Coronavirus - Making hay

Ever since the UK government allowed both essential and non-essential stores to reopen, queues have been forming across car parks and down highstreets as patrons patiently wait to enter.

This practice has become part and parcel of everyday life and has given some businesses a vital injection of funds. However, it should be noted that May had the most hours of sunshine on record, making this an easy adaptation. The weather looks to be taking a turn for the worse, at least in the short term, and it will be interesting to see if these queues continue to form in the rain. British summer weather is notoriously fickle, hopefully consumers will be less so.


• China’s service sector rebounds

• UK confirms 14-day quarantine on travellers from 8 June

• Global air passenger traffic rose 30% in May vs April (IATA)

• Italy lifts travel restrictions

• Air pollution in China back to pre-lockdown levels

• Sweden suggests it should have followed a different strategy

• Berlin sees R0 rise to 1.95

Company news

Buildings & Construction

 Forterra – ‘Since our announcement of 28 April 2020, we have been encouraged by a gradual increase in despatches as our customers reopened their operations. Daily despatches of our brick & block products have now recovered to approximately 50% of corresponding 2019 levels. Group revenue declined by 39% for the five months to 31 May 2020 compared with the corresponding period in 2019, with a year-on-year decline of 86% in April and 62% in May.

We are currently manufacturing at twelve of our eighteen facilities and are preparing to further increase production as demand requires. We anticipate recommencing production at most of our remaining facilities by the end of July and retain full flexibility to reopen facilities sooner should demand increase at a faster rate than expected.

Restructuring - Economic and industry forecasts indicate a prolonged impact from Covid-19 on the UK economy and more specifically the construction sector. Although the Construction Products Association’s most recent forecast anticipates the residential construction market will recover during 2021, output in 2021 is forecast to be approximately 20% lower than in 2019.

Accordingly, we are taking steps to restructure the Group’s operations in line with the anticipated decline in medium-term demand. In the coming weeks we will consult with employees on our plans, which include proposed changes to shift patterns and adjustments to the size and structure of support functions. Additionally, these proposals include consolidating the manufacture of all precast concrete flooring products at our Hoveringham facility in Nottinghamshire. This proposal will necessitate the mothballing of our hollowcore flooring manufacturing facility at Swadlincote in Derbyshire once the current order book is completed. These proposals will not affect our ability to service key customers or our specialist precast concrete facility at Swadlincote. These actions, if implemented, will regrettably lead to the loss of approximately 225 jobs, primarily from our concrete products facilities.

Balance sheet and liquidity - The Group entered the Covid-19 crisis with net debt (pre IFRS 16) of £43.2m at 31 December 2019.

The Group has access to a £150m revolving credit facility which runs to July 2022, which is presently fully drawn. At 31 May 2020 the Group had cash reserves of £79m as well as access to an undrawn overdraft facility of £10m.

In addition, Forterra plc has been confirmed as eligible for the joint HM Treasury and Bank of England Covid Corporate Financing Facility (CCFF) with an issuer limit of £175 million and is now able to access the liquidity available under this facility. The Board does not have any present intention to draw upon this facility, which provides the Group with additional headroom if required.’

 Ibstock – ‘Sales volumes during the first 10 weeks of the year were, as anticipated, modestly below the comparative period as we entered 2020 against the backdrop of more subdued market conditions. The Group saw a sharp decline in sales volumes from late March as the Government measures to control the Covid-19 pandemic began to take effect and our construction and housebuilding customers closed sites. During April, volumes in our Clay division fell by around 90% year on year, whilst exposure to infrastructure and RMI markets meant that volumes in our Concrete division remained relatively more resilient during that period.

As the construction and housebuilding sectors have begun to return to work over recent weeks, trading conditions have started to improve. We have seen a modest recovery in clay brick sales although volumes currently remain around 70% below the comparative period. Concrete volumes are now at around 50% of those from the same period in 2019.

Overall, Group revenues for the three months to 31 March 2020 were down by approximately 10% compared to the comparative period, with a decline of around 75% in the two months to 31 May 2020.

Operations - As announced on 15 May 2020, the Group has developed new working practices and protocols, which reflect the latest guidance from the Government and public health authorities. This has allowed the recommencement of production at approximately one third of our manufacturing sites in response to customer demand. The Group will keep demand levels under close review and is able to restart production at further manufacturing sites over the coming months as required.

The Group has taken significant action to address the challenges presented by Covid-19. These measures have included utilising the Government’s Coronavirus Job Retention Scheme for a significant portion of colleagues during the shutdown period, reducing discretionary spend wherever possible and implementing a temporary salary reduction for the Board and the executive leadership team.

In addition, in order to ensure that the business remains well positioned as it emerges from the current crisis, we are conducting a review of all operations. This review is expected to lead to a material reduction in the Group’s fixed cost base, through selective site closures, changes in operating patterns and changes to the size and structure of support functions. We have entered into consultations with employees across the Group as part of a series of restructuring proposals, with up to 375 positions, representing around 15 per cent of the Group’s total workforce, potentially impacted as a result of these actions.

Whilst the changes anticipated will ensure our business is adapted to the near-term industry demand outlook, we retain the flexibility to scale production back up, as and when demand recovers.

Financial position - In addition to actions taken to reduce costs, the Group is continuing to prioritise liquidity and the preservation of cash to enhance its financial resilience and flexibility in response to Covid-19. In particular, this has included close management of working capital and deferral of non-essential capital expenditure and tax payments as allowed by Government schemes. As a result, net debt at 31 May 2020 was approximately £105 million, primarily reflecting seasonal working capital movements early in the year, and the Group continues to have significant liquidity headroom within its £215 million revolving credit facility (“RCF”), which expires in March 2022.

To maintain financial flexibility, the Group has secured agreement from its lending banks for a number of amendments to covenant tests under the Group’s RCF1. The Group is also pleased to announce that it has been confirmed as eligible in principle to access funding under the Covid Corporate Financing Facility (“CCFF”), subject to the Bank of England approving relevant documentation.

Outlook - With the health and safety of our colleagues remaining our top priority, the phased return to production is underway, to support our customers and help the UK construction sector get building again.

Current trading conditions remain difficult but the combination of the cost reductions, restructuring measures and improved liquidity have strengthened the Group’s ability to meet current challenges and benefit from the eventual recovery in its core markets.

As a result of current unprecedented levels of uncertainty, it is not possible to provide an accurate assessment of the trading outlook for the current year, and accordingly, guidance remains withdrawn.


 ASA International – ‘Lockdowns in Pakistan, Ghana, Kenya, Nigeria, Myanmar, Rwanda, Sri Lanka, Sierra Leone, Tanzania and the Philippines have ended or relaxed, which enabled us to re-open our branches and resume our field activities. The only two countries which have not resumed operations yet are India, which plans to start collections on 1 June, and Uganda. Collection efficiency up to 28 May has been relatively strong and is increasing in the countries that have resumed operations.

We are pleased that almost all countries have emerged from the lockdowns and resumed operations. Fortunately, collection efficiency has been relatively high and is gradually increasing. This gives us confidence that, assuming operations normalize over time, we may come out of this crisis stronger and strategically well-positioned for ongoing sustainable growth.

Assuming the spread of COVID-19 does not accelerate and there are no further restrictions on our operations, we expect that business activities in most of our operating countries will normalize during the course of the year.

In preparation for the resumption of field operations, we adjusted our operating procedures by restructuring our client groups meetings into smaller groups (4-5 clients maximum) and/or organizing the collection of loan instalments through the group leader. Based on prior experience with restrictions in conducting client meetings due to natural calamities and/or other disruptive events, we expect that the long-term operational and financial impact of these changes will be limited.

In addition, we encourage clients to pay loan instalments via mobile phone operated or online payment platforms, which already is taking place in Kenya and Tanzania via M-Pesa. With the rollout of AMBS, our core banking system, expected to be completed across all our operating entities by July 2020, we plan to accelerate the integration of low-cost payment platforms, such as M-Pesa, with AMBS. Once integrated with AMBS, we will be able to seamlessly disburse loans and collect regular loan instalments through mobile phone or digital payment platforms. While the transaction cost remains relatively high, we believe that the benefits for our clients and the Group in the new post Covid-19 environment outweigh the additional cost.

We also are reviewing other payment options as is being pursued in India where we already disburse all loans into our clients’ bank accounts and now are in the process of securing direct debit instructions for the payment of loan instalments as well.

We are confident that our ability to source funding for our operations will not be jeopardized by Covid-19. We are in active and positive dialogue with all our major lenders, the majority of whom are large, global microfinance investment funds and government owned development finance institutions who have long and established relationships with us and who are as committed as we are to increase financial inclusion. Many of our existing lenders already confirmed that they are ready to continue funding our operations with new loans. Since 1 March 2020, we secured over USD 25m of new loans and, as of the end of May, we have more than USD 108m of loan agreements in the pipeline across the Group, subject to final negotiation and agreement. In addition, as of 28 May 2020, we maintain USD 91.8m of unrestricted cash and cash equivalents across the Group available for lending to our clients.’


 Instem – ‘With both staff and customers based in China, some directly in Wuhan, Instem’s Business Continuity team was engaged at the early stages of the pandemic. Our first priority was to address personal safety and then to ensure business continuity for both Instem and our clients. Our Business Continuity team has continued to spearhead our response as the crisis has escalated and spread worldwide.

Like most businesses, we have been closely following and implementing the advice of agencies, such as the World Health Organization and US Centers for Disease Control & Prevention, and quickly introduced international and domestic travel bans, as well as policies to increase hygiene and social distancing. We required staff with even mild symptoms to stay at, or work from home and thus far our operations have not been materially impacted.

While these measures have had some impact on client-related site work, we have worked collaboratively with our customers to find ways to complete much of this work remotely. In some cases, this is increasing efficiency as we save on both the time and expense of international travel and we hope to see some enduring benefits as we, and our clients, realise how much can be achieved in this way.

Instem is fortunate to have invested heavily over the last 5 years in technology that supports our widely dispersed workforce and the many staff that already work entirely, or frequently, from home. Our regulatory compliant framework, certification to quality standard ISO 9001 and information security management standard ISO 27001, all require us to have a risk management and business continuity mindset embedded in the organisation. We also reflect these requirements with the operational partners on whom we rely, and they have confirmed their ability to continue to support Instem and our clients during this crisis.

We have quickly, but carefully, moved to a position where all of our staff are working from home, keeping ahead of those locations where governmental mandatory “work from home” and/or “shelter at home” is now in place. As a business supporting critical, life enhancing/sustaining scientific research and development such as the activities we are now routinely undertaking to produce SEND submissions for Covid-19 related drugs and vaccines, we believe that we will likely retain the right to attend our offices; however our personnel are only doing so in exceptional circumstances. We are starting to see some limited domestic travel to sites in China, to satisfy prior client commitments, as business there returns to a “new normal”.

While most of our staff are working equally efficiently remotely, we are addressing situations where staff need to balance home working with caring for children at home or other dependents, and also occasions where external network connectivity is challenged as entire regions are restricted to home working and schooling.

The immediate disruption to client operations, as they determined how to adopt safe working practices for their essential laboratory staff and transitioned other staff to home working, seems to be largely behind us. Some new business opportunities have been delayed, principally those in the early phase clinical and academic sectors, although most 2020 opportunities remain within the year and, to date, no pipeline opportunities have been cancelled altogether by clients.

While we cannot be certain what the impact will be of a sustained period of global business disruption, at this point, we believe that Instem and the majority of our clients are well positioned to successfully manage their way through it.

One particularly beneficial impact of the extensive work-from-home restrictions has been a significant improvement in the ability for our boutique corporate finance partner to contact principals in potential acquisition targets, as part of their target identification and qualification assignment. It has also facilitated follow-on meetings for the Instem team with those businesses deemed interesting, with ongoing dialogue across a number of potentially interesting opportunities. Surveys of strategic and financial buyers are suggesting that acquisition valuation multiples have reduced as a consequence of COVID-19, which may help unlock some opportunities for Instem.’


 Chemring Group – ‘In the US, the UK and Norway, Chemring’s operations have been designated as critical to the defence and national security industrial base, and in Australia the risk of business interruption is considered to be low. All our businesses remain open, with business continuity plans mobilised at every location. We continue to make every effort to maintain delivery of essential services and manufacturing production in support of our customers.

Customers - We are proud of the essential contribution that Chemring makes to the ongoing defence and national security missions of our customers and we are committed to supporting them throughout this crisis and beyond.

The Group has a strong order book with order cover for the remainder of the 2020 financial year of 95%. In the first half of 2020, order intake was £250m, which was 1% up on the same period last year leaving the Group with an order book of £504m.

Our manufacturing businesses continue to work closely with their customer representatives to deliver timely testing and acceptance of products. To date we have worked through some Covid-19 related disruptions where customer representatives have not been able to complete product acceptance procedures on a timely basis and going forward this presents a risk of some short-term revenue deferrals. Our wide geographic and customer base provides some mitigation to this potential short-term risk.

Forward guidance - The duration and impact of Covid-19 across our home markets is at this stage unknown, and we are clearly working in a changing and more challenging environment. We will continue to work closely with our customers, suppliers and other stakeholders, and will provide further updates as appropriate.’


 DP Eurasia – ‘In both of its core markets, the Group continues to operate under government mandated operational constraints due to Covid-19 and remains focused upon ensuring the safety of its staff and customers. As a result of these operational constraints, dine-in service has been unavailable in both countries and take-away has been greatly reduced, especially in Russia. Delivery system sales have increased by 19% in Turkey and have remained flat in Russia during the post-COVID period (16 March - 31 May 2020) compared to the same period last year.

In Turkey, the Group has been able to operate a consistent delivery service even during weekend and long-weekend curfews, which have continued to be in effect. The number of cities under curfew, which started with 31 cities, has been decreasing over the last few weekends except for the 23-26 May long weekend of Eid holiday, when the entire country was placed under curfew. Take-away service has also been available with the exception of curfew periods. Excluding ten stores located in shopping malls, all Turkish stores are currently operational, and the government lifted the dine-in restriction in restaurants as at 1 June 2020.

In Russia, 26 stores remain temporarily closed for reasons of labour optimisation. All other stores continue to provide delivery and take-away services, though Russia has been under strict lockdown measures which have been extended to 15 June 2020. The actions undertaken as part of the Group’s Russian plan have been showing progress in delivery; however, the impact of Covid-19 is making it difficult to gauge the full benefits of the Russian plan.

As steps to ease governmental restrictions are being taken in Turkey, the Group is experiencing a pick-up in take-away sales in the cities where weekend curfews are being lifted. The government also lifted the ban for dine-in as at 1 June 2020. Whilst Russia is behind Turkey in terms of starting this normalisation process, the Group is more comfortable that a full shut down of its stores in its markets in the future is a very remote possibility. Assuming that the current operational constraints do not significantly worsen, the Group remains confident in its plans for business continuity and cash flow.’


 Goco Group# – ‘GoCompare May car insurance volumes started to recover year-on-year, while brand spend and activity was adjusted in line with consumer behaviour ie what people wanted to see or engage with.

Behaviours impacting insurance comparison started to revert to previous patterns:

• Car insurance search volumes in Google started to recover in May with search volume flat year-on-year, having declined by c25% on average post lockdown. This is reflective of more people shopping around and we expect a further increase from car sales forecourts opening on 1 June

• In line with previous years’ seasonality, searches for motorbike insurance significantly improved in May (+1% vs. 2019), reflecting riders getting back on the road

• Studies show that people did delay buying insurance policies during Covid-19 (6% delayed purchase), but their intent is still to purchase post the crisis (60% plan to repurchase as the outbreak decreases)

Despite some return to work and increasing normalised patterns of work at home, there has been little shift back to previous behaviours relating to device, and time and day of week, suggesting that even though people are searching more, they are adopting new life behaviours.

Until the UK’s travel guidance is updated, travel Insurance services will remain unavailable.

TV and mass media marketing costs fell significantly in Q2, as advertisers stopped spending and people’s viewing habits changed. Within this environment, the Group believes that the £250 excess initiative remains very relevant as people head back onto the roads.’

Real Estate

 Town Centre Securities# – ‘For the cumulative rent payments that have fallen due since the outbreak of Covid-19, of the £6.6m rent and service charge billed we have collected £5.0m or 75%, with a further £0.7m (or 11% of payments) that we have agreed to defer, totalling £5.7m or 86% of the amounts due

Of the £0.9m remaining (out of £6.6m):

• We have agreed certain concessions over £0.3m of this outstanding amount, in return for an improvement in the terms or length of the lease

• Of the balance of £0.6m, we continue to attempt to come to a fair and equitable conclusion with the respective tenants

As previously disclosed, our CitiPark car parking business has been hardest hit so far, experiencing a material reduction in income. Despite detailed cost cutting measures including the temporary closure of seven branches, the impact of fixed costs such as rents and rates will result in a significant reduction in profitability

Over a third of our retail and leisure portfolio, which makes up just less than half of the asset base, is currently open and trading. At the Merrion Centre this continues to increase and now stands at approximately 43%. We are now making detailed plans in order to be ready to open all of our locations from 15 June, in line with government guidelines.’


 Angling Direct – ‘The impact of Covid-19 led to the closure of our 36 stores, but our online business has seen excellent growth and we have been able to fulfil the increasing number of orders as a consequence of the prior investment made in automation within our distribution centre, as well as our online customer experience. We are now in the process of preparing to open our stores safely, as we work in accordance with government advice to protect our staff and customers.

It is impossible to accurately predict the ongoing impact of the Covid-19 pandemic, but we have modelled a number of scenarios to ensure that we can successfully navigate through our view on what represents a ‘worst case’ trading environment. I am very optimistic about the on-going growth prospects for the Group, underpinned by the resilience and expertise of our colleagues and of the strong Angling Direct brand. We exist to serve our communities and now restrictions are relaxed, I expect that anglers will be eager to return to the waterside.

Covid-19 aside, the Board has taken progressive steps to create further operational efficiencies and address the challenges inherent in all rapidly growing businesses. We continue to focus on these steps and the opportunity to grow revenue and margins both in the UK and internationally.’

 SSP Group – ‘Covid-19 had a significant impact on SSP’s results for the first half of the current financial year. Prior to the onset of Covid-19, the Group had performed well and in line with expectations, delivering solid like-for-like sales growth and significant net contract gains, particularly in North America and Continental Europe. New contracts won during the first half, including those at Dublin, Cincinnati, Providence and Edmonton Airports, further strengthened our new business pipeline.

As indicated in our February and March updates, we began to see a material impact on trading in our Asia Pacific region from the escalation of the virus in late January and throughout February, following which trading then deteriorated rapidly across the entire Group during March as the impact of the pandemic spread across the world.

First half revenue decreased by 2.7% year on year on a constant currency basis, comprising a like-for-like sales reduction of 8.4% offset by net contract gains of 5.7%. At actual exchange rates, total revenue fell by 3.7%, to £1,214.6m.

The Group’s trading performance during the first half has been overshadowed by the very damaging impact of Covid-19, which we estimate has reduced first half sales by approximately £145-150m. Prior to seeing the initial impact from the virus in China towards the end of January, we had enjoyed a good start to the new financial year, with like-for-like sales growth of 1.2% during the first quarter of this year, in line with our expectations, despite the external headwinds noted in the second half of last year in Continental Europe and in the Rest of the World continuing into the autumn. Like-for-like sales growth in the UK and North America remained robust, driven by increasing passenger numbers. First quarter like-for like sales in Continental Europe were also affected by the transport strikes across France during December and January.

In the second quarter, like-for-like sales decreased by 18.5%, with the Group’s performance impacted significantly by the development of Covid-19. As indicated in our February trading update, we began to see a material impact on trading in our Asia-Pacific region (which accounted for around 8% of Group sales) from the escalation of the virus during late January and throughout February. Trading then deteriorated rapidly across the entire group during March as the impact of the pandemic spread across the world. By the final few days of March, as lockdowns and travel restrictions were implemented around the world, like-for-like sales had decreased by over 90% across all regions.

Despite the impact of Covid-19, net gains made a strong contribution to sales during the first half, particularly in North America and in Continental Europe, driven by the significant new contract openings last year. Furthermore, new openings during the second quarter and those planned for the second half were expected to drive significant further net gains in the remainder of the year, which were expected to be over 6% for the full year, prior to Covid-19. Those openings during the second quarter included outlets in Australia and Germany following the acquisitions of the Red Rock operations in Perth and Melbourne Airports and the Station Food rail business in Germany.

As we enter the recovery phase, there are many opportunities for SSP. With a global presence and operations across food, beverage and retail in multiple formats, we are well placed to respond to the recovery in demand. Our first priority continues to be the health and safety of our colleagues and customers. Key to that is confidence building and we are doing that by implementing new hygiene and safety protocols and new operational and social distancing measures. Staff are being trained to deal with the new environment, and our visual signage clearly sets out the safety measures we have in place.

Our approach to re-opening units will be systematic, so that we deliver the brands and the offer that customers want to eat and drink in the way they want to be served. Importantly, we will look to open units selectively in the larger multi-unit locations, which characterise the majority of our business, and therefore ensure that we can operate profitably even at lower levels of footfall. We expect that during the re-opening phase profitability will be further supported by the removal of minimum annual guarantees and concession fee reductions, as well as simplifying our operations and agreeing lower franchise fees with our brand partners.

We are also focused on simplifying the structures and processes within our business and reducing discretionary spend. We will continue to invest in technology where that will further simplify our processes and support our efficiency plans. Importantly, we will continue to engage closely with our teams, keeping them fully informed, and we will continue to support the communities in which we operate.’

 Vertu Motors – ‘Manufacturers rely upon their retail franchise dealer network to deliver their products to end users and to provide essential aftersales care. There is very little sign that this will not continue long into the future, primarily due to the capital investment required to have the necessary physical presence and the complexity of organising businesses across every geography across the globe. The Manufacturers have enough challenges for investment (exacerbated by the current crisis) and so the development of revolutionary new distribution models is considered unlikely. Indeed, the level of assistance by Manufacturers to their retail networks during the pandemic has been significant and gives evidence of their desire to support and maintain their existing distribution model.

This does not mean that there will be no changes in the composition and structure of the UK’s franchise dealer network. We expect a continued tendency for the number of UK franchised dealer outlets to decline and this may indeed progress more quickly now. Manufacturers will seek simplification in their networks, choosing to work with fewer, larger retail partners of scale which best deliver on their objectives. The positive relationships the Group has established with Manufacturer partners means it is well placed to take advantage of this ongoing consolidation. In terms of representation, a more fluid representation plan is anticipated to emerge, more suited to local market conditions (rather than a one-size-fits-all approach across varying geographies), which could involve the development of market areas, large dealership hubs, used car only operations, local aftersales only facilities, potentially combined with localised delivery points. These trends are likely to enhance sales per sales outlets for the remaining network representation points.

To deliver long-term value to the Group’s owners, the Group’s strategy is to continue to grow through acquiring both volume and premium franchised dealerships. The Board believes that the benefits of scale in the sector are increasing over time. Scale benefits include: a national online and offline co-ordinated marketing strategy, based on strong brands, to maximise the benefits of the Group’s unique national footprint, online platforms, scaled highly efficient contact centres, franchise management dedication, purchasing efficiencies and access to competitive consumer finance packages for the Group’s customers.

Post lockdown sales outlook - The longer-term consequences of the virus on retail and fleet demand are not known, however, the use of public transport and shared mobility may become less attractive, due to the risks of close contact with others, increasing demand for vehicles for personal mobility using private cars. In contrast, increased flexibility of the workforce in future may reduce the demand for transport as more are able and choose to work from home. The evolution of the UK vehicle parc going forward will be impacted by these factors.

Supply side impacts on new vehicles are also currently difficult to predict. Many Manufacturers temporarily closed production lines during the pandemic. Supply chains have been disrupted and are likely to take time to recover to previous levels. With Manufacturers already stretched in terms of their investment in alternative power trains, the impact of this disruption upon their liquidity, investment levels and ability to stimulate markets may also be significant. Carmakers in Europe have commenced the restart of production with the introduction of improved cleaning and protective practices. Experience in China to date points to manufacturing resuming relatively quickly, with most factories now reopened but with reduced output. The scale of the production ramp up in Europe will determine the scale of new car sales in the coming months and the level of supply in the market will also have an impact on used car pricing dynamics.

A reduction in the UK new vehicle market in 2020 is certain, given the significant falls in March through to May. Current SMMT forecasts are for the new car market to fall 27% from 2.31m to 1.69m in 2020 and light commercial vehicles are also expected to see a similar volume reduction of 28% from 0.366m to 0.263m units. This is likely to have a significant impact on the level of sales volumes achievable by the Group during the FY21 financial year.

Looking to the experience in China, new retail vehicle demand has seen a return to a little over half previous levels in their early days of recovery post virus. This continues to improve and there is also optimism in China that the new car market there will return to close to last year levels by the summer. Certainly the rise of PCP financing in the UK sector in new cars in recent years also creates a useful impetus to the new car change cycle, which is more pronounced than previously and could help to underpin new car demand in the months ahead.

One material consideration on future trading would be whether the UK Government seeks to kickstart new car demand through an incentive scheme in partnership with the Manufacturers. The introduction of an incentive programme may favourably change sector outlook in the short term.

It is likely for a number of reasons that the UK market for used vehicles will recover quickly in the short term as movement restrictions are lifted. Pent-up demand, aversion to public transport and the increased staycations in the UK may all come into play here. By way of illustration, a recent Autotrader survey indicated that 56% of UK holders of driving licenses, who did not own a car, were actively considering a purchase. Online activity during the lockdown has been robust as activity from other normal enquiry routes was shifted online and used car pricing has been remarkably stable to date. The robustness of the used car market in terms of volumes and pricing is also likely to be aided by a potential curtailment of new vehicle production referred to above. It is difficult to forecast where used car pricing will go in months following the re-opening of showrooms.

Clearly, the medium-term robustness of both the new and used car markets will be impacted by economic growth trends and changes in employment rates. Higher unemployment levels tend to reduce demand for cars in the UK, as less people need a car to get to work. A recessionary environment could also drive consumers to be more cautious, reduce spending and increase saving ratios. Finance providers may also become more risk averse so the market may see more finance declines impacting sales. The used car market tends to be more resilient than the new car market in such environments as people trade down to the former from the latter.

Current trading and outlook summary - Vertu has well located dealerships, works with the right Manufacturers, with which it has good relationships, has sector leading omni-channel capabilities, supportive banks, and very motivated colleagues.

We are monitoring data daily and meticulous planning has been undertaken for the re-opening of dealerships in a safe and socially distanced way, with customer and colleague safety paramount and with a phasing of the return to work of colleagues from furlough leave to match demand from customers.

The month of March initially tracked well with good vehicle sales demand for the first two weeks of the month before dipping in the week running up to lockdown. Manufacturers’ supported the Group with enhanced or guaranteed bonuses and paid out on reduced volumes. Adjusted profit before tax delivered in the month was £5.9m, well below normal levels.

With lockdown severely impacting operations, April and May saw combined losses incurred of £20m, which were significantly improved on the Group’s initial forecasts at the start of the Covid-19 crisis.

Cashflow performance has been the focus of the Group during lockdown and the Board are delighted with the progress made in collecting receivables, delivering stock and controlling costs. Cash levels have been significantly higher than the Group’s initial forecasts with cash balances at 22 May of £44.7m, up from £30.0m disclosed on 7 May.

Given the heightened uncertainty of any forecast at this current time, it is inappropriate to provide any guidance with respect to market expectations.’


 Wizz Air Holdings – ‘The beginning of the new financial year brought significant challenges for the entire airline industry: the coronavirus pandemic led to widespread travel restrictions across Europe and, as a result, brought air travel largely to a halt. Our decisions and actions during these unprecedented times are guided by our commitment to preserve a lean and agile organisation that has a history of outperforming the market. As such, we are focused on maintaining our strong balance sheet, protecting our cash balance and increasing capacity as soon as possible. Our strong liquidity position means that we are able to sustain the business throughout this crisis and take advantage of market opportunities as they arise: • Wizz Air’s balance sheet is one of the strongest in the industry, with €1.5 billion of total cash at the end of March 2020.

• Further liquidity has been secured by raising £300 million under the UK Government’s Covid Corporate Financing Facility (CCFF) in April 2020.

• Immediate cost mitigation measures put in place include the reduction in third-party spending, overhead and discretionary spending as well as non-essential capital expenditure.

• We reduced the number of employees by 19 per cent in the short term, in order to adjust the size of the company to the current circumstances.

However, longer term it is expected that the workforce will be increased as the industry recovers and Wizz Air resumes its growth trajectory.

We are able to scale up operations quickly thanks to our agile setup:

• We can stimulate traffic with low fares due to our ultra-low cost base.

• The majority of our passengers belong to a younger demographic that travels abroad regularly for work and to visit friends and relatives, which are more sustainable sources of traffic than tourism.

• We are reviewing our aircraft allocation and will react to the new market reality by taking advantage of opportunities across Europe as other carriers withdraw capacity.

Despite difficult conditions, we expect to grow the number of seats by roughly 9% compared to 2020, in line with the growth of the fleet to 131 aircraft by March 2021. While we do not expect a positive development in terms of ASKs and profit margin in the fiscal year 2021, we are not in a position to give guidance on net profit at this point due to the continued uncertainty regarding the duration and impact of the coronavirus pandemic. Company performance in 2021 is largely dependent on the level of flying permitted throughout the summer period, as well as the revenue performance in the second half of the 2021 fiscal year, a period for which the Company, like most airlines, currently has limited visibility.

Nevertheless, we remain confident that Wizz Air will emerge from this crisis as an even more formidable company. Our agility has been clearly demonstrated over the past months, as we have been actively involved in humanitarian missions and operated in geographies outside our markets. Since the outbreak of the coronavirus Wizz Air has worked with various governments to offer repatriation flights for their citizens in Europe, Central Asia, North Africa and North America. The Company has also operated a number of flights between China and CEE to deliver medical supplies.’

Lifting restrictions

• Italy has reopened its borders and ended travel restrictions between regions within the country. Italy will open its borders to tourists from most other European countries.

• Free movement between the Czech Republic and Slovenia will be restored from midnight tonight.

• Guernsey became the first place in the British Isles to reopen pubs.

• All schools in Wales will reopen on 29 June, the education minister has said. However, only a third of pupils will be in school at any one time.


• China’s service sector has bounced back above 50 for the first time since January. The Caixin/Markit services purchasing managers’ index rose to 55.0 in May, from 44.4 in April. However, employment and overseas demand remains weak in the economy.

• Sweden’s chief epidemiologist, Anders Tegnell, has conceded that too many have died in Sweden. Sweden has the highest per-capita death rate from coronavirus in the world.

• A team from London’s Guy’s and St Thomas’ hospital and King’s College are running a trial to see if ibuprofen can help hospital patients who are sick with coronavirus.

• The R0 has risen to 1.95 in Berlin, authorities have said, meaning each infected person in the German capital is passing the virus on to nearly two others. German Health Minister Dilek Kolat said it showed a “trend reversal”.

• Universities in the UK are setting out plans for social distancing when campuses reopen in the autumn. Students may have to live and study with the same small group of people.

• The Premier League has given clubs permission to play friendly matches, with strict restrictions, before the restart on 17 June.

• South Korea has also announced another supplementary budget to help the economy through the crisis. In it has announced an additional $29bn stimulus raising the total stimulus to $221bn. The government’s support measures are equivalent to around 14% of the country’s GDP and are aimed at anything from protecting jobs and granting loans to business, to developing a vaccine against the virus.

• Australia’s GDP shrank 0.3% in Q1 due to bushfires and the early stages of the virus’ impact. June quarter results are expected to show a greater impact - the Australian treasury has estimated a GDP hit of over 10%.

• Commercial flights are to return to London City Airport by the end of this month. The airport announced that domestic routes should be the first to resume. International flights should restart early next month but the timing “may depend on the proposed quarantine of passengers arriving into the UK”, according to the statement.

#corporate client of Peel Hunt