since March, however, the Board expects future trading to remain challenging.
The Board remains extremely cautious regarding trading in September and is continuing to explore ways to minimise costs and to strengthen the balance sheet including the possibility of new debt and/or equity capital. Discussions are also continuing with landlords and trade creditors to reduce current and future liabilities.”
• TI Fluid Systems – “Global light vehicle production volumes were significantly lower due to the unprecedented impact of Covid-19 with year on year declines of ~20% in China, ~40% in Europe and North America. In light of this growing pandemic, the Group took a number of steps early on to protect and prioritise the safety of our employees, their families and our communities. This response consisted of a global travel ban and the transition to a remote work environment for all applicable staff employees, as well the closing of certain production facilities as our OEM customers closed their assembly plants. The Group also implemented a detailed return to work protocol with enhanced workplace and manufacturing measures such as social distancing, improved hygiene procedures and modified shift patterns. As of 30 June 2020 all of the Group’s production facilities have re-opened.
As the Group communicated in its Q1 2020 Trading Update on 11 May 2020, the current global economic environment remains highly uncertain and the continuing impacts of the Covid-19 pandemic remain unknown, including the outlook for consumer demand adversely impacting global light vehicle production. As a result, the Group will not be providing full year 2020 financial outlook at this time.”
• Gaming Realms# – “Following on from the Group’s trading update on 2 June 2020, the Company is pleased to announce that it has continued to trade ahead of market expectations. Revenues in H1 2020 (the ‘Period’) were £5m (H1 2019: £3.1m) with adjusted EBITDA of approximately £1.2m (H1 2019: Loss of £0.1m).
The performance in the Period is a result of the expansion of our partners internationally and the release of new ‘Slingo’ games, which have had increased take up by consumers.
Whilst the revenue growth in the Period was helped by the impact of Covid-19, trading during the 7 weeks following the Period end, which were post lockdown, have maintained similar levels seen during the Period.”
• BHP Group – “The total impact from Covid-19 on our operations was US$348 million (pre-tax), including an exceptional charge of US$183 million, in the 2020 financial year. This represents the following impacts: lower volumes at our operated assets of US$112 million; temporary shutdowns at our non-operated equity accounted investments (Antamina and Cerrejón) of US$53 million; and additional costs incurred at our operated assets such as temporary relocation costs, screening and hygiene of US$183 million (exceptional item).”
• Angling Direct – “Revenue for the period increased by 21% to £32.1m in the six months ended 31 July 2020 (H1 2020: £26.5). Despite all retail stores being closed between 24 March and 14 June due to government restrictions during the coronavirus lockdown, the Company was very pleased to achieve strong online sales both in the UK and internationally. The Company’s web distribution centre was able to safely operate during lockdown, facilitated by drawing on existing stock levels as well as stock held in closed retail stores. Since restrictions were lifted and all stores safely re-opened on 15 June, sales across all channels have continued to grow strongly, exhibiting growth between 15 June-31 July 2020 of 95%.
Online sales in the period grew by 43% to £17.9m (H1 2020: £12.5m), which alongside continued momentum in the UK, reflected further progression of the Company's native language international web platforms. Sales to Germany grew by 33%, France by 62% and Netherlands by 81%. As the Company continues to focus on expanding more profitable web channels, other international sales, eBay and insurance sales decreased by £0.8m, 36% in total. The number of unique visitors to the Company's UK website increased by 1.3m in the period to 3.7m, with over 70,000 new customers completing a purchase.
Total store sales in the period increased 1.6% to £14.2m (H1 2020: £14m). Like-for-like (L4L) store sales were down by 23% for the period, as a consequence of the unavoidable impact of store closures. However, this has recovered strongly in the period since re-opening, with LFL growth of 75% from 15 June-31 July 2020. Working in accordance with lockdown restrictions, the Company opened three new stores in the period: Warrington (Feb 2020), Bristol (June 2020, with enhanced sea fishing ranges) and Northampton (July 2020), contributing £0.9m to sales.”
• Marks & Spencer Group – “Food business showing good year on year growth.
M&S Food sales have built steadily from the shifts in demand and closure of travel locations at the outset of the crisis. In the last 13 weeks total Food sales have increased 2.5%. In that same period like for like sales excluding the impact of the closure of hospitality and travel franchise units were up 10.6%, with an improving trend as more locations recover and performance has regained momentum as customers have bought back into our quality, fresh food offer and investment in range and trusted value.
The transition to taking over the supply agreement with Ocado Retail is on track for September and we are beginning to see the benefits as planned in the form of trading terms and the launch of over 500 new products in M&S stores from the expanded online range created for the switchover.
We are making good progress in our ‘Vangarde’ supply chain effectiveness programme working with our logistics partner GIST, along with the new ambient food warehouse in Milton Keynes with our partner XPO Logistics.
Clothing & Home significantly down but improving.
Total revenue was down 38.5% in the last 13 weeks. In the 8 weeks since store re-opening total sales have been down 29.9% with trends steadily improving. In those 8 weeks store sales were down 47.9% and online has continued to perform strongly up 39.2% on last year.
The performance of store sales has varied widely across the estate with some of the newer out of town stores trading close to last year’s level of sales overall in recent weeks but legacy town centre stores and some shopping centres still heavily impacted by social distancing and reduced footfall. Furthermore, with the closure of many workplaces and lack of social gatherings, the clothing sales mix has seen a substantial shift from office dressing and formal wear into casual clothing and leisure wear.
Through upweighted promotional activity we have made good progress in clearing surplus stock. As announced at the year-end we have booked additional storage space to hibernate surplus good stock for next year.
Online and digital accelerating
A central plank of our transformation strategy is to deliver a much higher proportion of sales through digital channels and relaunch our data and CRM platform under the Sparks banner. Online Clothing & Home sales have performed strongly since the start of the year with an additional 1.9m new customers. In the last 8 weeks, online sales have represented 41% of our total Clothing & Home sales.
There has been a substantial change in delivery mix, with c.68% of orders delivered to home, compared with 29% the previous year. Growth has been enabled by a robust performance from our Castle Donington distribution centre, where the group has invested in substantial additional capacity.
Following a successful relaunch in July, 8.2m customers are now members of the new Sparks programme and over 800,000 have downloaded the M&S App since launch.
International trends volatile.
International sales have performed ahead of the Covid-19 scenario, primarily driven by strong online sales and an improvement in franchise shipments in recent weeks, although it is too early to know if this will be sustained. Trading in a number of markets has been volatile with the re-imposition of local lockdowns and closures affecting trade.
NEXT STEPS ON STREAMLINING THE BUSINESS
We are today announcing important proposals to further streamline the business both at stores and management level.
As previously outlined Clothing & Home trading in the stores remains well below last year, with online and home delivery strong. It is clear that there has been a material shift in trade and whilst it is too early to predict with precision where a new post Covid sales mix will settle, we must act now to reflect this change.
We have also learnt that we can work more flexibly and productively with more colleagues multi-tasking and transitioning between Food and Clothing & Home. The deployment of our leading store technology package developed in partnership with Microsoft has also enabled us to reduce layers of management and overheads in the support office.
As a result we are today embarking on a multi-level consultation programme which we anticipate will result in a reduction of c.7,000 roles over the next 3 months. These will include departures in our central support centre, in regional management, and in our UK stores, reflecting the fact that the change has been felt throughout the business.
We expect a significant proportion will be through voluntary departures and early retirement. In line with our longstanding value of treating our people well, we will now begin an extensive programme of communication with colleagues.
Concurrently we expect to create a number of new jobs as we invest in online fulfilment and the new ambient food warehouse and reshape our store portfolio over the course of the year.
The cost of the programme including redundancies will be reflected in a significant adjusting item to be included in the group's half-year results. The streamlining programme is an important step in delivering on our cost savings programme and ensuring we emerge from the crisis with a lower cost base and a stronger more resilient business.”
• Sosander – “We are delighted to report revenue for the year of £9m up 103% year on year. Our customer base continues to be very engaged with the brand demonstrating the ongoing strength of our products across the entire range, with repeat orders up 144% and active customer base up 111%. Supported by our marketing strategy, the period saw continued growth in customer numbers with new customers up 67% and orders up 108%. Returns remained flat at 50%.”
• Capita – “This has been a challenging six months for Capita. We began 2020 with expectations of improving the business further, delivering modest growth (halting three years of revenue decline) and significantly increasing adjusted free cash flow, although with lower adjusted profit than 2019. The first quarter, up until the impact of Covid-19, was in line with our expectations.
However, since then we have had to respond to the impact of Covid-19. We reacted early and our strong programmatic response has enabled us to focus on our colleagues’ wellbeing and client service delivery and reflects the resilience of much of the outsourced services work that we do. Robust cost and cash saving initiatives have partly mitigated the negative impact; these have only been possible due to the actions we have taken over the past two years to simplify and strengthen the organisation.
Whilst we have met our debt covenants at the half year, the pandemic has also amplified financial challenges, in particular to our balance sheet at a time when we were planning to reduce risk through improving cash from trading operations, an intended bond issuance and the disposal of a large part of our Specialist Services division. We repaid £163m to our noteholders in June and will repay another £56m in September.
We have scheduled debt repayments of around £500m between 1 July 2020 and 31 December 2022. Proceeds from non-core disposals, including standalone software products which do not align to our core digital BPO services, will be used to support these payments and to manage our pension liabilities. If market conditions allow, we will also look to push our maturities out by raising new debt.
We expect the majority of our revenue to remain resilient, given the client base and the long-term nature of our contracts. Based on expectations of a slow economic recovery throughout the next six months and ongoing challenges to our ability to win transactional work, our current expectation is that revenue in the second half is flat to slightly down on H1.
We will continue our transformation cost savings programme to address revenue decline and target to increase margins. We expect these sustainable cost savings, alongside the short-term cost preservation action, to benefit the second half of 2020, alongside the reversal of the holiday pay accrual.”
• Wood (John) Group – “Revenue demonstrates relative resilience, reflecting breadth of Energy and Built Environment market exposure.
We are benefitting from the advanced stage of our strategy to broaden our end market exposure across Energy and the Built Environment. We have seen relative resilience in the c65% of our end market revenue which is derived from chemicals & downstream (c25%), renewables and other energy (c25%) and the built environment (c15%). Significant volatility in oil price has presented challenges in upstream and midstream oil & gas in terms of lower activity which now represents only c35% of our activity (H1 2019: c40%).
Revenue of $4.1bn was down 14.7% on 2019. On a like for like basis, adjusting for the disposals of the nuclear and industrial services businesses in Q1 2020, first half revenues were down 11.5%. Revenue included increased renewables activity which, as a proportion of total revenue, contributed an additional 5% compared to H1 2019. Relatively robust activity in chemicals & downstream and the built environment market helped offset lower upstream & midstream activity, which was down c5% as a proportion of total revenue compared to H1 2019. Reflecting the timing of macro challenges, the fall in H1 revenues was heavily weighted to the second quarter; Q2 revenue of $1.9bn was c10% lower than Q1.”
• UK retail sales volumes rose 12% in May compared with April, according to the Office for National Statistics (ONS). Sales were still down by 13.1% on February. Non-food stores saw the biggest jump in sales – up 42%.
• People in their 20s, 30s and 40s, unaware they are infected, are driving the spread of coronavirus, the World Health Organization (WHO) has warned. The proportion of young people with Covid-19 has risen, officials said, putting the lives of those who are more vulnerable at risk if people socialise without realising they are carrying the virus.
• France is to make wearing masks in all “shared and enclosed” workplaces compulsory.
• Health Secretary Matt Hancock has announced a new National Institute for Health Protection for England, to protect the public from external threats to health including biological weapons, pandemics and other infectious diseases. The body will merge some of the work of Public Health England with the NHS Test and Trace programme.
• Luxembourg has begun offering free coronavirus tests to all returning holidaymakers.
• The number of adults in Great Britain experiencing depression has doubled during the coronavirus pandemic, according to the Office for National Statistics. 19.2% of the 3,500 participants in the survey experienced depression in June, almost double the 9.7% of the group who had symptoms of depression in the nine months to March.
• The sale of some commonly used medicines will be restricted in Finland in order to ensure enough availability during the next predicted coronavirus wave, the health ministry announced today.
• In Australia, 90% of the Covid-19 cases in Victoria can be traced back to a single family that returned to Australia in mid-May who were kept in hotel quarantine an inquiry has heard.
• Hong Kong has banned flights from India due to rising Covid-19 cases.
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