Today the Global Vaccine Summit got underway.
This virtual meeting hosted by the UK aims to bring together political leaders from 50 countries, wealthy individuals and companies and represents a critical moment to advance collective solutions for Covid-19 vaccines. It is hoped that these discussions will be able to co-ordinate pharmaceutical companies and world leaders’ approaches. History has proven that a vaccine, with the globe united behind it, can defeat some of the most infectious diseases. Still, recent months give little reason to be optimistic of finding common ground in the current fractured political landscape.
• BoE has published a list of companies with commercial paper held by the CCFF link
• Germany announces €130bn economic recovery package
• Austria is reopening almost all its borders on Thursday
• 50% of the UK population is struggling with sleep
• Argentina extends lockdown to 21 June
Buildings & Construction
• Van Elle# – “Market conditions during April were consistent with the Board's revised planning assumptions and reflected the closure of many customer sites, particularly across the housing and regional construction sectors, together with considerable supply chain and logistical disruption. As a result, trading in April was within the range of scenarios outlined at time of the Group's announcement of 9 April 2020 (the 'April Update'), with revenues at approximately 20% of pre Covid-19 forecast levels.
Group revenues for the year were down approximately 4% compared to FY 2019 at approximately £85 million, but the significant, adverse impact of the Covid-19 outbreak on the final six weeks of the year impacted FY 2020 profitability such that, subject to audit, the Board expects to report an underlying pre-tax loss for the year.
Current trading – Whilst the Board does not yet believe it is appropriate to reinstate financial guidance for the year to April 2021, it is pleased to report that, following Government guidance regarding a return to work across the wider construction sector, customer activity levels within the Group are beginning to increase. As at 1 June 2020, approximately 30-40% of projects had resumed across the Housing and General Piling divisions, whilst the Specialist Piling, Rail and Geotechnical divisions are operating at approximately 60-70% of pre Covid-19 levels due to greater exposure to infrastructure sector activity.
The Group is fully complying with the Government's Covid-19 Secure guidance to ensure the continued wellbeing of its staff and other site workers and has commenced the return of staff from furlough in line with the return in customer demand.
Alongside managing the re-mobilisation of its operations, the Group has maintained a close dialogue with customers to progress its commercial pipeline. The Group's order book at 31 April 2020 remains in line with the half year position at £31.7m (31 October 2019: £31.9m) although enquiry levels have reduced by circa 20% compared to previous levels.
Whilst the Board expects that it will still take time for new project starts to gather momentum in some sectors, the Group is encouraged by developments in its targeted infrastructure markets. These include the confirmation of Notice to Proceed on phase one of High Speed 2 and the announcement of partner contracts on Highways England's Smart Motorways Alliance. The Group is therefore pleased to have achieved preferred bidder status for its first contract on High Speed 2 and to be recently appointed to two of the three regions on Highways England's new four-year ground investigation framework, both of which are expected to commence during the first half of the financial year.
Financial position & liquidity – As a result of the decisive actions taken to conserve cash and manage liquidity, including ongoing self-help actions and participation in a range of Government schemes, the Group's cash performance has been ahead of the Board's expectations at the time of the April Update.
The Group has a significantly strengthened balance sheet following the successful equity capital raise, announced on 9 April 2020, which raised gross proceeds of £6.7m. As at 31 May 2020, the Group had cash balances of approximately £12 million, having repaid its £0.9 million remaining term loan with Lloyds Bank, which was due for repayment in August 2020. The cash balance is enhanced by the deferral of some £1.4m of PAYE payments to HMRC.
The Group is progressing discussions with existing and potential lenders to put in place additional debt facilities as part of its long-term capital structure strategy and expects this process to be concluded in August 2020. The Board remains confident that it has sufficient financial stability and liquidity to respond quickly as the markets recover, building a platform from which to progress its longer-term strategic ambitions.”
• IG Group – “The Group issued a Q4 trading update on 24 April 2020 which noted that quarter to date net trading revenue was estimated to be around £173 million. Financial market volatility has remained elevated and the Group has continued to see high levels of client trading activity. Net trading revenue in Q4 FY20 is now estimated to be approximately £259 million (Q4 FY19: £117.9 million), with full year net trading revenue anticipated to be approximately £649 million (FY19: £476.9 million).”
• Impax Asset Management# – “The potential for equity markets to begin their recovery from this unprecedented shock depends primarily on how effectively the virus is contained. In the short term we will inevitably see many businesses collapse and high levels of unemployment that can only be partly mitigated by rapid fiscal intervention. The medium-term outlook for the global economy is currently difficult to predict, with large variations in the forecasts from respected experts. Current market levels appear to be pricing in a global recession for at least the next year. In the short term it is inevitable that we will see widespread dividend cuts and cash calls from many companies.
However, dealing with risk is what investment managers are paid to do and we believe that this continued disruption will lead to opportunities for Impax's funds. We remain focused on resilient, well-managed companies, and the majority of our holdings have low levels of debt, redundancy in supply chains, diversified customer bases and effective business continuity plans. We also see that companies with well-developed government relations, connections to community groups and other NGOs and proactive social media policies have an advantage.
In the longer term, when this crisis eventually lifts, investors around the world will continue to be increasingly attracted to investment portfolios focused on resilient companies, which are at the heart of Impax's investment processes.
While the daily Covid-19 updates have eclipsed all other news in recent months, we are still mindful of the significant potential impact of both Brexit and the resurfacing of global trade wars on global markets. From a corporate perspective, we continue to plan to move a small part of our business to our Dublin office.
In these uncertain times we continue to leverage Impax's strong brand and financial position, and to invest in the business to support the generation of long-term, sustainable benefits for all our stakeholders.
Food, Drinks & Household
• Fevertree – “Although we have been impacted by the Covid-19 crisis, we are well positioned to manage our way through the current situation. We have a fantastic team across the globe who have been working incredibly hard alongside our key customers, suppliers and distribution partners. Our asset light business model continues to support our secure financial position with a FY19 net cash position of £128 million and we benefit from a strong brand portfolio with well-balanced revenue streams across regions, channels and customers.
While the On-Trade remains fully or partially closed across many of our regions, the Group's performance across the Off-Trade continues to be very encouraging. Management remain focused on delivering our long-term strategy and we are confident the Group will be well placed once the current period of uncertainty ends.
UK – On-Trade sales typically represent 50% of UK revenue and continue to be severely impacted by the lockdown. Conversely, our Off-Trade performance has been strong. Sales in the first full month of lockdown were up 24%1 year-on-year and we have seen continued positive momentum since, reflecting increased at home consumption during the period. The core tonic range has performed particularly well, and there has also been notable growth in the convenience channel as consumers increasingly supplement or substitute their trips to large grocery stores.
US – The US market is naturally weighted to the Off-Trade, which typically contributes 70% to the Group's US revenue. Since the start of lockdown, while On-Trade sales have been severely impacted, Off-Trade sales have grown extremely strongly. Nielsen data, which covers just under half of Fever-Tree's Off-Trade sales in the US, reported 98%2 growth year-on-year for the four weeks to 18th April and 96%2 in the four weeks to the 16th May. Whilst this performance reflects the benefit of incremental distribution that was secured over the course of H2 2019, along with increased at-home consumption during lockdown, it also highlights the growing strength of the Fever-Tree brand, supported by the continued trend towards premium, long drinks. In addition, the Group's US pricing and format optimisation has been very well received by distributors and retailers, with implementation beginning to be seen on-shelf between March and June 2020.
Europe – The impacts from Covid-19 have varied across countries within Europe. While Northern Europe is naturally weighted to the Off-Trade and has therefore been more robust, Southern Europe is more reliant on the On-Trade, causing it to be more significantly affected. However, we remain confident in building our momentum in this region over the medium and long-term as premiumisation continues to gain traction. Fever-Tree is the only premium brand with scale across the entire region, with a category leading position in many markets.
ROW – While On-Trade challenges have also been evident across the ROW, we are delivering strong Off-Trade sales and continued distribution gains, most notably in Australia and Canada.”
• Avacta Group – “PCR testing will not be able to provide daily testing for millions of people.
A rapid point-of-care antigen test using saliva is ideal for mass screening of populations for Covid-19 infection.
The directors believe that there are only a few rapid antigen tests in development and none have CE/FDA approval yet.
Avacta has already put in place one distribution partner for the direct-to-consumer market (Medusa19) and will put in place additional distribution partners for the healthcare professional/work-force testing markets, as well as OEM partnerships in order to maximise the commercial opportunity.
Given the expected volume of sales for Covid-19 antigen testing products the potential revenue stream has the potential to be transformational for Avacta.
Avacta intends to commercialise further the Covid-19 Affimer reagents that it has generated through additional diagnostic development partnerships.”
• Aston Martin Lagonda – “Today updates on actions to improve the cost efficiency of the business, in alignment with its strategic plan to deliver profitable growth, operating as a true luxury car brand.
As communicated previously, the plan requires a fundamental reset, which includes a planned reduction in front-engined sports car production to rebalance supply to demand. The Company's first SUV, DBX, remains on track for deliveries in the summer and has a strong order book. The measures announced today will right-size the organisational structure and bring the cost base into line with reduced sports car production levels, consistent with restoring profitability.
Aston Martin will shortly launch a consultation process on proposals to reduce employee numbers by up to 500, reflecting lower than originally planned production volumes and improved productivity across the business. The employee and Trade Union consultation process will be launched in the coming days.
Aston Martin continues to take decisive action in other areas to reduce cost and remove non-critical expenditure from the business at every level including in areas such as contractor numbers, site footprint, marketing and travel.
The restructuring is expected to deliver, on an annualised basis:
• Incremental operating cost savings of c.£10m (in addition to the c.£10m announced on 31 January 2020);
• Reduced direct manufacturing costs in line with volumes (c.£8m); and
• Reduced capital expenditure (c£10m).
The associated cash restructuring costs are expected to be c£12m in 2020.”
• Luceco – “Q1 2020 – 10% lower than 2019 impacted by coronavirus-driven supply chain issues, which were resolved by the end of Q1.
Q2 2020 – started at a run rate of 50% lower than 2019 because of coronavirus lockdowns in most of the Group's markets, with demand steadily improving thereafter as lockdown conditions have eased. Revenue for Q2 expected to be circa 25% lower than 2019, outperforming the UK market.
The Group responded quickly and decisively to protect the business and our employees from the coronavirus. We took action to reduce costs, preserve cash and add extra resilience to the Group's liquidity and financing arrangements. As a result, the Board expects profit and cash generation in H1 2020 to be at least as strong as H1 2019.
Although the performance to date has been encouraging, macro uncertainty continues to prevent us from offering full year guidance.”
• XP Power – “All of the Group’s manufacturing and logistics facilities are currently operational. Our operational performance is continuing to improve following the extended shutdown of our Chinese manufacturing facility in February, and the associated supply chain challenges, that we experienced earlier in the period.
Our local supply chains in China and Vietnam are working at pre-Covid-19 capacity levels. Despite experiencing a modest level of certain specific component shortages, overall the supply chain is proving resilient, but we continue to monitor the situation closely. The recent significant reduction in airfreight capacity has resulted in substantial increases in airfreight costs on routes from Asia into Europe and North America that are subject to negotiation with customers.
Current trading- Trading during April and May 2020 has been encouraging. Order intake in April and May continued to be strong, building on the levels seen in Q1 and the Group will enter H2 2020 with a healthy order book.
The Group has seen exceptional levels of demand from its Healthcare customers and is working hard to deliver the related order backlog. The demand from these customers has been very broadly based and includes critical applications used to treat Covid-19 patients including ventilators, Continuous Positive Airway Pressure (CPAP) devices, patient monitors, hospital beds, drug delivery devices, medical suction pumps and specialist lung ultrasound and X-Ray machines. We expect this level of demand to normalise in H2 2020.
The Semiconductor Equipment Manufacturing sector, which has started to recover from the cyclical downturn we experienced in 2019, also continued to see strong order intake in April and May. The Technology and Industrial Electronics sectors have also seen resilient order intake, although over more recent weeks a small number of Industrial Electronics customers have deferred scheduled orders due to weakness in their end markets or their own production capacity issues related to Covid-19. To date, the impact of these deferrals has been more than compensated for by demand from our Healthcare and Semiconductor Equipment Manufacturing customers. The book to bill ratio, which tracks the relationship between orders received and completed sales, was 1.48 for the year to May 2020 (2019: 1.05 times), similar to the position at the end of Q1.”
• Loungers# – “Our engagement with customers has been based on supporting them through this difficult time with competitions, acts of kindness in the community and reminding them about what makes their Lounge or Cosy Club special. We have also surveyed significant numbers of our customers in both Lounge and Cosy Club to understand their attitudes towards visiting our
venues when we are allowed to re-open. Encouragingly, the vast majority of those surveyed are looking forward to returning (only 2% of customers out of the 6,000 respondents said they would not be comfortable resuming their normal visits to Lounge and Cosy Club when Government restrictions are lifted), and their feedback has given us some great insight into what they will expect to see in place in terms of physical distancing and hygiene measures. We will continue to survey our customers in the coming weeks to understand how attitudes are shifting and to make sure our strategy is on point.
We have opened 17 Lounge sites for takeout and will open a further 10 sites on the same basis over the next week. Takeout, 'From our Lounge to your Lounge' is a completely new model for us but our objectives here were to understand if it could provide an additional revenue stream once re-opened, to help us understand operating in a physically distanced environment, to get the supply chain back up and running, to bring team members back from furlough and working, and most importantly to further energise the culture of the business and generate some excitement. It has been a big success, hugely welcomed in the communities where we have opened, and we don't rule out following up with more sites in the coming weeks. It won't move the dial financially on a standalone basis but could potentially provide a further revenue stream when re-opened, as well as providing a service to anyone who is less comfortable eating out.
We have chosen not to go down the delivery route, and still don't think it appropriate for our concepts which have customer and community engagement at the very heart of them but operating an order and collect model suits Loungers' personality.
As we prepare to re-open, we are challenging aspects of the service model in both Lounge and Cosy Club. We are looking to trial order-at-table technology, for example, and whilst this is something we have ruled out several times in the past, we would be keen to try it post lockdown if it makes a minority of our customers feel more comfortable. Likewise, we are considering menu size, understanding what efficiencies we might achieve with slightly smaller menus, a change we will trial whilst operating physical distancing in our kitchens. We also plan to trial going cashless when we re-open. Importantly these changes are not just relevant in the immediate months following re-opening but may well teach us more about how our brands can evolve in the longer-term.
We are naturally preparing to re-open, anticipating some – and potentially the majority – of sites being allowed to open in July, assuming the hospitality sector gets the go-ahead from the Government to do so, as anticipated. As a business that is used to opening a new site every two weeks, this is the kind of logistical challenge that we relish and perform well at. We are in the process of planning revised layouts and removing and storing surplus furniture to allow for the introduction of the physical distancing rules. Due to the size and layout of the majority of our sites and the spread of our trade across the day parts, we anticipate being able to trade profitably with distancing rules in place. There is, however, a marked difference between 1 metre and 2 metre distancing, and if 2 metres is implemented, it may not make sense to open a small number of our more compact sites immediately. We are also using the closure period to perform regular site visits and using our in-house build team to carry out both essential and preventative maintenance work that will help our P&L going forward by avoiding interruptions to trade. Our approach to partitioning and physical distancing in the sites has been to challenge ourselves to find ways to improve the sites from a design point of view, regardless of Coronavirus. Naturally, it will be necessary to have PPE and additional hygiene protocol in place for a period of time but we think the measures we are taking from a design perspective will feel very complementary to the look and feel of a Lounge and Cosy Club, whilst providing reassurance to our customers.
In terms of re-opening, given the suburban and market town locations of the majority of our sites, alongside the fact that we are not in central London nor in transport hubs or tourism locations, means we are optimistic with regards to the future and expect to benefit from more home-working. The versatility of our all-day offer, use of multiple day parts and occasions, alongside our value for money positioning, means we are well placed to resume trading. Regarding the roll-out of new sites, we are keen to re-start our new site opening programme as soon as it is sensible and we expect to be able to secure great property opportunities in the coming months in a tenant-friendly market.
In summary, we have used this time constructively and positively. As full re-opening gets closer, and with the valuable intelligence we have gained from participating in the latter stages of the lockdown, we believe we are in a strong position and look forward to the future.”
• Young & Co Brewery – “The coronavirus pandemic has had a significant impact on these results. Closure of our pubs for the final 10 days of the financial year and the preceding downturn in trade resulted in an estimated £13.0 million shortfall in revenue, with a disproportionate impact on profits, estimated to be £7.7 million due to the limited opportunity for mitigating actions.
One thing we can be sure of is that at some point the pandemic will pass. The fabulous weather we have experienced so far this spring has been a gentle reminder of the enormous opportunity our business has to bounce back once it's safe for the government's restrictions to be lifted. I am looking forward to all of our team reuniting, opening the doors to our great pubs and welcoming back our customers once we are through this.
Whilst the period of closure and any restrictions that may remain are still unknown, there are many things to be excited by. The five new pubs acquired late in March traded for only a matter of days before they were forced to close; they offer an immediate boost to both revenue and bottom line profit, with no additional capital expenditure required. The significant investments we made last year in our existing estate will give us further growth potential as soon as we reopen our pubs – it was one of our most exciting and biggest investment years and I'm looking forward to seeing what our customers think. Optimistically, we are looking forward to continuing our consistent growth records of previous years but accept that it will take time for things to normalise.
We are grateful for the positive moves made by the Chancellor to ensure that great businesses like ours survive these particularly tough times. Through extending the job retention scheme until October he has given us a degree of certainty in uncertain times, whilst the support of the business rates holiday will be a welcome £14.5 million cost saving in the coming year.
We are confident with the steps we have taken to safeguard our business from the immediate threat of coronavirus. The board expects our pubs to have opened by 3 August and for trading in FY21 to be materially below average. We expect sales to return to more normalised levels in FY22 when this unprecedented period is at an end, and we remain confident in our proven strategy.”
• Euromoney – “The short-term outlook for face-to-face events remains uncertain due to government and client companies' restrictions on travel and meetings. Due to Euromoney's nimble events execution, we expect to return to running face-to-face events rapidly when restrictions are lifted.
Our strategy of focusing on 3.0 businesses, where content is deeply embedded in customers' workflow, is more relevant than ever. However, as previously disclosed, the effect of Covid-19 on broader economic activity is likely to result in customers delaying purchasing decisions. Trading in April and May has been substantially in line with recent trends.
We are committed to our growth plan for the Asset Management segment and encouraged by the pre-covid-19 signs of improvement following our investment in that business. We are targeting to return IRD's non-vote Book of Business to growth by the end of FY22 (IRD's non-vote revenue accounted for 51% of segment revenue in FY19) which should lead to subsequent revenue growth as the Book of Business earns out into revenue.”
• Helical – “92% of March quarter rents collected, with a further 3% being paid in instalments, however, letting progress on Kaleidoscope, London EC1 and Trinity, Manchester has slowed.
All the Group's buildings have remained open, whilst complying with Government guidelines on providing safe office space.”
• Lookers# – “We are pleased to have safely reopened our dealerships and resumed selling new and used cars and providing after sales service albeit at lower than normal capacity levels. We have taken the opportunity during the recent period of closure to enhance our digital capabilities to support the sale of vehicles through our dealership network and to focus on improving the customer experience.
On 23 March 2020, in light of the Covid-19 pandemic and Government guidelines, the Board took the decision to temporarily close all its trading locations. In April, following the introduction of new operating measures, the Group then partly reopened 41 locations to provide essential repairs, parts and maintenance to key workers' vehicles.
Having successfully implemented and tested new operations and processes, on 11 May 2020 the Group reopened all its aftersales facilities and has gradually built capacity to around half the normal level. Initial demand for aftersales from customers has been encouraging. As demand builds additional technicians will return from furlough to increase capacity.
On 18 May 2020 the Group implemented a new contactless vehicle handover and delivery process. Since then, we have fulfilled a total of nearly 4,000 new and used retail vehicle orders.
Following the introduction of new operating and social distancing measures to ensure the health and safety of customers and colleagues, the Group reopened most of its dealership sales facilities on 1 June 2020. With the benefit of enhanced online functionality that the business has been implementing, in the last two weeks, the Group has taken retail orders for 2,865 new and used vehicles, which on a like-for-like basis represents approximately 51% of sales for the same period last year.
The Group had approximately 66% of its total current colleague base (c8,100) remaining on furlough at the end of May. In June it is expected that this will reduce to approximately 55%.
The Board has considered the future structure of Lookers in light of potential demand, a smaller dealership estate and the structural changes taking place across the industry. As a result, the Group has taken the difficult decision to commence redundancy consultations across all areas of the Group, which could, subject to consultation, result in approximately 1,500 redundancies. The Board has carefully considered all options and regrettably considers this action as being necessary in the current environment to sustain and protect the Lookers business over the long term. This restructuring could, subject to consultation, deliver annual payroll savings of approximately £50m. The one-off cash restructuring cost will be circa £9m.”
• Renewi# – “Volume reductions during lockdown slightly lower than originally expected, remaining cautious as to shape of economic recovery.
Outlook – Based on our experience since the second half of March, we expect Covid-19 to result in a potential reduction in EBIT and cash of up to €20m in the first quarter compared with our previous expectations. This outflow is comfortably contained within our €252m of liquidity as at 31 March 2020 and our revised banking covenants. The outlook for the remainder of the year will be dependent on the nature and timing of the lifting of lockdown restrictions and the speed of economic recovery. Longer term, waste volumes are resilient through cycles and the transition to increased recycling remains a strong long-term structural growth driver for the Group. The recovery of earnings at ATM and our Renewi 2.0 programme are expected to further support sustained future earnings growth.”
• Wizz Air – “Wizz Air announced the opening of four new bases from 1 July, deploying 11 aircraft and launching over 50 new routes to: • Milan Malpensa, Italy: Five new based aircraft
• Larnaca, Cyprus: Two new based aircraft
• Lviv, Ukraine: One new based aircraft
• Tirana, Albania: Three new based aircraft.”
• Good Energy Group – “We have seen no significant financial impact from the coronavirus (Covid-19) outbreak to date. The Company started the period with a strong cash position and this has been maintained, due to: • Our diverse Domestic and Commercial supply bases; whilst near-term overall demand has decreased and pricing patterns have shifted, cash collection to date has remained in line with normal seasonal expectations;
• Pro-active actions to mitigate any potential short-term cash flow issues; and
• Successful business continuity execution.”
• Pennon Group – “Financial impacts for 2019/20 focused on expected credit losses (ECL) – related to customer debt – provision of £9.0 million across the Pennon Group
Pennon Water Services not requiring deferral of wholesale payments at this stage – a number of other retailers taking advantage of wholesaler regulatory support
Impact for 2020/21 – assumes a three-month lockdown with ramp-up over the remaining year
• non-household revenue expected to reduce, offset by increased household demand
• risk from ECL for businesses, retailers and households. Support schemes to mitigate impacts
• Viridor resilient through ERF contracts.”
• Austria has unilaterally opened its borders except the order with Italy.
• Germany’s Chancellor Angela Merkel unveiled a €130bn economic recovery package, including a cut in VAT to boost consumer spending and a €300 stipend per child for struggling families.
• North Macedonia is imposing a strict curfew in certain cities, running from 9:00pm tonight until 5:00am on Monday, after a recent spike in infections.
• Organisers of the postponed Tokyo 2020 Olympics are apparently looking at a way to scale back next year’s games. The games are postponed until July 2021.
• US President Donald Trump said he will ban all Chinese airlines from travelling to the US. In response, China has signalled an easing of its restrictions. The civil aviation administration said “qualifying” airlines will be allowed to fly once a week to a city of their choosing.
• More than 40% of Chinese cinemas said they “are very likely to close” in the near future, according to the China Film Association survey. This could mean nearly 5,000 cinemas going bust as a result of the pandemic.
• Australian airline Qantas says it hopes to increase domestic flights to 40% of pre-pandemic levels by August, up from 5% currently.
• More than half the UK population has struggled with sleep during the lockdown, according to a study carried out by Ipsos MORI and King’s College London.
• Virgin Atlantic says it’s going to resume flights to five worldwide destinations from London’s Heathrow airport from 20 July. Services will operate to Orlando, New York, Los Angeles, Shanghai and Hong Kong.
• Israel’s parliament has suspended most of its activities after a lawmaker tested positive for coronavirus. Staff at the Knesset have been asked not to come into work unless it is essential, while committee meetings have been postponed.
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