Coronavirus - Hanging by a thread

Hanging by a thread President Trump has reignited his war of words with the WHO calling it a ‘puppet of China’.

While the WHO has agreed to an independent review, China has hit back, accusing the US of attempting to distract from its own mishandling of the crisis. The ongoing trade war is unlikely to soften, which does not bode well for the long-term global recovery effort. Conversely, after initial disagreements, France and Germany have agreed to a substantial €500bn recovery fund for the more-affected states. Economic recovery will require collaboration and humility. Neither appear forthcoming by the global superpowers.


• France and Germany propose €500bn recovery fund for EU countries

• UK unemployment rises to 2.1m

• President Trump sends a letter to the WHO demanding changes

• World Health Assembly has agreed to an independent investigation into the response to the global coronavirus pandemic.

• Car sales in Europe plunged by 76.3% in April (ACEA)

Company news

Buildings & Construction

 Watkin Jones# – “We have remobilised construction activities where possible, with appropriate health & safety practices in place, following an initial closure of all sites

Sites in England, Wales and Northern Ireland now operating at c75% of pre Covid-19 resource levels

Our two Scottish sites currently remain closed due to Scottish Government instructions

Encouraging early progress to mitigate the impacts of the disruption to our student accommodation deliveries for FY 2020; six of the seven schemes are targeted for delivery by Q3 2020 and the seventh is targeted by Q4 2020. The outcome for the residual scheme is being discussed with the purchaser, with options including accelerated work and phased delivery being considered

We anticipate a modest increase in costs to complete our committed development programme during Covid-19 disruption

The outturn for FY 2020 will be largely dependent on the completion of the seven student accommodation developments due this year, the level of progress made with the construction of the forward sold FY 2021 pipeline and whether the Group decides to forward sell any of its development sites in the second half given the uncertain investment environment

Activity in the institutional forward sale and land purchase markets has been subdued since the period end. Whilst we anticipate that activity in these markets will increase through the second half, the Group will use its strong financial position to progress forward sales and site acquisitions in the short term only if negotiated terms prove satisfactory

We are offering support to students in the form of short-term rent relief and extended periods of occupation, where appropriate, to help them manage through this period at a voluntary cost of c£1.0 million. Approximately 50% of students left term time residences in conjunction with the lock-down

The Group implemented comprehensive cash conservation measures, including accessing the Government's Job Retention Scheme for furloughed employees. Our remobilisation programme is leading to a commensurate unwinding of use of the furlough scheme

Board fees and senior executive base pay has been temporarily reduced by 20%.”


 Aberdeen Standard – “UK market review – Global equity markets were generally buoyant during the first four months of the period as investors took encouragement from dissipating US-China trade tensions and a US Federal Reserve rate cut. The UK market responded positively to a landslide Conservative majority in the General Election in December and stocks with exposure to the UK domestic economy benefited from the decisive Conservative election victory.

Sentiment turned sour in late February when it became apparent that Covid-19 was becoming a global pandemic. A global recession became inevitable once governments announced lockdowns to limit the spread of the virus. The UK lockdown, announced on 23 March 2020, caused the economy to go into an induced coma. This led to a spate of profit warnings, dividend cuts and calls for additional capital by companies. The market quickly priced in these negatives. For the three months to the end of March, the FTSE All-Share Index was down by 22% on a total return basis – its most significant quarterly decline since the Black Monday sell-off in 1987.

As pessimism set in, large-cap defensive sectors fared less badly than small and mid-cap cyclical sectors. The worst-affected sectors over the period were those where social interaction is fundamental to their business and which were consequently most directly affected by the lockdown and which saw an almost total collapse in their revenues, such as Travel & Leisure and General Retailers. Oil stocks fell as the oil price collapsed, driven by lower activity levels and an ongoing dispute between Saudi Arabia and Russia, while Banks fell on fears of a spike in loan impairments.

Portfolio performance – The portfolio's performance can be split into two discrete periods. The period started well, with December proving to be a particularly strong month for performance as our UK domestic holdings rallied strongly on the decisive Conservative election majority.

The portfolio's performance deteriorated markedly from mid-February as the full consequences of Covid-19 started to become apparent. Our portfolio was not well positioned for such a bleak and unprecedented event. Investor sentiment reversed quickly. UK domestic stocks, which investors had been buying for a recovery following the General Election, fell sharply. The vast majority of our under-performance came from owning companies that were directly impacted by the lockdown, in particular housebuilder Vistry, cinema operator Cineworld, transport operator National Express and travel business TUI. The underweight position in defensive stocks such as AstraZeneca and Reckitt Benckiser also detracted from performance, albeit far less significantly. There were only a few stock-specific disappointments during the period; the main one being oil producer Tullow Oil, which announced a poor production update.

Partially offsetting these negatives, the portfolio benefited from owning financial businesses CMC Markets, which enjoyed very strong volumes, John Laing Group whose pipeline of new investments surpassed expectations and Chesnara whose operations and capital position remained solid. All three companies announced an increase in their dividends in March, highlighting their resilience to Covid-19. The holding in SSE also benefited performance as the market responded positively to the sale of its wholesale energy business. Each of these positions helped generate some positive performance, but not enough to offset the impact of the stocks directly hit by Covid-19.

Revenue Account – Dividends distributed by companies in the portfolio in the period were £4.7m, which was 5.8% less than the £5.0m received at the same time last year.

During the period, 93% of the dividend income came from recurring rather than special dividends. Although the value of special dividends increased in the period year on year, in light of Covid-19, we do not expect to see further special dividends in the second half of the financial year.

The market backdrop has changed drastically since the advent of Covid-19. Dividend cuts have become very widespread with over half of FTSE 100 companies and over three quarters of FTSE 250 companies cutting. We have undertaken a line-by-line review of the portfolio, weighing the income prospects of our holdings based on their trading and balance sheet outlook. We have adjusted the portfolio by adding to existing holdings or buying new holdings in companies with the most resilient dividend prospects. Conversely, we have sold some holdings in companies that are unlikely to be able to restore the dividend in the foreseeable future. We expect that around 60% of our holdings will continue to pay dividends despite Covid-19 and we would expect our income to fall less dramatically than the FTSE All-Share index, partly thanks to not owning some of the highest profile dividend cutters such as the large-cap banking stocks. Looking ahead, we expect the revenue account to recover as dividends are reinstated thanks to improved earnings visibility post-lockdown (especially companies that had cut for precautionary reasons) and also because we have added to attractively valued resilient dividend stocks.


Purchases – Our portfolio activity during the six-month period reflected the opportunities arising as a result of political and economic uncertainty. The run-up to the UK General Election in December was characterised by nervousness towards UK domestic stocks. We therefore started a new holding in housebuilding business Vistry (previously known as Bovis) which undertook an equity placing to fund the purchase of Galliford Try's housebuilding and partnerships businesses. We considered the deal to be attractive, with forecast cost synergies from the integration set to drive double-digit earnings growth. We also started a new holding in utility business Centrica where we saw early signs of an operational turnaround, as reflected in stabilising customer numbers, increasing energy services revenues and success delivering cost efficiencies.

The period also offered opportunities to buy solid international companies trading at attractive valuations. These included paper and packaging business Mondi whose consistently high returns are a function of its low cost of production and high quality assets. We also added to our holding in mining company Rio Tinto which appears well positioned given its position at the bottom end of the cost curve and to tobacco companies British American Tobacco and Imperial Brands whose revenue growth should benefit from ongoing price hikes and improving volume growth trends.

Sales – During the period we received bids for two of our holdings – real estate company Hansteen and insurance administrator Charles Taylor. Both were opportunistic bids by private equity, underlining the attractive valuations of neglected UK small cap stocks.

We also sold a number of industrial stocks whose full valuations appeared to offer limited upside potential, especially in the context of weakening order trends. These included ventilation business Volution, engineering business IMI and heat treatment business Bodycote. We also moderated our financials weighting by selling our holding in insurance business Prudential the solvency of whose US annuity business, Jackson National, might be jeopardised by the widening in corporate credit spreads.”

 Georgia Capital – “The impact and magnitude of the Covid-19 is still very difficult to estimate. Most of our portfolio, however, is largely concentrated in structurally important, defensive sectors. Our NAV per share (GEL) was down 35.6% in 1Q20, mainly impacted by the depressed valuations of BOG and GHG (-21.0% impact on NAV per share). Despite solid operating performance in 1Q20, valuations also decreased across our private businesses (-7.8% impact on NAV per share). The NAV per share was further impacted by GEL depreciation against USD by 14.5%, resulting in foreign exchange loss of GEL 92 million on GCAP net debt (-5.3% impact on NAV per share).

Listed businesses – The market value of listed assets decreased by GEL 368 million, of which, GEL 233 million was driven by a 43.7% decrease in the BoG share price to GBP 9.15 and GEL 135 million – by a 36.6% decrease in the GHG share price to GBP 0.78. Despite the initial impact of the Covid-19, BoG's 1Q20 operating income grew 6.1% y-o-y, while the Covid-19 related upfront provision charge for the full economic cycle led to a net loss of GEL 99.9 million. GHG's 1Q20 revenues grew double-digits and cash flows from operating activities were up by 65% to GEL 43.2 million, with an EBITDA to cash conversion ratio of 119% (70% in 1Q19).

Private businesses – The GEL 137 million decrease in the value of our private assets primarily reflects contractions in the multiples across the peer group companies that drive most of the valuations. Decrease in the value of private business excluding multiple change and FX was GEL 63 million, of which, GEL 56 million was related to the hospitality business. At 31 March 2020, we consistently applied our multiple-based valuation methodology and as such, the valuations reflect impact of market volatility, even though the underlying operating performances were solid across the board. In these unprecedented times, I am pleased to report the strong cash flow generation of our portfolio companies, in the seasonally quiet first quarter, was up almost three times y-o-y to GEL 92.3 million in 1Q20.”

Food, Drinks & Household

 Compass Group – “The Covid-19 pandemic has had a profound impact on Compass. We can only exist with the commitment of our colleagues around the world, many of whom have been on the front line of the battle against the pandemic. I am extremely proud of how the organisation has responded, and I'm humbled by the commitment and dedication our people are showing, day in day out.

I want to extend my deepest sympathies to the families of those colleagues that have lost their lives to Covid-19. Since the beginning of the crisis, keeping our colleagues safe has been our overriding focus. Colleague and consumer safety will continue to guide everything we do as we move towards reopening more units over the months ahead.

The first five months covered by the results we are announcing today showed a continuation of the strong performance we reported last year, but it goes without saying that Covid-19 has changed everything. Compass is a resilient and adaptable organisation and we have moved quickly to manage cash and costs and increase liquidity. We are doing all we can to protect jobs by redeploying colleagues into units that remain open and using government job retention schemes where available.

The duration of the pandemic, and the pace at which containment measures are relaxed in different countries is unknown, which makes it a challenge to assess reliably the impact across our markets and our business. We are therefore withdrawing our previous growth and margin outlook for 2020. We remain, however, excited about the significant structural market opportunity globally and the potential for further organic revenue growth, margin improvement and returns to shareholders over time. Given the uncertainty in the short-term outlook, today we have launched a £2 billion equity raise to reduce leverage and increase our liquidity. A strong balance sheet will allow us to weather the crisis whilst continuing to invest in the business to enhance our competitive advantages, support our long-term growth prospects and further consolidate our position as the industry leader in food services. Alongside a placing to institutional shareholders, I am pleased that we are giving our valued retail investors an opportunity to participate in the fundraising through a separate retail offer.

 Greencore Group – “The Group is managing through this challenging trading environment with three priorities – keeping our people safe, feeding the UK, and protecting our flexible business. The organisation is functioning well in demanding working circumstances, with a resilient supply chain and production network enabling strong levels of customer service in a volatile demand environment.

Greencore is playing an important role in a food industry that has become a critical component of UK infrastructure through this pandemic. The Group's colleagues have been designated as 'key workers' and have performed with a powerful sense of commitment, skill, spirit, and purpose. Greencore is immensely grateful and proud of its own Food Heroes at this time. The Group is engaging continuously with regulatory bodies including the Health & Safety Executive and Public Health England, and in doing so has carried out an extensive range of measures to support and improve colleague safety across its manufacturing and distribution network. This strategy and these initiatives are consistent with the Group's broader sustainability agenda. These measures include a large number of social distancing measures in the workplace, the introduction of a range of new hygiene protocols, and the provision of support to colleagues who are working in manufacturing facilities and those who are working from home. Labour absence, either through illness or through caring for ill or vulnerable family members, has been managed effectively and sensitively.

Greencore is working hard with its customers, the Government and the local communities in which it operates to provide high quality freshly prepared food to both consumers and frontline workers during this pandemic. The Group is contributing to the Government's food parcels for the most vulnerable housebound people in the UK and is donating thousands of food to go products to NHS workers across numerous UK hospitals and care homes. In addition, it is supporting the food industry charity, FareShare, and many other local organisations and charities that provide support for those in need at this time.

Performance since period end – In the first six weeks of H2 20, the Covid-19 pandemic has had a dramatic and volatile impact on the shape of UK food consumption, though there are signs that demand patterns have recently begun to stabilise. Weekly demand in the Group's food to go categories declined by up to 70% and is currently less than 60% below prior year levels. There has been sustained growth in the Group's other convenience categories, in particular cooking sauces, with growth currently about 5% above prior year levels. Group revenue is now approximately 60% of prior year levels on a pro forma basis.

In response to these changed levels of consumer demand and in order to maintain efficient production, the Group moved rapidly to simplify its product ranges with its customers. Greencore has worked collaboratively with its customers to quickly adapt to the effects of the lockdown while maintaining customer service and working together on ways to maintain the integrity of the supply chain, while planning for activation as social restrictions begin to ease.

The Group has taken prudent measures to protect profitability and cash flow to ensure maximum flexibility through this uncertain environment. It has:

• Tightened its food to go production network by temporarily ceasing production at its Bow, Atherstone and Heathrow facilities and rationalising production at its Northampton site.

• Furloughed a substantial proportion of colleagues, using the Government's Coronavirus Job Retention Scheme.

• Eliminated all non-essential operating costs including recruitment, travel, and other variable overheads.

• Announced on 30 March that the Board and the Executive Directors have voluntarily agreed to take a 30% reduction in respective fees and base salary for a period of three months, with the wider senior teams also taking a voluntary reduction of between 10% and 20% of base salary for the same period.

The impact from the full suite of mitigating actions is now returning the Group to modestly positive EBITDA.

Liquidity – The Group is also focused on conserving balance sheet strength and liquidity, and retains substantial and increased financial headroom. Together with positive underlying market fundamentals and the Group's market position, this leaves Greencore well placed to deliver over the medium term.

Greencore had cash and undrawn committed bank facilities of £267.5m at 27 March 2020. This includes a newly agreed £75m committed debt facility that matures in March 2021.

• Since the end of H1 20, the Group secured formal agreement with its lending syndicate of banks to waive its Net debt: EBITDA covenant condition for the September 2020 and March 2021 test periods. The Group is also in advanced stages of discussions with the Private Placement holders in respect of a waiver of the September 2020 and March 2021 leverage covenants contained in the Private Placement documentation and the Group expects that an agreement in respect of such waivers will be finalised and concluded in the coming weeks.

• In addition, the Group also confirms that it has received eligibility, in principle, to access funding under the Covid Corporate Financing Facility (CCFF).

• The Group will defer a substantial portion of non-essential capital expenditure.

• As previously announced, the Group is not proceeding with an interim FY20 dividend payment and the Group today announces that it will not be proceeding with either a final FY20 or an interim FY21 dividend payment.

• Where relevant, the Group has agreed to defer cash contributions into its legacy defined benefit pension schemes.

The Group believes that this provides more than sufficient liquidity to manage through a range of different cash flow scenarios including fluctuations in working capital over the next 12 months.”

 Imperial Brands – “Overall, Covid-19 has so far had only a small impact on trading but we expect this to be more pronounced in the second half due to continued pressures on our duty free and travel retail business, changes in consumption patterns including downtrading and a reversal of some first half inventory build.

The business is well-placed to navigate the challenges arising from Covid-19, which is reinforced by the defensive qualities of tobacco and our financial stability. However, we also recognise no company is immune and there are external factors outside our control at this time, such as the severity and duration of the pandemic and how lockdown measures might affect our supply chain, retail channels and consumer behaviour. These are expected to have a more significant impact on our second half, although at this early stage it is difficult to assess their extent.

We currently estimate Covid-19 related factors will have a low single digit impact on earnings per share, in addition to current market expectations (constant currency EPS down 2%), which reflect the full year guidance given in our February AGM update.

Although there are different trends across different markets, we see three main drivers of the Covid impact that will influence the outcome:

• Market size declines have deteriorated due to significant restrictions on certain sales channels. This principally relates to a material decline in demand in our global duty free/travel retail operations with the cessation of international and cross border travel. Given the outlook for international travel, we are currently assuming no recovery in this business during the second half. The Horeca channel has also experienced declines in demand.

• There is evidence of changes to consumption and buying patterns, including increased downtrading across certain markets. We expect these trends will continue and potentially deteriorate further with recessionary pressures. However, we believe we are relatively well placed with a lower exposure to premium products within our portfolio.

• The current Covid-related restrictions on some of our manufacturing facilities have reduced their production capacity and affected their operating efficiencies. We have assumed these will be back to full capacity by the end of June. We have also assumed there is no second spike that will further disrupt other areas of our manufacturing and supply chain.

In addition, our full year results will now also reflect the impact of the intellectual property asset impairment of £19 million (c0.6% impact to EPS), which has been recognised in the first half but was not included in our previous guidance in February. We now also expect the Premium Cigar disposal will complete in July resulting in earnings dilution of c0.3% in the current year.”

 McBride – “Further to our update on 25 March 2020, demand levels in our Household business have moderated from the surge seen in many markets as countries went into lockdown but encouragingly remain above the run-rate levels seen before March. These higher demand levels are evident in most of our major markets and apply mostly to surface cleaning and dishwashing products, with more limited impact in laundry products.

Our teams have worked well to address the early challenges of staff shortages, material availability and distribution blockages and all factories are currently operating at more normal activity levels. As anticipated in our March update, we have seen lower input pricing in this period although some of this benefit has been tempered by one off Covid-19 related operating costs.

The Group's Aerosols business is benefiting from sales of new hand sanitiser products and as a result will deliver a profit improvement in the final quarter, supported by investment in additional production capacity.

As a consequence the Board now expects full year adjusted profit before tax to be approximately 15% ahead of current market expectations (*) and for net debt at 30 June 2020 to be lower than expectations.”


 Georgia Healthcare – “During the first quarter of 2020, the Group's business and focus has been substantially affected by the impact of the Covid-19 global pandemic and Georgia's response to it which has, to date, been effective and successful. Georgia's response to the virus outbreak was rapid, with swift containment measures proving critical in ensuring that Georgia has one of the lowest active ratio of Covid-19 cases per capita in the Europe. Early international flight restrictions and a full lockdown, extending to a declared State of Emergency, which will remain in place until 21 May, have led to significant negative economic pressures and an expectation of a reduction of an estimated 4% in GDP during 2020.

As the largest healthcare provider in the country, Georgia Healthcare Group has risen to the challenge of supporting the Government's efforts while, at the same time, developing significant Group-wide action plans to cater for our patients' and customers' needs, as well as to ensure the health and well-being of all of our employees.

Infection prevention and communicable disease emergency preparedness programmes and guidelines relating to hospital admission, are already established across the Group. To prevent the virus spread, employees at our hospitals, clinics and pharmacies have been given comprehensive training, including how to manage patients and customers flow. Personal protection equipment has been procured and made available in our healthcare facilities and pharmacies, with appropriate instructions.

In close co-ordination with the Government, we have made six of our hospitals (c600 beds) available across the country, for Covid-19 patients. These facilities are already prepared with properly trained medical teams, isolation wards, and fully equipped intensive and critical care units. In May, two of them already officially started to engage and receive the patients. Substantial contingency arrangements have been put in place, and further details of these are described on pages 9-10.

It is currently very difficult to estimate fully the severity of the economic impact of the Covid-19 virus and subsequent economic lockdown. The impact has, however, been different in each of the Group's businesses. In the Hospitals and Clinics businesses the most significant impact has been a meaningful reduction in patient footfall, both in terms of lower emergency treatment requirements, and the cancellation and/or postponement of many elective procedures during the lockdown. This reduction led to utilisation levels falling to between 35-40% during April, although there have been some early signs of a pick-up in treatments and utilisation rates so far in May, as the country started gradually to lift lock-down restrictions. The Pharmacy and Distribution business has been more resilient throughout the pandemic, as our pharmacies remained open throughout Georgia's initial economic lockdown and delivered a small increase in quarter on quarter sales. In the Medical Insurance business, the main impact of the last few months has been a reduction in loss ratios.

In the face of these challenges, the Group's response has been robust. Each of our businesses has stood strong and we are ensuring that the Group is well positioned to face the changing environment. We have taken number of specific actions to ensure the Group's operational stability and financial and balance sheet health, including:

• Implementing a number of Group wide cost management initiatives, such as reviewing the lease contracts terms of our pharmacies and clinics;

• Reducing certain planned capital expenditures;

• Securing a new USD 25 million loan facility from EBRD, to provide additional contingent liquidity;

• Requesting grace periods on principal payments on some existing loan facilities; and

• Deciding not to recommend an annual dividend to shareholders at the forthcoming AGM.

During the first two months of the year, our performance was demonstrating our ability to capture the benefits of our recent investments and core business strategies. In March, however, the Covid-19 impact changed many short-term business priorities, and our near-term focus has shifted to supporting the country's healthcare system to effectively manage the situation and maintain the health of the Georgian population. At the same time, we have prepared for the economic downturn, for which the Group is well positioned.”


 Avon Rubber# – “The Covid-19 pandemic presents an unprecedented challenge across industries and territories and we are very mindful of the potential effects on our key markets and locations. At this time, the safety and wellbeing of our employees and their families is our first priority and we are pleased that we have been able to ensure this whilst also limiting the impact on our business.

Both Avon Protection and milkrite | InterPuls have continued to operate throughout with only minor disruption, playing a crucial role in supporting our customers' ongoing requirements. This has only been possible with the exceptional contribution of our people and the measures put in place to ensure their safety in our facilities. As a result, there has been no material impact on our financial performance to date.

We have also been focused on maintaining the strength of our balance sheet and financial liquidity. At the half year the Group's net debt excluding lease obligations was £45.8m. We held $9.5m (£7.8m) of cash and had undrawn facilities of $19.5m (£15.8m) on our US Dollar denominated $85m (£69.5m) Revolving Credit Facility ("RCF"), resulting in headroom of $29.0m (£23.7m). We expect our financial headroom to continue to grow in the second half.

The net debt to EBITDA covenant on our RCF is a ratio of less than 3.00x (excluding lease obligations) and is tested on a rolling twelve-month basis at a calendar quarter end. At 31 March our net debt to EBITDA, on this basis, was 1.0x. We expect this ratio to reduce in the second half as we generate cash and continue to grow our earnings.”


 Antofagasta – “Announces that the Board has today decided to revise its recommendation in respect of the 2019 final dividend.

In reaching this decision, the Board has considered recent developments in relation to the spread of Covid-19 both globally and in Chile. Chile has recorded a significant increase in the number of new Covid-19 cases since 13 May and, on 15 May, the Chilean Government imposed a total quarantine over the Greater Santiago area. While these latest restrictions are not expected to have an impact on the Company's current operations, it has created additional uncertainty. The evolution of the health emergency in Chile could result in an increased risk of an escalation in quarantine provisions, which could restrict the Company's ability to move its workforce to and from its operations.

Because of this heightened uncertainty, and despite the ongoing strength of the Company's financial and operational position, the Board has decided it would be prudent to conserve cash in the Company by revising its 2019 final dividend recommendation to 7.1 cents per ordinary share (or a total of $70.0 million). This represents a reduction of 16.3 cents per share (or a total of $160.7 million) from the previous recommendation. The total dividend payment for 2019 will therefore be 17.8 cents per share, which amounts to $175.5 million, equal to a 35% payout of net earnings and in-line with Antofagasta's dividend policy.

The Board recognises the importance of the dividend to the Company's shareholders and remains committed to returning surplus cash to them and its dividend policy. In making this decision, the Board carefully considered the need to balance its responsibility towards all stakeholders, including the Company's employees, contractors, communities, suppliers and broader Chilean civil society, especially in the current environment as the health emergency in Chile moves into, what seems likely to be, a more critical phase. It is vital, for the long-term sustainability of the business that Antofagasta supports all its stakeholders in Chile and globally during these unprecedented times.

As conditions in Chile evolve, the Board will continue to monitor the progression of Covid-19 and its impact on the business, and any future dividend decisions will be made considering the prevailing situation at that time, noting the Company's priorities remain maintaining a strong balance sheet, investing in the business, supporting its local stakeholders and increasing returns to its shareholders.

This revised amount will be recommended by the Board to shareholders for approval at the Company's AGM on 20 May 2020 and will be paid on 22 May 2020 to shareholders on the register at the close of business on 24 April 2020.”


 French Connection Group – “As announced in our last update on 24 March, our stores and concessions continue to be closed, however we have been able to continue to operate our own websites in both the UK and USA with sales up 44% over the last 6 weeks, while continuing to supply a few of the predominantly online wholesale customers who are still trading, although this all makes up a small proportion of the overall business. In addition, we are starting to see a small increase in activity in Europe as countries begin to open up.

The Company has taken a number of actions to conserve cash and reduce costs given the significant reduction in sales, together with the delayed payments from many of our wholesale customers, particularly in the USA. The Company is in ongoing and generally constructive discussions with many of our key stakeholders including:

• all suppliers to confirm extending payment terms and discounts

• landlords with a view to agreeing rent holidays or deferred payments

• factories to manage the supply of future goods to match current requirements while reducing quantities to reflect the expected lower level of trade for the remainder of the year

• rescheduling payments to HMRC

We have attempted to participate in as many of the Government's support initiatives as is possible. The Job Retention Scheme for colleagues and rates relief for the store portfolio are now in place. It has however proved very challenging for us, in line with other retailers, to access any other Government funds due to the tight qualification constraints that have been imposed and to date we have been unable to access any further funding from these schemes.

In the light of the Company's current cash position and the continued expected weak trading environment, we have been in active discussions with a number of potential funding partners. The Board is confident of raising sufficient funds to support the business until the return of trading levels that are able to support the ongoing operations. This process is proceeding well and we are making good progress on due diligence and agreeing terms. Without securing additional funding and should the current Covid impacted trading levels continue, the Company's cash resources will eventually be eroded in the coming months.

We have been developing plans for when the stores re-open to ensure they do so safely and in line with all Government guidance, so that our customers and colleagues will be able to shop and work confidently in a safe and healthy environment. Given the UK Government's recent update regarding the potential phased reopening of stores from 1 June, we are planning to open up in an orderly manner to ensure everything required is in place. We look forward to returning to more normal levels of trade as the situation evolves, although we do not expect this for some time to come. Further announcements will be made as appropriate.”

 N Brown – “Trading has improved from the sudden and significant decline experienced in March with product sales down 25% in the last 6 weeks. The Board regards this performance as creditable in the circumstances and is hugely grateful for the commitment and flexibility shown by colleagues throughout the business. In the last 6 weeks, we have seen significant growth in our Home & Gift categories, up 74%, but continued weakness in apparel sales, down 48%. Within apparel, offline sales declined significantly more than digital sales.

Home & Gift sales have been supported by the launch, on 1st April, of our standalone Home brand, Home Essentials, and we look forward to providing more detail on this in our strategic brand review at the full year results in June.

Our financial services business continues to provide consistent streams of revenue and cash inflows. Through focused operational activity and the migration of more credit customers to automated payment methods, financial services cash collections have performed well and are broadly in line with the prior year. Following FCA guidance, on 14th April we offered customers in financial difficulty as a result of Covid-19 the option to defer payments for 3 months. Consequently, we expect cash collections to trend lower over the coming months. However, as a result of the flexibility provided by our new debt financing arrangements, our ability to draw on our securitisation facility will be stabilised despite a lower cash collection rate environment than previously.

The Group has taken decisive action to maximise operating efficiency and preserve liquidity and has successfully achieved the following:

• Continued operation of our distribution centres, though at lower levels of capacity than normal;

• An 80% reduction in marketing expenditure;

• A significant reduction in capital expenditure;

• The furloughing of 30% of colleagues across the business;

• Recruitment and salary freezes;

• Voluntary pay reductions from April to June for PLC Board, Management Board and senior leadership team; and

• Agreement with HMRC to defer certain tax and duty payments associated with our normal operating activities as well as certain legacy tax payments that were expected to be paid in H1 FY21.

Financing arrangements and liquidity update. The Group has financing facilities in place, comprising:

• An up to £500 million securitisation facility, secured by a charge over eligible customer receivables without recourse to the Group's other assets, drawings on which are linked to prevailing levels of eligible receivables;

• A Revolving Credit Facility ("RCF") of £125 million; and

• An overdraft facility of £27.5 million.

As at 18th May 2020, drawings under the securitisation facility and RCF stood at £512.0 million. As at the same date cash balances stood at £45.3 million and the overdraft facility was undrawn.

Today, the Group is pleased to announce new financing arrangements with its long-standing, supportive lenders:

• A new up to £50 million 3-year Term Loan facility, provided by our lenders under the Government's Coronavirus Large Business Interruption Loan Scheme ("CLBILS");

• Amendment of certain terms and covenants of the securitisation facility, to mitigate a significant amount of the impact that Covid-19 may have in 2020 on the facility. This is to address variations in collection rates and customer behaviour, and to enable the Group to continue to offer its customers enhanced flexibility. The amendments to the facility are in place until late December 2020 and are intended to fully cover the impact of the current period of the FCA's Covid-19 forbearance; and

• The widening of certain covenants at the August 2020 half-year test date in its existing unsecured £125 million RCF and the introduction of quarterly covenant tests.

The RCF and the securitisation facility are committed until September 2021 and December 2021 respectively. The Group expects to renegotiate these facilities well in advance of these dates.

The Group has modelled various scenarios, including a "severe but plausible" scenario assuming:

• Product sales down 50% year on year in April, May and June;

• Product sales down 45% in July and August and 25% to 30% down for the remainder of the 2021 financial year; and

• Collections 15% to 20% lower than we are currently experiencing, throughout the remainder of the 2021 financial year.

Under these scenarios the new financing arrangements provide the Group with a strong basis from which to continue to service its customers and to manage appropriately the challenges faced by the Group. For as long as the £50 million CLBILS facilities remain in place, the Group will be restricted from paying cash dividends. The Board does not anticipate declaring cash dividends in respect of the 2021 financial year.

Operational actions to protect our business and stakeholders – Our priority through the crisis has been to protect the health, safety and wellbeing of our colleagues and customers. Since the outbreak of Covid-19 we have managed to keep a continuous supply of goods to our customers, whilst at all times keeping colleagues safe in our distribution centres, operating at all times in line with Government guidelines.

In March and April, we made several changes to ensure continuing safe operations and to follow the Public Health England guidelines on social distancing. At our distribution centres, we re-organised the floorplan layouts to ensure social distancing, introduced one-way walkways, increased points of access and exit, staggered the entry and exit times of colleagues and laid out clear floor markings. We also significantly expanded our cleaning regime and introduced additional hand washing stations for all colleagues. We are in regular dialogue with USDAW, our trade union, with which we are working to maintain satisfactory health and safety conditions for our colleagues. Following publication of the guidelines for workplaces on 11th May 2020, we will be incorporating recommended practices and publishing our risk assessment.

Throughout the pandemic we have worked collaboratively with all of our suppliers. We continue to pay our product suppliers to contractual terms but have cancelled some orders due for SS20 given the uncertain demand backdrop. Future orders for AW20 have been rephased and, in some cases suppliers are reworking pre-ordered fabrics for more appropriate seasonal lines. In recent weeks we have started to work with suppliers on SS21 orders. We have continued to pay all other suppliers and partners to terms.”

 Portmeirion – “As the Company reported on 30 March 2020, we temporarily shut our Stoke-on-Trent ceramic factory in late March. Since that time our teams have worked to implement new safe social distancing procedures in line with Covid-19 secure guidelines issued by the government. We partially reopened the factory on 6 May 2020 at a reduced capacity in order to fulfil existing export orders, and expect to increase our capacity in the coming weeks. Our warehouses in the UK and US have continued to operate safely and efficiently, servicing our ecommerce business without any disruption.

Our UK home fragrance company Wax Lyrical repurposed production lines at its Cumbria-based factory and has continued to produce hand sanitiser for the community, NHS and pharmacies. We forecast to ship in excess of 1 million units during the second quarter of 2020.

With retail stores around the world shut down since March due to Covid-19 lockdowns, our business has been significantly impacted and we expect this to continue through the second quarter until there is clarity around how and when stores will reopen. We have continued to ship export orders to the Far East where retail stores have now reopened, and have seen a significant uplift in our online sales in the UK and US. Our own ecommerce site sales were up by more than 100% in April 2020 over the same period last year and we expect this trend to continue in the coming months.

We believe that the early and swift action we took to minimise cash burn during the Covid-19 crisis will put us in a strong position to thrive once lockdown restrictions are lifted around the world. We expect our cash burn in Q2 2020 to be less than £1 million and, as previously reported, our balance sheet remains strong with sufficient committed bank facilities and headroom.”

 Topps Tiles# – “Retail stores closed from 23 March 2020 to safeguard colleagues and customers;

Strength of supplier relationships demonstrated by flexible arrangements and continued supply – nature of product means minimal obsolescence from disruption;

Recently re-launched website has performed well, with revenues c3x pre-crisis levels, but overall retail sales down significantly during period of store closures;

Trials of new safe operating procedures commenced 22 April 2020 – 250 stores currently offering a click and collect service, and of those 130 are also allowing controlled customer entry, with strict social distancing and other protective measures in place;

Commercial business has seen a material impact from Covid-19 but has continued to trade and build new customer relationships over this period;

Board and senior management agreed a voluntary 20% reduction in base pay from April;

UK Government support schemes utilised – 90% of colleagues furloughed at peak, business rates relief and VAT deferral;

Additional £10 million loan facility through existing lenders and backed by the UK Government Coronavirus Large Business Interruption Loan Scheme ("CLBILS") credit approved and to be finalised shortly, including a substantial relaxing or removal of covenant conditions over the next 12 months; and

Robust liquidity position with option for further funding through asset sales in event of extended disruption. Cash headroom as at 28 March 2020 stood at £21.7 million, and is currently at £14.0 million, cash consumption since the half year primarily driven by unwinding of working capital cycle and the earlier timing of the half year end date.”

Support Services

 DCC – “The Covid-19 pandemic and the global measures being taken to mitigate its impact have resulted in unprecedented change for DCC's employees, customers and business operations. All DCC operations, deemed essential operations by local governments, have successfully invoked their business continuity plans and are operating effectively, albeit in a much-changed environment. The commitment of DCC's employees during such a difficult and uncertain period has been extremely evident and has ensured that our customers continue to receive our essential products and services. Protecting the health, safety and well-being of employees, ensuring the continued supply of these essential products and services to customers, whilst maintaining DCC's very strong financial position, are the Group's key priorities at this time.

With restrictions introduced in all countries where the Group operates, each division of DCC has experienced changed demand patterns. This resulted in significant demand increases in some areas, with significant declines in others. The strong trading performance of the Group in March 2020 benefited from increased demand for essential heating and healthcare products, with negative impacts most apparent later in the month in reduced demand for retail transport fuels and certain consumer technology products.”

 HomeServe – “The Covid-19 crisis is still an evolving situation which all businesses are actively tackling in a number of different respects. For example ensuring technology is available to support staff working from home, ensuring that engineers on the front line can complete repairs whilst protecting themselves and our customers and ensuring that supplier relationships are maintained safely and appropriately to deliver the necessary protective equipment and parts and materials.

As a risk that has crystallised, Covid-19 is categorised neither as an enterprise level risk nor as an emerging risk. However, consideration is being given to a wider emerging risk of the potential for other pandemics in the future. The work undertaken to switch to home working and maintain emergency repairs is being reviewed as is the impact on sales volumes, claims volumes, cancellation rates and a number of other KPIs and metrics. The results of this analysis will inform not only short-term return to work plans but also longer-term risk monitoring approaches and mitigations.

Having demonstrated in the short term that we were able to respond quickly and effectively to keep operations functioning and maintain good levels of service in all businesses, key to the longer term prospects of the Group will be the resilience of the model and consumer behaviour. In previous periods of consumer uncertainty and economic downturn, for example during the financial crisis in c2008 to 2009, little negative impact on business performance was observed and the model remained resilient.

Impacts have so far been more pronounced on the Home Experts businesses but the portfolio effect of different business lines, and four main Membership businesses situated in different countries affords a good degree of protection for the Group as a whole and the longer-term prospects for Home Experts, including Checkatrade's milestone targets remain unchanged. Underpinning the resilience of the Membership model is the type of customer it attracts; policy buyers like to protect themselves from unforeseen expenses and the difficulty of getting a good tradesman out quickly. The additional requirement to find a provider who can perform repairs whilst adhering to strict health and hygiene guidance is an extra factor customers now need to consider.

The Group has a strong balance sheet and retains a range of financing facilities with medium to long-term maturities, which provide access to additional resources across a range of currencies. With over £330m of headroom against its debt facilities, liquidity is healthy and the Group is well positioned to face the ongoing challenges of Covid-19.”

 Renew Holdings – “Where it remains safe to do so we continue to operate across the majority of our sectors; albeit some disruption has been inevitable. In Rail and Highways, which account for the majority of our engineering activity, we are working closely with our public sector customers in areas designated critical to the Covid-19 response. We continue to see clear commitment and ongoing demand for our directly delivered maintenance and renewal services. Water and Telecommunications have also been designated 'critical sectors' and our key workers continue to be deployed across all network areas where we have framework contracts. In total, approximately 80% of our activities have continued as they are in areas deemed critical to the Covid-19 response.

In response to the escalation of the Covid-19 pandemic, the Board has been focused on taking actions to preserve cash and protect liquidity in a way that does not compromise the long-term prospects of the business. These include deferral of all non-essential capital expenditure, a hiring freeze, deferral of VAT payments (£2.6m deferred in March 2020), utilisation of the Government's Coronavirus Job Retention Scheme (c15% of the workforce furloughed) and a temporary 20% reduction in the salaries of the Board and senior management from 1 April 2020. As stated in the trading update on 1 April 2020, the Board has suspended payment of the interim dividend, which would ordinarily have been paid to shareholders in July 2020. We understand the importance of the dividend to our shareholders and will keep our dividend policy under review in the coming months.

The Group recently refinanced its working capital facilities as part of the acquisition of Carnell Support Services ("Carnell") in January 2020 and now has a revolving credit facility ("RCF") provided by HSBC and NatWest of £44.2m, expiring in January 2024. In addition, the Group has a £10m unsecured overdraft facility. As at 31 March 2020, headroom in our available facilities was approximately £55m, plus a £15m uncommitted accordion facility on the RCF. The Group's cash generation has continued to be strong since the end of March with our regulated public sector customers adhering to the Government's Public Procurement Notice guidelines, that encourages prompt payment.

In order to provide a picture of the impact Covid-19 has had on our various market sectors we have provided a specific commentary in each of the following sector reviews. In general, while there is naturally some disruption, the Group's inherently defensive qualities are providing a good degree of resilience in these unprecedented circumstances.”


 First Derivatives – “Towards the end of our financial year, we successfully implemented our pandemic plan in response to Covid-19, protecting the health and wellbeing of our employees and supporting our customers. The Group issued a trading statement on 9 April 2020 relating to the impact of Covid-19 and the mitigating actions it has taken to maintain productivity and ensure financial liquidity.

In summary, by transitioning employees to remote working the Group has not seen any material financial impact on revenue to date. Sales cycles across the Group have lengthened, and we continue to monitor the impact of this on the likely financial performance for the current year. We have conducted a scenario testing exercise with a range of assumptions including a severe, extended downturn in economic activity that showed that even in this scenario the Group remains profitable and cash generative.

Notwithstanding the comfort provided by our scenario testing, the Group has acted to mitigate any future potential impact of Covid-19, including suspending non-essential business travel and deferral of the summer graduate intake. The Executive Directors will not receive a bonus payment relating to the financial year to 29 February 2020 and as noted above, the Board has determined not to recommend a final dividend payment for the year. To ensure liquidity, on 24 March 2020 we drew down £35m from our available finance facility. These funds have been placed on deposit and the Group has significant headroom on its covenants, with a further £15m of undrawn revolving credit facilities available to it.

Current trading and outlook – We entered the current financial year with a strong pipeline, good momentum and a clear strategy that provided confidence in delivering a year of strong growth. While Covid-19 has had no material financial impact to date, we have seen a lengthening of sales cycles, although it remains too early to determine the probable impact on our full year performance. We have a robust balance sheet and high levels of financial liquidity that leave us well positioned to weather the challenge and continue to invest and grow the business.

In the short term, our high levels of repeat and recurring revenue provide some mitigation from the impact of Covid-19. In the longer term, FD remains confident in its strategy and the growing demand for its world-class Kx streaming analytics from both potential customers and partners.”

 Micro Focus International – “Micro Focus expects to report revenue of approximately $1.45bn for the first half, which represents a decline of approximately 11% on a constant currency basis when compared to the six months ended 30 April 2019.

This is consistent with the guidance given at the time of our preliminary results on 4 February 2020, taking into account the expected disruption to new sales activity, which we highlighted in our Covid-19 update of 18 March 2020. The Group identified a slowdown in customer buying behaviour in April 2020 leading to the deferral of some projects involving new licence and services revenues as well as delays to some maintenance renewals. The identifiable impact of this is estimated to be at least 2% on revenues in the period.

The impact of this revenue reduction on Adjusted EBITDA (after IFRS 16)* has been largely mitigated due to the close management of variable and discretionary costs in addition to a reduction in certain costs as a direct result of Covid-19. As such, our Adjusted EBITDA margin (after IFRS 16)* of approximately 38% in the period was towards the upper end of our expectations.”

 Quixant – “During this period of disruption to our business, the health and wellbeing of our staff is our highest priority, and we are pleased to report that our staff members continue to operate normally having transitioned smoothly to remote working wherever appropriate.

As previously stated, the global gaming industry remains largely closed down and consequentially demand for Quixant's gaming products has been impacted and receivables collection has been slower than normal. Positive signs of recovery are starting to show and from week commencing 11th May, we started to see the first reopening of venues in the US and robust attendance from players.

The Densitron business is performing well with healthy demand for its products in a range of sectors and coupled with robust gross margins. In keeping with this performance, Densitron has not experienced any material reduction in customer payments.

The Board believes that once we start to see the gradual reopening of more of the economy, multiple opportunities across the Gaming and Densitron businesses to deliver long term growth will present themselves and we are ensuring that the business is in an ideal position to take advantage of these opportunities when they arise.”

Lifting restrictions

• Portugal has reopened cafes, restaurants and many more shops, in a new phase of easing restrictions. Crèches have also reopened, with children removing shoes at the door and smaller groups in each room. In schools, some face-to-face classes have resumed for older pupils.


• US President Donald Trump has sent a letter to the WHO chief executive Dr Tedros, a 30-day deadline to make “major changes”, or the US would permanently cut off funding to the organisation.

• The World Health Assembly has agreed to an independent investigation into the World Health Organization's response to the global coronavirus pandemic.

• In April, only 271,000 new cars were registered in the EU, 76% fewer than in the same month last year according to the European Automobile Manufacturers Association. Across the first four months of the year, new registrations fell by 38.5%.

• The number of people claiming unemployment benefit in the UK has risen by 856,500 to 2.1m last month according to the ONS. Also the number of job vacancies fell by nearly a quarter to 637,000 in the three months to April.

• The government of New Zealand is considering giving an additional holiday to boost domestic tourism, according to Prime Minister Jacinda Ardern.

• Protesters and police in the Chilean capital of Santiago have clashed amid tension over food shortages in lockdown. A recent surge in cases prompted the national capital to go under a strict and total lockdown this weekend.

• France and Germany are proposing a €500bn European recovery fund that will be aimed at the worst affected EU countries.

• India and Bangladesh are evacuating millions of people from coastal areas ahead of a super cyclone that is approaching from the Bay of Bengal. Cyclone Amphan is expected to make landfall in an area near the border of the two countries later on Wednesday. The coronavirus outbreak is making it harder for officials in both countries to evacuate people in these regions.

• The US Centers for Disease Control and Prevention (CDC) is planning a nationwide study from up to 325,000 people to track how coronavirus is spreading across the US. Researchers will take samples over the course of 18 months.

#corporate client of Peel Hunt