Coronavirus - 29 September


• India sees lowest daily deaths since 3 August
• The Netherlands introduces new restrictions
• UK Government’s track and trace app downloaded 12.5m times
• UK mortgage approvals in August highest since 2007
• Households in the Northeast of England banned from mixing socially

Company news
Housing, Building Materials and Merchants

• Ferguson – “We have rapidly adjusted our ways of working to adapt to this new operating reality while taking action to lower the cost base. We have also managed working capital and capital expenditure, which alongside the strong profit delivery has led to an excellent cash performance.
On an ongoing basis we delivered group revenue growth and grew trading profit ahead of revenue despite lockdowns in the second half. I would like to thank all of our 34,000 associates for their dedication and commitment during this challenging period. They have demonstrated a remarkable ability to adapt to an unprecedented change in their personal and professional lives while still delivering outstanding service to our customers.
We have the necessary safeguards in place to protect our associates and support our customers and the majority of our colleagues are now back at work. We continue to execute our strategy of developing the business through organic growth and given recent better than expected trading we are now proposing to reinstate ordinary dividends.
It is impossible to predict the future progress of the virus, or its economic impact and we expect the current levels of uncertainty to continue for the foreseeable future. However, the fundamental aspects of our business model remain attractive and since the start of the new financial year Ferguson has generated low single digit revenue growth in the US in flat markets overall. While we remain cautious on the outlook for the year as a whole, the business is in good shape and well prepared to address any further market related disruption. ”

Real Estate

• Grainger
 – “We have continued to perform well with our residential lettings. Our in -house operations and commitment to customer service has been crucial to supporting our residents through this time. Rental growth remains strong at 3.0% year to date, demonstrating the continuing demand for our product:

• 2.5% like for like rental growth on our PRS homes (renewals 2.5% and new lets 2.6%); and
• 4.7% like for like rental growth on the regulated tenancy portfolio

Rent collections on time have remained consistently high at 95% .
Occupancy in our PRS portfolio is over 95% year to date (FY19: 97%) with our August month end occupancy at 91% compared to 97% (at August 2019) due to delays in the seasonal peak letting period caused by Covid -19.
Residential arrears remain low at 1.8% of gross rent, below the historical average. Payment plans have reduced; having agreed payment plans during the lockdown period only 31 customers remain on plans. ”


 B&M European Value Retail – “Strong first half revenue growth and profit uplift driven by elevated average spend per visit

B&M’s value-led, variety goods model and its convenient, easily accessible, out-of-town locations continue to prove attractive to customers

Group revenue growth in the first half of 25.3%, with B&M UK stores generating revenue growth of 29.5% including like-for-like growth of 23.0%

Trading momentum at B&M UK stores maintained in Q2, with 19.1% like-for-like growth in the quarter and an exit rate at a similar level

First half group adjusted EBITDA (pre-IFRS16) expected to be above the previously guided range (£250-270m announced on 28 July) and now estimated to be approximately £285m (before currency adjustments)

9 new B&M UK fascia stores opened by the half year end, offset by eight closures, the latter comprising mostly older, smaller stores

Guidance upgraded on new stores this financial year as a result of pick-up in leasing activity; now expected in the range of 40-45 B&M UK gross openings, most of which scheduled to open in the fourth quarter

Positive like-for-like sales growth and six net new stores opened in the first half by the Group’s value convenience store chain, Heron Foods

Positive like-for-like sales growth at Babou in France since re-opening on 11 May 2020, with total H1 revenue of €156.8m, and a small positive EBITDA outturn for the half year despite the closure due to lockdown over the first six weeks. 37 stores were trading under the B&M brand at the end of H1.”

 Card Factory – ‘The first half of 2020 was undoubtedly a challenging period for most companies navigating through the uncertainties created by the Covid-19 pandemic. Our priority at all times has been the health and wellbeing of our colleagues and customers.

The closure of 1,018 stores across the UK and Republic of Ireland for a significant proportion of HY21 had a material impact on group sales for the period, leading to a 48.6% year on year reduction in group revenue. The uncertainty throughout this financial period spanned important seasons such as Mother’s Day, Easter and Father’s Day, albeit we saw strong performance in our online business, which provided some offset to the reduction in store sales. As of 29 September 2020, we have 1,017 stores open and operating within national and local Covid-secure guidelines.

As stores have reopened, trading has been better than expected. Compared to an anticipated reduction in the 14-week period from reopening to 20 September 2020 of over 20%, like-for-like sales were down 13.6%. Reduced high street footfall has weighed on transaction volumes, down 30%, but customers are spending more in store with a 24% increase in average basket value. Although transaction volumes are improving - like-for-like sales in the four weeks ended 20 September 2020 were down only 6.9% – trading remains sensitive to local fluctuations in Covid-19 cases and consequent changes to government guidelines.

During the period, we have taken a number of mitigating actions to limit the impact of the significant and unprecedented reduction in group revenue on the business. Nevertheless, we did, and continue to, invest in areas of the business, which are critical to the delivery of the refreshed five-year growth strategy.

The effects of our actions, together with government support measures, enabled us to maintain free cash flow over the six-month period at a broadly breakeven level. We ended the period with net debt at a similar level to last year-end, and £27m lower than the position at HY20.”

 Greggs – “We saw activity levels increase as we came into September, following a more challenging month in August. Since reopening our full estate on 2 July like-for-like sales in company-managed shops have averaged 71.2% of the 2019 level in the 12 weeks to 26 September. In the most recent four weeks to 26 September like-for-like sales in company-managed shops have averaged 76.1% of the 2019 level, in line with our planning assumptions at this stage.

With greater experience of post-Covid trading levels in different locations, we are reintroducing more of our range and reopening our seated operation in larger shops. Alongside this we have rolled out digital channels nationwide and expect to see digital sales continue to grow as customer awareness builds. Recent trading experience under these conditions has also allowed us to reactivate our new shop opening programme, something that should help mitigate job losses in the current employee consultation as well as positioning us for long-term growth in target locations.

In the 39 weeks to 26 September 2020 we have opened 38 new shops and closed 49 shops, giving a total of 2,039 shops (comprising 1,720 company-managed shops and 319 franchised units). With greater clarity on activity levels we have reactivated elements of our shop opening pipeline and now expect to open a net 20 shops in 2020, predominantly in locations accessed by car.”

 Hotel Chocolat – “The vast majority of physical locations have re-opened but are in aggregate currently trading lower year-on-year. Other channels continue to grow at an accelerated rate and overall trading is in line with management expectations. The group continues to focus on the long term and is making careful investments to maximise the medium- and long-term opportunity.

Historically we have reported our UK sales by channel. We are now of the view that this classification has become much less relevant, as our customers are increasingly shopping across multiple channels which is, of course, a key business aim.

In FY19 we reported that 67% of sales came from physical UK locations. In the first 12 weeks of FY21 (29 June to 20 September) approximately 56% of sales are coming from physical, and digital sales are up by over 150% year on year. Our focus is always on the customer’s relationship with the brand, maintaining an agnostic view on which channels should attract most investment.

Our VIP.ME programme is at the centre of our relationship and the investments we made in people and technology over the last 18 months are key to driving our future performance. The VIP.ME customer base has grown by 50% YoY. The quality of our content and benefits, coupled with the change in shopping patterns following Covid-19, has resulted in higher spend per transaction and a greater propensity to shop across all our channels.”

SCS – “Trading since the start of the new financial year has remained strong, with like-for-like order intake growth of 45.8% for the nine weeks to 26 September 2020. We believe current performance has continued to benefit from pent-up demand and an increased investment by UK consumers in their homes. This growth has significantly exceeded our expectations and the Board continues to be encouraged by recent trading.

We are delighted with the strong trading since the start of the new financial year. However, we are now entering our key autumn trading period and it remains difficult to predict the potential impact of the increased economic uncertainty, including the cessation of the government’s Coronavirus Job Retention Scheme (CJRS) at the end of October.”

Support Services

 John Menzies# – “On the basis of current visibility and assumptions for ground handling and cargo volumes, second half revenue is expected to be at a similar level to the first half, with profitability benefiting from a more significant contribution from various government support programmes and continuing tight cost management. We continue to review the marketplace and work with our customers to gauge flying volumes. We are expecting a reduced winter season, with flight schedules substantially lower than the previous year, and have planned accordingly.

We currently anticipate market conditions will remain challenging through the winter and the early part of next year, but expect a sustainable recovery in activity levels thereafter, contributing to modest revenue growth in 2021 over 2020. Whilst cautious on the pace of activity level recovery over the next 18 months, our restructured cost base and the rationalisation of the global portfolio should enable the group to generate higher returns as volumes improve.”


 Blancco Technology Group# – “While the impact of Covid-19 has undoubtedly been disruptive and slowed growth, the business model has proven to be extremely resilient, with financial performance in line with the market expectations originally set twelve months ago, pre Covid-19.

As global lockdown measures have gradually eased in recent months, trading is in the process of returning to pre Covid-19 levels and we are confident in the future prospects for growth as the environmental and governance aspects of the solutions provided by Blancco become increasingly attractive for prospective customers.

The increase in the volume of IT hardware assets purchased in recent months along with the move to remote working will increase the use cases for Data Sanitisation and will lead to growth in the value of customer contracts. We also believe that the ongoing development of channel partnerships such as those with AWS, Deloitte and Aon will start to generate revenue in the current financial year. In the Mobile market segment, significant growth in the number of handsets being sold in the second-hand mobile market continues to be forecast and Blancco has a market leading proposition in this area. This will be supplemented by the new revenue stream opportunity presented by the Blancco Ireland solution in the insurance market.

Overall, we remain cautious while there is global uncertainty around the Covid-19 pandemic and particularly in the first half of the financial year when the comparator period was unaffected by Covid-19. However, with a strong balance sheet, no debt and a business which has continued to generate cash through the most challenging months of the pandemic, we are confident that the company remains very well placed to deliver returns to shareholders in the medium term and beyond.”


• The coronavirus contact-tracing app for England and Wales has now been downloaded more than 12.4 million times, the UK Government has said.

• Over 100 students at Queen’s University in Belfast have been told to self-isolate at their halls of residence, after 30 people at the university tested positive.

• Mortgage approvals in the UK last month hit the highest levels since 2007. The Bank of England says some 84,700 mortgages were approved in August, up from 66,300 in July, as the market continues to recover from lockdown.

• Spain is to continue its furlough scheme. Under the scheme, workers are able to claim 70% of their base salary for the first six months and 50% thereafter – with employers able to top up the rest.

• Pubs, hotel bars and restaurants will have to shut at 23:00 in Northern Ireland under new rules that come into force from midnight on Wednesday.

• Israeli health minister Yuli Edelstein said today that there was “no way” the country’s second nationwide lockdown would be lifted after three weeks as originally planned.

• New restrictions are being introduced in the Netherlands as cases continue to rise. Restaurants and bars across the country must close by 22:00 local time (20:00 GMT). Fans are banned from attending sports events. Businesses such as hairdressers and dentists must log their clients’ contact details. People are encouraged to work from home and stay indoors if they have coronavirus-like symptoms.

#corporate client of Peel Hunt