Coronavirus - Butterfly effect

Governments across the world have accelerated their responses to the virus outbreak over the weekend and the measures have continued to escalate. While quick to implement, the impact of these measures is difficult to predict and the consequences could be long-lasting. Companies are beginning to shut down in order to reduce costs and limit cash outflow. There will be additional costs when the time comes to restart. Restrictions on movement continue to increase and UK nationals have been told to avoid all but essential travel.

 - 12,896 Deaths - 641

Cases - 182,663 Deaths - 7,160


• UK nationals told to avoid all but essential travel
• Imperial research report on Covid-19
• ABI – making businesses know they’re not covered
• FRC says no short cuts
• Quebec – to push back tax filings and payments
• Spain – €200bn spending commitment
• Patrick Vallance – potentially 55,000 cases in UK currently and aiming for fewer than 20,000 deaths
• BHA – cancels all racing
• Church of England – suspends services except for weddings and funerals

Company news

• Fiat Chrysler has resumed limited production at its Atessa facility in Italy. The plant has been closed since last week to allow some reconfiguration to the production line in order to the reduce contact between staff.

• Airbus is pausing production in France and Spain for four days. This closure has been ordered so that the company can implement new production line processes that enable its staff to maintain better distances and hygiene procedures.

• Compass Group: “The vast majority of our Sports & Leisure and Education business in these regions has been closed, and our Business & Industry volumes are being severely impacted. Our current expectations are that Half Year 2020 organic revenue growth should be between 0-2%. We are implementing significant mitigation plans to manage our costs, and at this stage expect the drop-through impact of the lost revenue to be between 25-30% across the business. As a result, our operating profit for Half Year 2020 will be £125-225m lower than expected. We are working to protect our cash flow and are proactively managing our capital expenditure and working capital. We have significant headroom against a 4x net debt/EBITDA covenant in our US Private Placement Agreements and we have substantial liquidity with a £2bn committed Revolving Credit Facility 3 maturing in 2024.”

• Rank#: “Since the start of the second half of the 2019/20 financial year, The Rank Group Plc (Group) has traded well and in line with the guidance issued on 16 January 2020. In the last three weeks, we have seen a slowdown in trading across our UK venues and in recent days, we have inevitably witnessed a sharper decline. Despite the slowdown, our UK venues remained profitable last week. Our venues in Spain and Belgium have closed following movement restrictions with substantial support from those governments subsidising payroll costs as we temporarily lay off colleagues. The Group’s digital business operates as normal with colleagues able to work from home and we are providing additional opportunities for our venues players to socialise and play online. Following the UK Government guiding consumers to avoid leisure venues, our modelling shows that the impact of closures would result in monthly net cash costs for the Group of approximately £25m before mitigating actions and around £17m with mitigation. In addition, the Group has tax and duty payments of around £40m falling due in April. The Group has a strong balance sheet with net debt at the end of February 2020 of £32m (pre-IFRS 16), which is funded by the Stride acquisition facility of £128m. The Group also has undrawn Revolving Credit Facilities of £85m (of which £30m expires on 29 September 2020, £40m in 2024 and £15m in 2025). Total available cash and facilities after customer deposits at the end of February was £163m. At this stage, given the continued uncertainty, the Board does not believe it appropriate to provide financial guidance for the current financial year ending 30 June 2020. The Board will provide an update as and when appropriate.”

• GVC: “The British Horse Racing Authority (BHA) has today announced the suspension of all horse racing events in the UK until the end of April. The Group estimates that the suspension will have an incremental impact on EBITDA for the financial year to 31 December 2020 of approximately £20-25m per month before any mitigating actions. As outlined in yesterday's announcement, the Group retains a strong balance sheet with net debt/EBITDA as at 31 December 2019 of 2.69x. We have a Revolving Credit Facility of £550m available and a covenant test of 4x net debt/EBITDA. This test only occurs if the facility is drawn by 35% or more at the end of a financial quarter. The facility remains currently undrawn and as at 31 December 2019 the Group had accessible cash of £260m.”

• Anglo American has implemented a temporary project delay at Quellaveco. Anglo has taken the decision to demobilise the ~10,000 strong workforce at the project due to the 15-day national quarantine in Peru. In reality, that process and the remobilisation effort combined will likely take closer to four weeks to implement fully. We would expect a minimum one-month delay in the project, which should have only a limited impact on the timeline to production in 2022.

• McDonald’s: “We are working with franchisees around the world in order to evaluate operational feasibility and support financial liquidity (eg, rent deferrals) during this period of uncertainty. We are also working closely with suppliers on contingency planning for continuous supply. At this time, neither the duration nor scope of the disruption can be predicted, therefore, the negative financial impact to our results cannot be reasonably estimated. Below is a brief summary of operational impact to McDonald’s restaurants around the world; please note that this does not reflect declines in overall consumer behaviour. US: Substantially all restaurants are operating Drive-thru, Delivery & Take-away only; subject to local restrictions, dining rooms are operating at restaurant discretion. Limited hours may apply.

Most markets, such as France and Canada, have limited operations including Drive-thru, Delivery and/or Take-away; some restaurants within these markets may be closed, have limited hours and/or restricted capacity.

Several markets, such as Italy & Spain, have closed all restaurants.

International Developmental Licensed Markets: Substantially all restaurants are operating in Japan; China is operating ~95% of restaurants; operating hours in most other countries are driven by government regulations.”

• Laura Ashley has filed for administration. The company operates 150 stores across the UK with 2,700 staff employed. The company attributed this to the virus outbreak. It is likely this accelerated the decline of an already struggling business that was going to struggle to raise more cash in the current environment.

• SCS (furniture & flooring) announces that the Group’s full interim results are subject to a short delay. This is as a result of yesterday’s changes to the UK government policy in relation to the Covid-19 virus, which we are currently reviewing in conjunction with the Group’s auditors.

The company expects to be able to release its full interim results before the end of the week. In the meantime, the company is pleased to announce the following highlights for the financial period and an update on current trading which is in line with the Board’s expectations.

• Shoe Zone: “The board announce that following consultation with its advisers, it is taking the prudent decision to defer the payment of the 8.0p/share 2019 Final Dividend that was approved at the company’s Annual General Meeting held on 5 March 2020.

It is expected that on 28 April 2020, in addition to providing a half year trading update ahead of the company’s Interim Results on 19 May 2020, the Board will announce the intention to convene a General Meeting in May 2020, at which a resolution will be proposed to cancel the 2019 Final Dividend.

In recent days we have seen a reduction in footfall, across our estate, and whilst the full extent of the coronavirus on the short and medium term retail environment is not yet clear, it is becoming ever more apparent that it will create significant disruption to people’s lives and shopping habits in the coming months. The decision to defer and take steps to propose the cancellation of the 2019 Final Dividend has been taken with the unanimous backing of the Board and is one of number of appropriate measures being implemented to conserve the company’s cash balances and ensure the robustness of the business to protect it from a sustained period of challenging trading.”

• Odeon Cineworld and Picturehouse will be closing most UK cinemas over the coming days.

• Finablr is preparing for possible insolvency amid ongoing talks with its lenders as a possible way of “maximising value in the group”. Shares remain suspended.

• VW is to suspend production at several of its European facilities. Plants in Spain, Portugal, Slovakia and Germany are preparing to shut down over the next two weeks.

• Lundin Mining announced yesterday a delay to its Neves-Corvo zinc project expansion considering the fact that many of the contractors on the project travel from other regions in Portugal or abroad. Lundin has noted the length of the project delay is uncertain, but the company will reassess both the timelines and the budget.

• Foot Locker has closed all stores in the US and EMEA for the next two weeks: this follows the example set by Nike, Under Armour and Apple.

• Ferguson: “Given the strength of our first half results, we had intended to confirm our full-year trading profit outlook for 2020. However, due to the dynamic situation unfolding with Covid-19 it is too early to understand its impact on current trading. Recent government actions to contain the spread of Covid-19 and societal reactions, alongside any potential actions we will take to mitigate them are not reflected in existing market forecasts and it is too early to quantify them. Ferguson remains well positioned for long-term success operating in attractive and fragmented markets with a robust business model and backed by a strong balance sheet and liquidity position.”

• Polypipe has not seen any impact on its business from Covid-19 to date, although its small manufacturing plant in Genoa has been shut down.

• TI Fluids: “The Group continued to outperform global light vehicle production, however, the global automotive market remains challenging given the uncertainty presented by the Covid-19 (coronavirus) outbreak to regional and global economies. We remain confident in our strategy, business model, operating flexibility and strength in our ability to generate positive free cash flow.”

• Minerva (Brazilian meatpacker) is suspending operations at four slaughter plants due to supply issues with China

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• UK horse racing has been suspended; this national suspension follows on from the cancellation of this year’s Grand National meeting.

• Euro 2020 has been postponed until next summer.

• West End shows have been shut down in response to UK government announcements.

• Pakistan Super League (cricket) has been cancelled.

• Copa America postponed.

• All British boxing events cancelled until the start of April.

• Anthony Joshua’s fight against Oleksander Usyk has been postponed until July.


• France closed all schools and universities beginning Monday 16 March. Employers urged to let staff work from home. Announced a ban on public gatherings with more than 100 people in order to prevent the spread of coronavirus.

• Israel has announced new restrictions on movements of its population. Residents should not leave their home unless they need to get food or medication. Trips to parks, playgrounds, beaches, pools and libraries are banned.

• NHS postpones all non-urgent medical operations in England for three months to help free up beds.

• 50,000 face mask have been stolen from a hospital in Germany.

• French residents face fines of €38, reportedly set to increase to €135, if they are outside without good reason, for example, buying food or other essential supplies, travelling to work if unavoidable, exercising or attending medical appointments.

• The EU has pledged more than €120bn to economies within the block.

• Bosnia & Herzegovina has declared a state of emergency.

• BBC Question Time is to be held without an audience.

• Mumbai has begun stamping hands of those order to quarantine at home. The stamps are dated with the end date of the quarantine period.

• Iran has now released more than 85,000 prisoners. It is unclear whether the release is temporary.

• Uber has suspended pool rides in North America.

• Ukraine has halted all internal transport services. The government has also banned more groups of more than 10 and closed restaurants, shopping centres and other large public buildings.

• Sweden closes high schools and universities.