• Face masks to be mandatory across Paris as R number rises to 1.4.
• South Korea central bank cuts its growth outlook to -1%.
• Obesity increases risk of Covid-19 death by 48%, study finds.
• 1.3m air passengers arrived in the UK in July, down 89% on July 2019.
Buildings & Construction
• Grafton – “The outlook for the Group’s businesses remains uncertain due to the unprecedented situation caused by the Covid-19 pandemic. It is likely that Governments and health authorities will require some social distancing and other measures to remain in place for some time, including possible local or national lockdowns which may be reintroduced from time to time, impacting sentiment, trading and the broader economic environment over the remainder of the year.
The reopening of the UK economy and relaxation of social distancing measures has seen a recovery in the Group’s UK distribution and mortar manufacturing businesses in May and June that was sustained in July and August. The gradual recovery in housebuilding is expected to continue but will remain sensitive to the confidence of households to make long-term commitments of this nature, employment prospects after the furlough scheme ends and the availability of mortgage finance.
The recovery in the UK housing RMI market is likely to have benefitted from pent-up demand and an increase in household savings during the lockdown. RMI spending over the remainder of the year will be influenced by consumer sentiment at a time of significant uncertainty and the willingness of households to undertake indoor projects due to concerns about social distancing.
In Ireland, although economic activity remains below pre-Covid-19 levels, the Chadwicks and Woodie’s businesses have in recent months outperformed the prior year. The near-term prospects remain favourable but are sensitive to the possible reintroduction of containment measures that may be needed to control the spread of the virus and the associated impact on unemployment, consumer confidence and spending over the coming months.
In the Netherlands, measures to control Covid-19, a decline in exports and a moderation in household spending are likely to temper demand in the Isero and Polvo businesses over the remainder of the year. The Polvo acquisition made over a year ago provides an opportunity to continue to realise integration benefits in the enlarged business.
Average daily like-for-like Group revenue increased by 3.8 per cent in the period from 1 July to 16 August. This comprises a decline of 0.7 per cent in UK Distribution, an increase of 11.6 per cent in Irish Distribution, a decline of 1.3 per cent in the Netherlands Distribution, an increase of 35.6 per cent in Retailing and a decline of 12.3 per cent in Manufacturing.
We are very encouraged by the performance of the Group in recent months as it emerged in a strong position from the Covid-19 lockdown but we remain cautious about revenue trends in our markets over the remainder of the year. Based on current trends the Group should deliver a similar level of adjusted operating profit in the second half to the comparable period last year.”
• OneSavings Bank – “When market activity was subdued at the peak of lockdown, we concentrated on progressing existing applications for our customers where we had an existing physical valuation and flexed our operations ensuring that resources were deployed to support customers, including those who wished to take a payment holiday. We quickly adjusted lending criteria, including maximum loan sizes and LTVs, for new business to match our appetite for risk and lending volumes, given the uncertainty surrounding the outlook for house prices, employment levels and economic growth.
When lockdown restrictions began to ease and the mortgage market started to operate effectively once again, we took the opportunity to undertake a controlled increase of business volumes in our core Buy-to-Let and Residential market sub-segments. Our recently introduced product range continues to reflect the Group’s prudent risk appetite. We are encouraged by the volumes and quality of new applications we are seeing for our core products, despite tighter lending criteria and have taken the opportunity to increase asset pricing for those products. We have reduced lending growth in our other market subsegments; commercial business, bridging, development finance, funding lines and second charge, given the greater dependence these businesses have on the macroeconomic cycle. Overall, across all products, application levels are currently approaching 60% of their pre-Covid-19 levels.
Mortgage originations for the Group were £2.1bn for the first six months of 2020, down from £3.1bn on a pro forma underlying basis in the same period last year, reflecting the reduction in lending and applications during lockdown in all segments, following strong activity in the first quarter of 2020.
The Group’s underlying net loan book increased by 2% in the first half of 2020 to £18.5bn, after removing the impact of acquisition-related adjustments. The underlying net loan book would have increased by 7%, excluding the impact of structured asset sales that took place at the beginning of the year. On a statutory basis, net loans grew by 2% to £18.8bn from £18.4bn at the end of 2019.”
• Diploma – “The Group prudently took part in the UK government ’s Job Retention Scheme given the highly uncertain market outlook at the outset of the crisis. However, by the end of June all furloughed colleagues had returned to work. In light of the resilience of the Group’s performance through the crisis, we have now repaid all UK government support funds.
The Group has delivered a resilient trading performance and adjusted operating profit for the full year is expected to be in line with market expectations. The Group ’s third quarter, running from April to June 2020, was impacted by the Covid -19 crisis with revenues down 12% on a reported basis and down 21% on an underlying basis. Performance started to recover in June and has continued into the fourth quarter, with revenues steadily improving in July, down 4% on a reported basis and down 10% on an underlying basis.”
• Rolls Royce – “Although we started the year with positive momentum, the global Covid -19 pandemic severely impacted our H1 performance and medium -term forecasts. The most pronounced effect was seen in Civil Aerospace with large engine deliveries and flying hours both down around 50% in H1 including a 75% reduction in engine flying hours in Q2, however business jets and regional flying hours were more resilient. In Power Systems, which was less severely impacted than Civil Aerospace, industrial markets were suppressed, economic disruption and lower utilisation impacted demand for services while government marine was stable. Defence remained resilient with no material impact on results from the pandemic and delivered strong profit growth. ITP Aero was impacted by the same adverse industry trends as Civil Aerospace.
Underlying results: The £(3.2)bn underlying loss before tax primarily reflected the impact of Covid -19 on Civil Aerospace with lower aftermarket profit, under utilisation of operations, lower spare engine sales as well as £1.2bn of Covid -19 related contract catch -ups and one -time charges resulting from a reduction in forecast flying hours, a reassessment of the timing and parking of aircraft and the viability of airlines. Lower expected US$ receipts over the next seven years resulted in a £(1.46)bn underlying finance charge as we took the necessary decision to reduce the size of our hedge book by $10.3bn. In addition, we were net purchasers of US$ in H1 2020 and therefore unable to utilise our hedge book in the period. This resulted in the translation of our H1 2020 results at an effective GBP:US$ rate of 1.24. This compared to an effective GBP:US$ rate of 1.53 in H1 2019, when we utilised our hedge book to sell excess US$.
Reported results: Our reported results were further impacted by £(1.1)bn impairment charges and write -offs, £(0.4)bn exceptional restructuring charges and adverse FX fluctuations leading to a £(2.6)bn negative movement on the mark -to -market of the hedge book, partly offset by £0.5bn improvements in the expected in -service costs of Trent 1000 durability issues, which were all a consequence of Covid -19.
In response to the sudden market deterioration, we executed a number of specific mitigations to reduce our cash expenditure with an expected cash flow benefit of at least £1bn in 2020, of which approximately £350m was achieved in H1. These mitigations include minimising discretionary expenditure such as non -critical capital expenditure projects, reducing consulting spend, professional fees and sub -contractor costs and reducing salary costs across our global workforce including a 20% reduction for senior managers and executives. In addition, we launched a major restructuring of our Group, in particular our Civil Aerospace business, to remove at least 9,000 roles with forecast annualised pre-tax savings of over £1.3bn by the end of 2022. This, together with the expected recovery in engine flying hours, underpins our targeted recovery to positive free cash flow during H2 2021.
Throughout the pandemic we have worked hard to safeguard our people while ensuring our operations have been able to continue. We have implemented measures to protect against the spread of the virus at our sites around the world and increased our focus on employee mental health and wellbeing. Furthermore, we have been providing practical assistance to aid the recovery for the countries and communities in which we operate. This included launching the Emergent Alliance, a global community with more than 140 members that is using data analytics to assist the global economic recovery.
The Board decided that given the uncertain macro outlook they would no longer be recommending a final shareholder payment of 7.1 pence per share in respect of 2019, resulting in cash savings equivalent to £137m. For the same reasons, the Board has not approved an interim shareholder payment for 2020.”
• Carnival – “Carnival Cruise Line said today that in light of continuing Australian travel restrictions, it is extending its pause in departures from Australia through 2 December 2020 for Carnival Spirit and Carnival Splendor.
P&O Cruises Australia is extending its rolling pause in operations from Australia to 2 December this year as the cruise line continues to take guidance from authorities, public health experts and society on restarting sailing.
Due to the continued progression of Covid-19 and related decisions of various governments, health authorities, and airlines regarding travel restrictions, Princess Cruises is extending its pause in cruise operations in Australia through December 12, 2020 which includes cruises throughout Australia and New Zealand.”
• Flutter Entertainment – “The second half of the year has started well, benefitting from condensed football fixtures, favourable sports results and the ongoing resilience of gaming. However the outlook remains highly uncertain, due to potential further Covid-19 related disruption and potential regulatory change in various markets. Assuming normalised net revenue margins for the remainder of the year, no material additional disruption to sporting events and no further shutdown of retail operations, we anticipate that 2020 pro forma Adjusted EBITDA will be:
Between £1,175m and £1,325m for Group ex-US, reflecting an additional £50m marketing investment in H2 over H1 and the cost of the enhanced RG/AML measures introduced in PokerStars.
An EBITDA loss of £140-160m in the US, assuming online launches in Tennessee and Michigan in H2 and the continuation of mobile registration in Illinois for the full remainder of the half. Should mobile registration be restricted at some point, the loss will likely be closer to the £140m end of the range.
Based on a mid-range EBITDA outcome, the Group’s leverage ratio is expected to be circa 2.5-2.8x at year-end, reflecting additional investment in H2. We are very pleased with the progress achieved in H1 and we are excited about the opportunities we see for the business in H2 and beyond. ”
• M&C Saatchi – “Further to the announcement on 28 July 2020, we are pleased to announce that the Group has continued to trade well and profitably in the opening few weeks of the second half of 2020. New business remains strong and since the last update, we have been appointed by the ONS in the UK to handle the National Census to be conducted in 2021, launched both the new season English Premier League on behalf of Coca Cola and UEFA Champions League for Heineken and launched Open House a virtual training programme to accelerate the industry's ambitions to attract more diverse talent. ”
• WPP – “As a result of the significant restrictions on many aspects of economic activity, GroupM now forecasts that the global advertising economy will decline by 11.8% in 2020, after growth of 6.2% in 2019. Within this, spend on digital media is expected to increase to 54% of total spend in 2020, from 48% in 2019, as the impact of Covid -19 accelerates an underlying structural trend. As consumers increased their time at home, we generally saw heightened levels of consumption of media and a rapid expansion of ecommerce activity. As a result, businesses are looking to grow their ecommerce and multi -channel capabilities.
More specifically, TV and video consumption has grown rapidly, driven by on -demand and streaming services. Consumers have also needed to change their shopping patterns, with ecommerce surging, finding new adopters and penetrating new categories. On the other hand, media spend on outdoor, cinema and print has suffered materially.
Activity and spend trends by geography have for the most part been driven by the closing and re -opening of economies. Based on GroupM forecasts, China is expected to see only a 2.8% decline in the advertising market this year, reflecting its strong underlying economic growth and a rapid and successful response to the pandemic. Major markets in Europe, on the other hand, are forecast to decline 10 -20% given the more sustained lockdowns and lower underlying growth. The USA is expected to decline 7.5%, or -12.9% excluding political spend.
In terms of sectors, marketing spend from consumer packaged goods, technology and pharmaceuticals businesses (56% of WPP's revenue less pass - through costs in the first half) has held up relatively well as demand for their services has been less impacted or in some cases significantly enhanced. Automotive, luxury, travel and leisure businesses (22% of revenue less pass - through costs) have been understandably the hardest hit and this in turn has been reflected in their marketing spend.
The significant majority of our people have been working remotely since March, with some recent re -opening of offices at reduced capacity in certain countries, involving very strict hygiene and social distancing protocols. As outlined above, we have ensured strong continuity of service to clients at a time when the need for our services and expertise has been greater than ever.
The latest level of office -based working in our main markets is as follows: US 1%, UK 3%, Germany 17%, China 77% and India 0%.
We have continued to work with clients, governments, national health organisations and NGOs to help limit the impact of Covid -19 on society, including our multi-agency support for the World Health Organization on a pro bono basis, delivering global and regional public awareness campaigns to encourage people to stay at home and adopt safe behaviours.”
• Hunting – “Hunting's performance for Q1 2020 was in line with management’s expectations. The impact of Covid-19 and the actions of the OPEC+ group in late Q1 2020 led to the material decline in the global oil price, which has devastated the industry, firstly within the US onshore market, but followed by the weakening of US offshore and international markets. The asset impairments reported, while significant, reflect similar adjustments reported elsewhere in the energy industry. We continue to manage those business inputs that are in our control, which include tight controls over our cost-base, cash flows and inventories, all of which continue to move in the right direction.
The outlook for the remainder of the year remains uncertain, as Covid-19 prevention measures continue to change daily. However, enquiry levels have improved with the increasing average oil price and areas of the US onshore market indicate that the mid-point of the year could have been the bottom of the cycle, with cautious steps being taken by our clients to incrementally restart operations. Management anticipates an improving Q4 2020, subject to the impact of the pandemic remaining materially unchanged from the current position.”
• FRP Advisory – “For many businesses across the UK, their resilience was, and continues to be, tested as the country went into lockdown to manage the impact of the global pandemic. There remains a significant degree of uncertainty around the shape and scale of economic recovery, combined with potential additional pressure as the Brexit transitional agreement comes to an end in 2020.
The support measures made available to both firms and individuals by the UK Government in response to Covid-19 has reduced the number of appointments in our financial Q1 compared to prior year. Despite this, trading for the period since year end has been in line with expectations and we remain confident of making further progress in the current year. We have maintained steady growth and utlilisation rates by continuing to secure larger projects and market share, while sharing resources across our office network.
In a recessionary environment, there will naturally be higher levels of corporate financial distress, which depending on a number of factors - such as creditors' attitudes to forbearance – have historically led to an increase in insolvency volumes. We believe there should be an increase in restructuring assignments at all levels across the business community as the various UK government support mechanisms are phased out and the impact of Brexit is also felt across the wider economy when the current transitional agreement concludes.”
• Macfarlane Group – “Macfarlane Group has achieved a resilient performance in the first half of 2020 despite the challenging market conditions due to the impact of Covid-19. The Board recognises this achievement is a testament to the exceptional contribution of our employees and wishes to take this opportunity to publicly thank the whole Macfarlane team for their hard work and commitment. All our sites have remained open and trading throughout, albeit adjusted to service reduced demand, with social distancing and hygiene measures in place to protect the health, safety and well -being of our staff and our customers. In addition, the majority of our office -based staff have been working successfully from home in accordance with our home working protocols.
Macfarlane Group sales decreased by 1.8% to £105.6m in the first half of 2020 (2019: £107.5m). Despite the impact of Covid -19 in the second quarter, our sales performance has been robust with the first half sales reduction versus the prior year comprising a 1.6% increase in sales in Q1 followed by a 5.2% fall in Q2. Profit before tax in the first half, at £3.6m, was 5.5% lower than in 2019 (2019: £3.8m) this excludes any benefit received from government support programmes as these have now been repaid. Incremental costs of £0.2m were incurred in the first half of the year as a direct consequence of Covid -19.
Packaging Distribution sales decreased by 1.7% in the first half of 2020 compared with 2019. Sales increased by 3.0% in Q1 and decreased by 6.3% in Q2 compared to the equivalent periods in 2019. Sales revenue was impacted by weaker demand from the automotive and high street retail sectors, although this was partially offset by underlying strength in the e - commerce, household and medical sectors. First half sales also benefited from the 2019 acquisitions as well as the January 2020 acquisition of the packaging trade and assets of Armagrip Limited (‘Armagrip ’). First half operating profit in Packaging Distribution of £4.0m was £0.4m below the equivalent period in 2019.
Sales in our Manufacturing Operations were 5.8% below 2019, with Q1 sales decreasing by 8.7% and Q2 sales falling by 2.9%. Strong demand from the food, medical and household essentials sectors in the Labels business, particularly in the second quarter, was more than offset by weaker demand from the aerospace and automotive sectors in the Packaging Design and Manufacture business. First half operating profit of £0.2m in our Manufacturing Operations was £0.2m below that achieved in 2019.”
• Hays – “As at 30 June 2020, Hays had c.10,400 employees in 266 offices in 33 countries. In many of our global markets, the vast majority of professional and skilled recruitment is still done in -house, with minimal outsourcing to recruitment agencies, which presents substantial long -term structural growth opportunities. This has been a key driver of the diversification and internationalisation of the Group, with the International business representing c.77% of the Group's net fees in FY20, compared with 25% in 2005.
Our 6,900 consultants work in a broad range of sectors covering 20 professional and skilled recruitment specialisms, and during FY20 our three largest specialisms of IT (25% of Group net fees). Accountancy & Finance (15%) and Construction & Property (12%) together represented 52% of Group net fees.
In addition to our international and sectoral diversification, in FY20 the Group ’s net fees were generated 59% from temporary and 41% from permanent placement markets, and this balance gives our business model relative resilience. This well -diversified business model continues to be a key driver of the Group's financial performance.
The macroeconomic backdrop deteriorated through the first half of the year, impacted by weaker conditions in many of our main markets and a slowdown in activity in Germany, especially in the Automotive sector. Additionally, specific events (the UK General Election, bushfires in Australia and general strikes in France) further negatively impacted fees in our second quarter. In the second half, our markets were severely impacted by the unprecedented effects of the Covid-19 pandemic. The severity of each country’s lockdown arrangements directly influenced our fee performance, with Australia and the USA less impacted than most European markets.
Net fees decreased by 11% on a like-for-like basis, or £126.9 million (down 12% on an actual basis). Our Temp business, 59% of Group net fees, fell by 9% and Perm by 15%. The fall in net fees after the pandemic hit was similar in magnitude to our experience in the Global Financial Crisis (GFC), however it occurred in only six weeks versus eight months in the GFC as fees fell by 34% in Q4 FY20.
As at 30 June, c.85% of our non-UK offices and 59% of our total offices were open and operating under a hybrid model of home and office working. As at 25 August, the Group percentage had increased to c.80%, with the increase due to more UK offices reopening.”
• GETECH Group – “The H2 2020 business environment remains challenging for almost all businesses globally, and despite a significant, but partial, recovery in oil prices, customer confidence remains fragile.
Getech has responded to this environment by expanding the Group’s digital marketing campaigns and redoubling the focus on its customers’ most pressing needs. This has been rewarded with both annual and multi-year product licence renewals, as well as the addition of new Globe and software customers in both H1 and already in H2 2020. Balancing this, some existing licence discussions have become more drawn out, and Getech is focused on concluding these before year-end. The Group’s data assets continue to sell but customer budgets during the period have been pared back to essential needs.”
• Sopheon – “Since our last trading update in May, we have seen some increase in customer non-renewal notices or user reduction notices, and our annual recurring revenue (‘ARR’) retention rate now stands at approximately 94 percent on a gross basis. In our view this is a respectable outcome in light of the Covid situation. Reasons for non-renewal included budget cuts and M&A. We have more than offset this with new orders, adding $1.5m in new ARR since the start of the year. This means our ARR now stands at $16.5m compared to $15.9m at the start of this year and $15.3m last June. Our net promoter score – a measure of customer satisfaction – remains steady at 40 based on year to date surveys, considered a high score for B2B. We draw a dual conclusion from these data points – our customer base is not immune to the difficulties faced by the broader market, however our solutions remain highly valuable to new and existing customers through the recent turbulent conditions.”
• Around 1.3m passengers arrived in the UK by air in July, according to figures published by the Home Office. This was higher than the average for April, May and June when there were fewer than 200,000 arrivals by air each month, but 89% lower than the total of 11.1m in July 2019.
• France has recorded 5,429 new cases in 24 hours – the highest number since the mass rollout of Covid testing.
• Swiss infections reached their highest number since April. The city with the biggest problem is Zurich. Face coverings in the city's clubs are being made compulsory for parties with more than 100 people under the slogan "no mask, no party".
• US Centers for Disease Control and Prevention (CDC) has quietly changed its guidance on testing to say that people who have come into contact with someone confirmed to have the virus now don’t need to get tested themselves.
• Workers on low incomes in parts of England, where there are high rates of coronavirus, will be able to claim up to £182 if they have to self-isolate. From Tuesday, those who claim Universal Credit or Working Tax Credit and cannot work from home will be able to get the money – equal to £13 a day.
• In the 90 days to mid-August, a three-bedroom home has typically sold in 24 days, 12 days quicker than the same period a year ago, with all types of property selling faster property portal Zoopla said.
• Flights within China are expected to fully recover by the start of September, travel data firm ForwardKeys says. This month domestic arrivals at Chinese airports reached 86% of 2019 levels.
• South Korea has recorded its highest single-day rise in coronavirus cases since 7 March. South Korean public health body KCDC reported 441 new cases, 434 of which were locally-transmitted.
• At least one third of the world's schoolchildren – some 463m – were unable to access any remote learning in the months when Covid-19 shuttered their schools, Unicef says in a new report.
• Liverpool City Council has appealed to adults under 40 to follow social distancing guidelines following a rise in cases across the city in north-west England. The council said there had been a steady increase in the rolling weekly total over the past fortnight, with those aged 40 and under accounting for half of the cases.
• Obesity increases the risk of dying of Covid-19 by 48% and may make vaccines against the disease less effective, according to a comprehensive study using global data and a collaborative effort between the University of North Carolina (UNC), Saudi Health Council and World Bank.
#Corporate client of Peel Hunt