Coronavirus - 25 August 2020


• German economy contracts by 9.7%.

• Schools in Seoul close as cases rise.

• Finnair announces plans to cut 1,000 jobs.

• A patient in the Netherlands and another in Belgium became re-infected.

• 48-hour lockdown is in force across the Gaza Strip.

• School pupils in Scotland to wear face coverings.


 Apax Global – “The economic outlook remains highly uncertain. While countries have begun to rebound as they have reopened from lockdowns, levels of GDP remain well below pre-Covid levels in most economies. The speed of recovery will depend on the evolution of the pandemic, medical interventions, policy responses, and general consumer and business confidence. The recovery is unlikely to be linear and, for most economies, economic activity may not return to pre-Covid levels until 2022.

Valuation levels for equity markets are at elevated levels and generally assume earnings normalise to 2019 levels by 2021. This is somewhat driven by very low bond yields and a lack of attractive liquid investment alternatives indicating that valuations may remain elevated for the foreseeable future.

Valuations will also likely continue to be superior for those companies viewed as better positioned through Covid-19 compared to those which are more impacted or structurally challenged.”

 Arrow Global – “Trading conditions in the first half of 2020 were dominated by the global Covid-19 pandemic. The business started the year strongly before the impact from the global crisis. After outperforming ERC in January and February 2020, cash collections began to be affected by the end of March 2020 and fell to their lowest point in April as the macroeconomic environment deteriorated and the business's ability to operate was significantly restricted due to European lockdowns. Since April, we have seen an improving cash collections trend, with improvements seen throughout Q2 2020. This continued into July 2020, where the business strongly outperformed the reforecast ERC, albeit below the original FY 2019 ERC. Third-party AMS income also remained robust, with performance flat on H1 2019, demonstrating the resilience of the business's capital light cash flows and the early signs of the benefits to AMS from the fund launch. While the improvement seen in the collections environment is positive, it is the Group's view that the macroeconomic environment will continue to have an adverse impact on the operating environment. The Group's reforecast of its ERC, resulting in a non-cash write down to assets on the balance sheet and an operating loss of £108.9 million (H1 2019: £59.0 million operating profit), reflects our assumptions of a gradual recovery in collections over the course of H2 2020 and FY 2021. On this basis, the business anticipates that it will return to profitability in H2 2020, with further improving profitability targeted through a combination of fund deployment, gradually recovering cash collections and cost action by management.

Arrow's operational response to the crisis was strong. Our foremost priority has been to safeguard the health and wellbeing of our colleagues and ensure the continuity of service for customers and clients. Arrow has succeeded on both counts, enabling 100% of its workforce to work from home effectively, maintaining service to clients while also offering customers appropriate levels of forbearance where necessary through an enhancement of our already comprehensive Vulnerable Customer Policy. The Group's policy of offering forbearance to those in financial distress or ill health was expanded by implementing a specific Covid-19 customer support programme enabling us to help customers directly affected by the virus.

The Group's financial response has been proactive. Balance sheet cash has improved by £77.0 million at 30 June 2020 to £165.8 million (31 December 2019: £88.8 million) with decisive action on cost and working capital as well as acceleration of collections to make up for Covid-19 induced collection weakness and reduced portfolio purchases of £42.9 million (H1 2019: £165.6 million). Furthermore, we have raised additional funds after the period end through the execution of a €100 million ABS facility, which is incremental to 30 June 2020 cash headroom of £166.7 million. Finally, we have completed a long-term support agreement with our RCF banks, recognising that short term leverage is likely to increase above covenant levels as the impact of lower collections builds over 12 months (see note 14 for more detail). Taken together, these actions ensure that we can look forward with confidence backed by a strong and highly liquid balance sheet with lender support through to the medium term.

Deployment of capital into attractive market opportunities was limited in the first half as the Group looked to preserve liquidity and assess the market pricing and availability of assets as financial institutions examine the impact of loan losses on their balance sheets. We generated a net IRR of 18% (FY 2019: 17%), seeing the first emerging signs of an improving pricing environment.”


 Catenae – “In order to provide a more comprehensive product offering to cater for the needs of multiple sectors, Catenae has focused on upgrading its Onsite ID app to deliver an enhanced version of the Cov-ID app. Onsite ID allows multiple health and other work-related documents to be filed in a multidocument digital wallet and passport, and can therefore be used across a range of sectors including healthcare, construction and hospitality.

The Company now includes Data Dashboarding as part of the service that it offers its clients. The presentation of data sets within an easy-to-use, instant access dashboard on mobile devices gives business managers the ability to see the health and availability to work status of their workforces and to make fast business decisions ensuring efficient and productive workflows are maintained in the face of Covid-19.”

 Next Fifteen – “Next 15 is pleased to announce that trading has continued to remain resilient over the first half of the financial year and is well ahead of management expectations set in March of this year.

For the six-month period to 31st July 2020, revenues are expected to be up by approximately 6.5% compared with the same period last year to £126m and adjusted profit before tax up by over 16% to at least £20m. This has resulted in an improved overall operating profit margin of above 16%, up from 14.7% last year. The strong performance was driven by our B2B technology focused agencies, such as Activate and Agent3, and more resilient trading than previously anticipated in our brand marketing and creative technology divisions. The overall organic decline in revenues for the period was approximately 6%, though the decline was less severe in the US where organic revenues declined by just 2.5%. Client budget declines were typically related to those industry sectors most affected by Covid-19, whereas sectors such as technology and the digital services we provide have seen increases over previously budgeted spend.

Whilst the group remains cautiously optimistic about trading as we enter the second half of our financial year in what is still a highly uncertain general economic environment, we currently expect results for the year to be materially ahead of current market expectations.”


 DFS# – “We have continued to trade strongly both online and in our showrooms, with year-on-year order intake growth over the last six weeks that is equivalent to c. £70m of revenues. This trading is significantly ahead of our initial expectations and is in addition to our previously announced strong opening order book that will generate a further in year revenue benefit of c£100m.

We believe that this trading performance reflects a combination of consumers currently spending more on their homes relative to other sectors, latent demand caused by the nationwide lockdown and also a strengthening advantage from our hybrid digital and physical retail offering, which is particularly relevant in this consumer environment.

The financial year has started strongly, however we do note that significant uncertainty related to Covid-19 on UK consumer confidence and the potential impact of Brexit exists and it is exceptionally difficult to assess the outlook beyond the short term. While positive trading momentum currently remains we do note that some consumers may be bringing forward spending decisions and this may affect trading later in the financial year.

Notwithstanding these risks, recent trading and our current momentum does increase our earnings resilience and it has significantly strengthened our financial headroom. Furthermore, the Board continues to have confidence that the business is well-positioned to capitalise on opportunities as its markets recover.”


 James Fisher – “The first half of 2020 was one of the most demanding periods the Company has faced, and the commitment, support and engagement of our employees in stepping up to the challenges has been remarkable. The Group responded swiftly to both the unprecedented headwinds presented by Covid19 and the longer-term implications for energy demand by taking actions to reduce costs and protect the Group's liquidity. Whilst the second half is expected to remain challenging and the outlook for our end markets is uncertain, we expect trading to improve through the second half, assuming no material deterioration in the Covid-19 situation. James Fisher is well diversified by geographical sector and end market. The resilience of the Group, our strong liquidity position combined with swift actions taken to reduce costs position James Fisher well for any improvement in market conditions in the second half and beyond. Whilst the financial performance in 2020 will be lower than 2019, the Group remains well placed to deliver future growth to its shareholders.”


• Schools in and around the South Korean capital Seoul have been ordered to switch to online classes as authorities try to tackle an increase in coronavirus cases. The country was widely praised for controlling its initial outbreak but cases linked to a church have caused a new spike in infections.

• The Gaza Strip has imposed an immediate 48-hour curfew after the first locally-transmitted coronavirus infections were recorded. Four members of a family at a refugee camp tested positive.

• Hong Kong scientists have reported the first confirmed case of an apparently healthy patient being re-infected with Covid-19, four months after the first infection.

• Notting Hill Carnival performances will be streamed online to people’s homes.

• The Indonesian island of Bali will not open to foreign tourists again this year because of coronavirus concerns, officials have announced. Authorities in the popular holiday destination had earlier said foreign visitors would be allowed to return from next month, but the plan has been scrapped over concerns about Indonesia's mounting Covid-19 cases.

• The German economy contracted by a record 9.7% in the second quarter as consumer spending, company investments and exports all fell, the statistics office said today. The reading marked a minor upward revision from an earlier estimate for the April-June period of -10.1% that the office had published last month. Consumer spending shrank by 10.9% on the quarter, capital investments by 19.6% and exports by 20.3%, seasonally-adjusted data showed. Construction activity, normally a consistent growth driver for the German economy, fell by 4.2% on the quarter.

• Secondary school pupils in Scotland will be required to wear face coverings in corridors and shared areas from Monday. Education Secretary John Swinney said the new guidance would be updated based on advice from the World Health Organization (WHO).

#corporate client of Peel Hunt