Coronavirus - Practice makes perfect

Global cases are continuing to rise, likely as a function of lockdown restrictions being eased and increased testing capacity.

However, it should be noted that deaths are continuing to fall both globally and in the UK. There was further goods news today as a global study has found the first drug proven to increase survivability in severe cases. As more time passes healthcare systems will inevitably become better at dealing with the virus and thus reducing deaths, hopefully making any second wave far less severe.


• First drug proven to cut Covid-19 deaths is found by a global study

• UK unemployment rises to 2.4m

• UK furlough claims top £20bn

• US FDA withdraws approval for hydroxychloroquine

• Beijing increases lockdown measures

Company news

Buildings & Construction

 Epwin Group– ‘Since our announcement on 28 May 2020, the Group has continued to return its manufacturing and distribution sites to operation. All sites are now operational to some degree as we ramp up activity cautiously to meet demand levels. Market demand is returning, albeit at significantly lower levels than before the Covid-19 pandemic and that which would usually be expected at this time of the year.

The Group’s balance sheet remains strong. Available cash and facility headroom as at 16 June 2020 remains at c£45 million, unchanged from the level as at 31 March 2020 reported in the Group’s final results announcement of 23 April 2020.

The Group’s banking facilities, which were increased last year, total £75m. The Board has not sought to increase these bank facilities further nor access other sources of funding, as it believes its available headroom provides sufficient liquidity based on current analysis and the support of its various stakeholders.

As previously stated, the impact of Covid-19 will inevitably have a material impact on trading for the current year and it is still too soon to quantify this at this stage. Therefore, in line with other businesses in the sector, all market guidance and forecasts remain withdrawn’.


 Circassia# – ‘In the first five months of 2020 NIOX® revenues were impacted in nearly all markets during the Covid-19 outbreak, although the extent varied by territory and timing of local restrictions. Global revenues declined 34% compared with the same period in 2019, largely driven by falls of 69% in China and 62% in research sales. Revenues in the US and UK slowed, decreasing 36% and 21% respectively. The impact was lesser in Germany and partner markets, where sales were only 11% and 7% lower than the same period in 2019. In April and May 2020, revenues recovered modestly in a number of countries as restrictions were gradually lifted, but remained well below the same period in 2019 at both a global and local level. While it remains highly challenging to predict revenue trajectory, early signs of recovery in certain markets offer some signs of encouragement. As a result of the coronavirus-related downturn, the Company anticipates that the NIOX® business will burn cash for a period before becoming both profitable and cash generative in the medium term.

On 2 June 2020, the Company announced that it had concluded an equity financing facility with two of its principal shareholders to allow it to access up to £5m until 30 November 2020 at a price of 24.6p per share. This provides the Company with access to additional funding should this be required in the coming months.’

 Oxford BioDynamics – ‘Shortly after the period end, in April 2020, the Company announced the selection of its EpiSwitch™ platform for prognostic and predictive profiling of Covid-19 patients in the GETAFIX clinical study, in collaboration with the University of Glasgow. As well as seeking a biomarker profile to predict likely response to the anti-viral treatment Favipiravir, OBD plans to develop a predictive disease severity classifier, to help identify patients who may be at increased risk of serious illness or death as

a result of overreaction of their immune systems in so-called ‘cytokine storms’. These occur when the response of the body goes into overdrive triggering excessive release of key regulators of inflammation - cytokines, leading to tissue damage by the patient’s own immune system. Cytokine storms are well-known complications in a number of diseases such as flu, SARS, or sepsis and similar reactions are observed in patients with multiple sclerosis, pancreatitis, or as a common side effect of IO treatments such as CAR-Ts and TCRs. We believe such a classifier could therefore have broad clinical utility and significant commercial potential.

In addition to its involvement in the research-driven fight against Covid-19, the Group set out its operational response to the current pandemic in our business update on 21 May 2020. We restate here that the Covid-19 pandemic has already had an impact, which is expected to continue, on the timing of certain existing projects, directly as a result of delays in receipt of blood samples, especially from cohorts of patients who are considered particularly vulnerable to serious illness from a Covid-19 infection. In addition, travel restrictions worldwide have impacted business development activity. The likely severity and duration of the pandemic and its impact on OBD’s customers’ activities remains uncertain.

Notwithstanding these issues, the Group is in a strong position to navigate the current crisis, with cash and fixed-term deposits at 31 March 2020 of £13.9m, sufficient to fund planned activity for several years. To date, none of the Company’s UK employees has been put on furlough. Activity has continued on several projects including the receipt, in April 2020, of the first 500 patient samples to be analysed under the master services agreement announced on 20 December 2019 (referred to below). The Company continues to do everything possible to keep its employees safe. Our most recent risk assessments have allowed us cautiously to increase the number of laboratory personnel permitted to work at our facilities, while still following strict social distancing rules’.


 Dialight – ‘Our manufacturing facilities remain open. We continue to meet government-mandated health and safety requirements and the well-being of our employees remains a high priority.

Current trading - In recent weeks we have experienced generally improving, but volatile, order intake, especially in the US. We are starting to see early signs of project business and our MRO orders have continued to strengthen, demonstrating a significant increase in our market share.

Due to the temporary closure of our facilities in April our order book is higher than we had expected, but we are increasing deliveries to customers week-on-week and have reduced the overdue backlog. We are operating our Mexico facilities with reduced headcount and additional shifts, which has enabled us to ramp up production levels to near pre-Covid-19 levels. There have been additional costs incurred in complying with government guidelines, critical in maintaining the ‘essential’ status of all our facilities globally.

While, to date, component supply has been resilient, we have chosen to temporarily increase purchases of crucial inventory. A number of our suppliers are not fully operational and the long lead times for transportation has made it necessary to ensure business continuity in these uncertain times. We continue to monitor the supply chain situation closely’.

 Ilika – ‘In our RNS of 9 June 2020, we reported that we expected our Stereax pilot line for miniature cells at the University of Southampton to re-open shortly and we are pleased to announce that this facility has re-opened as of 15 June 2020. We are deploying similar practices at the Stereax pilot facility to those we have used successfully at our headquarters. We are continuing to communicate regularly with our Stereax customers to advise them of the measures we have taken and the likely impact on delivery times of evaluation samples. As a result, we are pleased to confirm that we have not received any order cancellations and our expectations for FY21 remain unchanged’.

 Renold# – ‘The first impact of the Covid-19 pandemic occurred in the Group’s Chinese operations. Following the normal closure of the Chinese factory for the Chinese Spring Festival in January, the government enforced lockdown resulted in almost four weeks of additional closure. This closure reduced sales to domestic Chinese markets and created some disruption in the Group’s supply chains for Chinese-manufactured product. In addition, our Australasian Chain businesses source some products from other Chinese suppliers, and the extended shutdown resulted in delayed supply of product to them.

Upon release of the Chinese lockdown, operations in our Chinese factory recovered quickly with minimal supply chain disruption and slightly outperformed our expectations in March 2020.

As the Covid-19 pandemic spread around the world, governments took different approaches resulting in inconsistent impacts in different parts of the world. New Zealand, Malaysia and India enforced complete lockdowns, including requirements for complete closure of factories. Across Europe, our manufacturing sites remained open, but with increased levels of absence as school closures resulted in childcare responsibilities for a number of employees and as strict self-isolation procedures were applied. Our US sites followed state requirements, which resulted in different approaches. Our Chain factory in Tennessee remained open, designated as an essential supplier. Our Torque Transmission manufacturing site in New York State initially closed but then partially reopened as an essential business. As lockdowns have started to be relaxed across the world, all our locations have reopened.

The geographically different Covid-19 restrictions and the speed with which they have been introduced has required our management teams around the world to quickly assess the impact and requirements on a localised basis. Throughout this period, our highest priority has been the safety and welfare of our employees. Each location has established a Covid-19 operational planning team with best practice and learning being shared across the different geographic teams. The solutions implemented differ by location but include employees not required in our factories working from home, changes to shift patterns to reduce the number of individuals on site at any point in time, changes to operational processes to ensure social distancing is enforced and strict approaches to self-isolation for individuals who are at risk of having been exposed to anybody showing symptoms or having been diagnosed as having the virus.

As we enter the new financial year, the Covid-19 pandemic is causing significant disruptions to our end markets and their respective supply chains, with customer demand falling as activity levels have reduced. In expectation of falling demand, a number of actions have been implemented to reduce costs and preserve cash. These include:

• suspending all discretionary spend and restricting non-committed capital expenditure;

• flexing working hours or operational headcount to match labour to demand;

• re-phasing or renegotiating payments on leased properties, direct and indirect tax payments and recovery of over-estimated corporate taxes where paid on account;

• agreeing, with the scheme Trustee, a deferral of contributions to the UK pension fund for 12 months; and

• temporary pay reductions for indirect employees, including a 25% reduction for the Executive Directors and 20% for the Non-Executive Directors.

The above actions include making use of government support packages being provided in different territories, particularly the UK, Germany and USA, where we have sought to avoid redundancies where possible.

In addition to the actions noted above to reduce costs and preserve cash, we have also worked with our banks to revise covenant structures creating additional flexibility in uncertain operating conditions. More details of these temporary changes to borrowing facilities are outlined in the Finance Director’s Review.

At 31 March 2020, our committed borrowing facilities were £65.5m and the Group had headroom of £13.1m under these committed facilities in addition to £15.6m of cash. Following the early stages of implementation of the cash preservation actions noted above, the Group’s net debt at 31 May 2020 was £35.8m, being £0.8m lower than at 31 March 2020. The Group was profitable in both April and May 2020’.


 Cineworld – ‘With several blockbuster movies including Tenet and Mulan now confirmed for release in the coming weeks, Cineworld is pleased to announce plans that will see it reopen cinemas across some territories during the last week of June, with all theatres expected to be open over the course of July.

Amidst the ongoing Covid-19 crisis, Cineworld’s main priority remains the health and well-being of both our customers and colleagues. As a result, it has made several operational changes and invested in new technology to ensure a safe but enjoyable cinematic experience for all our visitors.

Among the new measures introduced, we have updated our booking system to ensure social distancing within and throughout our auditoriums; adapted our daily movie schedules to manage queues and avoid the build-up of crowds in our lobbies; and enhanced our cleanliness and sanitation procedures across all of our sites.

We have outlined below the scheduled opening dates, however these are subject to final clarifications and confirmation in relation to various government Covid-19 restrictions in certain territories:

• Unites States: 10 July

• United Kingdom: 10 July

• Poland: 3 July

• Czech Republic: 26 June

• Slovakia: 26 June

• Israel: 9 July

• Bulgaria: 3 July

• Hungary and Romania: to be confirmed (anticipated for week of 3 July)’.


 4imprint# – ‘In our last Covid-19 update issued on 7 April 2020, we noted that the spread of the pandemic and associated ‘Safer at Home’ or similar directives had resulted in order counts reducing to about 20% of prior year levels. As the partial or full lifting of these restrictions began in many US states in May and early June, weekly order counts have steadily increased and are now approaching 50% of the 2019 comparative. Importantly, we continue to acquire new customers and the new-to-existing customer ratio has remained broadly stable over this period.

Since the beginning of the pandemic, we have continued to provide excellent service to our customers through an expanded ‘work from home’ capability. Our two US locations in Oshkosh, Wisconsin and our office in Manchester, UK have now reopened. Where practical, however, team members continue to work from home, allowing us to implement robust social distancing protocols in our facilities. In line with our culture, the health, safety and wellbeing of our people remains our top priority, and we have continued to prioritise the retention of our team members throughout this difficult period. Our team is ready and very motivated to service the recovering demand that we are seeing.

Cash conservation was a clear focus for the Group early in the Covid-19 crisis. Action has been taken to control discretionary and capital spend. We executed a thoughtful and effective recalibration of the marketing strategy to significantly decrease marketing investment throughout the period yet stay connected with our existing customers and maintain our brand awareness. This strategy has also given us the flexibility to ramp up the marketing as justified by market conditions.

The Group’s balance sheet and liquidity position remain strong. At the end of May 2020, the Group had cash balances of $28.1m, and no debt. This is after the payment in May of the $9.4m planned lump sum contribution to the Group’s defined benefit pension plan. We also have a working capital facility of $20m.

The Group intends to announce its half-year results for the 26 weeks ended 27 June 2020 on Thursday 13 August 2020. In the meantime, the Board remains confident in 4imprint’s strategy, business model and market position, culminating in the delivery of longer-term value for all stakeholders’.


 Greggs – ‘In recent weeks we have successfully operated a small number of shops and tested various operational changes, including new workwear, equipment and social distancing measures, that will support the safety of our teams and customers when we open shops at scale. Our team has done an outstanding job and the trials have been well received by both our colleagues and our customers, whilst providing valuable learning to allow us to refine our new processes. Phased re-opening plan - We have been working to the following phased plan for the re-opening of our shops:

1. Early May - commence trial at a small number of shops to test new social distancing measures and operational processes.

2. Mid-June - a larger scale opening of selected shops with new procedures and equipment.

3. Early July - plan to re-open the rest of the shop estate.

In line with this plan we intend to re-open around 800 shops to takeaway customers later this week, on Thursday 18 June. All team members are being trained in the range of operational changes and protective measures that we have implemented across our retail estate, including:

• Floor markings and signage to help customers maintain social distancing

• Protective screens at our counters

• Availability of protective workwear for our teams

• Additional, more frequent, cleaning measures

• Availability of hand sanitiser

• Encouragement of contactless card payment

Social distancing impact - We are not able to predict the impact of social distancing on our ability to trade or on customer demand. However, our capacity to operate will be restricted by size of shop and we must anticipate that sales may be lower than normal for some time.

This will require us to maintain a proportion of our colleagues on furlough, either fully or partially, until sales levels begin returning to normal. In anticipation of lower sales, we have limited our initial product range to our best sellers and therefore a number of our manufacturing operational teams will remain furloughed until demand reaches a level that justifies the addition of remaining product lines.

Strategic decisions - During the closure period we have reviewed our immediate strategic priorities and made a number of key decisions while we continue to assess the longer-term implications of this crisis on our strategic planning:

With uncertainty in the sales outlook we have temporarily suspended our new shop opening programme with the exception of a few shops where we are already legally committed or we anticipate strong customer traffic. As a result, we now expect to open c60 shops and close c50 over the year as a whole.

We have reviewed our existing estate and are approaching landlords making a variety of proposals in return for rent reductions. All landlords have been informed of our plan to move to monthly rent payments from June. We made our full quarterly rent payment in March as usual.

With digital shopping channels becoming more important we have accelerated our development of ‘delivery’ and ‘click and collect’ services. Included in this week’s reopening plan are 19 shops that will re-open for ‘delivery’ and ‘click and collect’ transactions, and we will extend these services to further catchments as soon as possible. Finally, we have continued with the investment in our new robotic frozen logistics facility in the North East, which will significantly improve efficiency under all trading conditions’.

 Joules# – ‘Since early March, the Group has been focused on managing both the immediate and longer-term impact of Covid-19 on the business. The foremost priority throughout this period has remained the safety and wellbeing of colleagues, customers, business partners and communities.

From 23 March until after the Period end, the entire Joules store portfolio was closed alongside the stores of its UK wholesale partners in accordance with UK Government guidance. Trading conditions in the brand’s key international markets, Germany and the U.S., experienced similarly high levels of disruption. The Group’s UK e-commerce channel has remained available to customers throughout the lockdown period but has operated with constrained warehouse capacity to ensure strict compliance with physical distancing and hygiene guidelines.

Reflecting the material Covid-19 related impact on the Group’s operations from mid-March as well as significant uncertainty regarding the near-term outlook, the Board planned for a range of trading scenarios. The Board is pleased to update that e-commerce demand from the start of lockdown to the end of the Period was significantly ahead of expectations and was more than 40% higher than the comparable period last year. In addition, over the same period, the Group’s collection of wholesale receivables was better than previously anticipated.

The Board believes that this performance during these extremely challenging trading conditions is a testament to the strength of the Joules brand, which it believes is more relevant to its customers than ever, and the substantial investment made in the business over a prolonged period of time.

Financial position - The Group has taken a significant number of actions to reduce costs and conserve cash throughout the ongoing pandemic disruption. These actions continue to involve the cooperation of many of the Group’s key stakeholders including stock suppliers, non-stock suppliers, landlords, and employees and we remain very grateful for their ongoing support.

The Group has worked collaboratively with its product suppliers to reduce its Autumn/Winter 2020 inventory commitments and to add greater flexibility to the Spring/Summer 2021 inventory commitments. This will enable the business to adjust the value of its stock purchasing closer to the season when management anticipate having better visibility of trading conditions.

The Group closed the Period with an inventory position marginally lower than the prior year. The closing inventory balance consisted primarily of current and future season stock and, as previously announced, the Group intends to carry forward a proportion of the current Spring/Summer inventory to future seasons.

In addition to the cash preservation initiatives implemented by the Group, on 3 April, Joules announced a successful equity placing to raise gross proceeds of £15m. On 21 April, the Group was also pleased to announce the completion of a £15m increase to its revolving credit facility with Barclays Bank plc.

As a result of these actions, as well as the better than anticipated trading during the period since lockdown, the Group ended FY20 with net cash of £4m and headroom of £53m against committed borrowing facilities. The Board is pleased with this cashflow performance, which is ahead of its Covid-19 base case scenario and significantly ahead of its Covid-19 downside scenario. The Board expects that, in line with expectations, this net cash position will reduce over the coming months due to seasonal working capital funding requirements and the repayment of amounts due to HMRC and landlords that were deferred as part of the Group’s Covid-19 mitigation actions’.

Support Services

 Ashtead Group – ‘While trading volumes were lower in the second half of March and April as a result of the pandemic, this has been mitigated, in part, by emergency response efforts throughout our business units but particularly within our specialty businesses. Sunbelt Rentals is designated as an essential business in the US, UK and Canada, supporting government and private sector responses to the pandemic. This includes providing vital equipment and services to first responders, hospitals, alternative care facilities, testing sites, food services and telecommunications and utility companies, while continuing to service ongoing construction sites and increased facility maintenance and cleaning.

As a result of these market dynamics, rental revenue for Sunbelt US in March was 3% higher (2% on a billings per day basis) than prior year and in April was 12% lower than prior year. This is due principally to the general tool business being 15% lower than prior year in April, while the specialty businesses (excluding oil and gas) were 9% higher than last year, with the reduction in the general tool business being driven by declines in volume rather than rental rates. This contributed to Group rental revenue in the fourth quarter 1% lower than the prior year at constant exchange rates. The degree of impact on volume has varied significantly across different markets and is correlated to the severity of infection rates and associated market level restrictions. Since 10 April, we have seen US fleet on rent stabilise and then increase as our markets adjust to new working practices and restrictions eased gradually. The trend has been similar in the UK and Canada. As a result, US May rental revenue was 14% (8% on a billings per day basis) lower than last year.

In early March we took steps to optimise cash flow, reduce operating costs and strengthen further our liquidity position including, but not limited to reducing planned capital expenditure for the year ending April 2021, suspending all current and prospective M&A activity, pausing our share buyback programme, implementing a group wide freeze on new hires and reducing discretionary staff costs, use of third party freight haulers and other operating expenditures consistent with reduced activity levels. We now expect capital expenditure of c£500m in 2020/21. In addition, on 24 April 2020, we accessed an additional $500m of liquidity through the Group’s senior secured credit facility, increasing the facility size to $4.6bn for the next twelve months.

A skilled workforce is instrumental to the Group’s long-term success and we have made every effort to preserve our committed workforce for the impending recovery. Therefore, we have not made any team members redundant as a result of the impact of Covid-19 and have not sought assistance from government support programmes such as the UK’s Coronavirus Job Retention Scheme or similar schemes in Canada.

Looking forward, we believe that the impact of the Covid-19 pandemic will continue to give rise to market uncertainties over the coming months. However, with strong market positions in all our markets, supported by good quality fleets and a strong financial position, we believe that we are well positioned to respond to this market uncertainty and continue to support our customers and team members’.

 Keller Group – ‘As announced on 23 April 2020, overall trading for the first quarter was better than our expectations, and materially better than the prior year. This was despite a deterioration in activity during the second half of March as the impacts of Covid-19 were felt across the group.

Trading during the second quarter to date has been resilient, with the impact of Covid-19 being less significant on the group overall than first anticipated. The impact has varied across the group’s geographic markets. In North America whilst some states have imposed tight restrictions, other states have not, and overall the vast majority of sites on which we are working have remained open. In EMEA, there has been a variation by country, with an earlier and more significant impact overall. In APAC, India and Singapore have experienced countrywide lockdowns whereas Australia has largely remained operational throughout. Markets in APAC and EMEA are now emerging more decisively from the lockdown restrictions than North America, which in contrast remains regionally variable.

The measures that we have put in place since the start of the Covid-19 pandemic have strengthened our resilience and minimised both the human and financial impact of the crisis. These measures include enhanced safety protocols, operating cost reductions, cancellation of discretionary projects, reduced capital expenditure and an even greater focus on working capital. We have selectively accessed relevant governmental support schemes across our major markets. In the UK, the level of support has not been material in the overall group context. To date we have not seen a deterioration in our receivables profile and have actively managed our investment in capital and revenue projects. As a result we have maintained our characteristically strong cash flow performance during the period.

The group order book remains steady at c£1bn. Recent project wins include the award of a $90m two-year contract for the Hampton Roads Bridge Tunnel Expansion Project in Virginia, US. During the second quarter we have experienced some increase in the level of contract deferrals and cancellations across the group, whilst in North America we have seen increased pricing pressure in some areas. We continue to closely monitor the level of tendering activity and both the pace and margin at which the order book is replenished’.

 RPS Group – ‘As previously announced, RPS has taken prudent steps to reduce costs and contain cash outflow. These have included cancelling the 2019 final dividend, suspending planned work on the ERP system, deferring 2020 salary increases and 2019 senior leadership bonuses, temporary reductions in pay or hours or placing employees on furlough, and ceasing all non-essential capex and discretionary operating expenditure.

Today RPS provides the following update for April and May 2020:

Net bank borrowings - At 29 May 2020, net bank borrowings were £77.2m (31 March 2020: £102.8m, 31 May 2019: £105.2m). This decrease since March 2020 is a result of the steps taken to contain the cash impact of Covid-19, accessing government support mechanisms and Covid-19 tax deferral arrangements, and focusing on accelerating cash collection, with many government clients paying well within terms. Revolving credit facility (‘RCF’) - The further £60.0m of RCF, available for 12 months, announced on 27 April 2020, was taken as an insurance policy should RPS require further financial flexibility at this time. To date, RPS has not had to draw down these funds due to the proactive actions that the Group has taken. The financial headroom in respect of committed bank facilities as at 29 May 2020 was £119.8m, which is in addition to £19.9m of cash held on that date.

Fee revenue - RPS generates over 50% of Fee Revenue from government or quasi-government work and colleagues continue to work effectively from a mix of office, home and client environments. This has and continues to provide some resilience to the impact of Covid-19 on the Group.

As anticipated, Fee Revenue in April and May 2020 decreased compared to the same period in 2019 by c17% (at constant currency). This is in line with management’s Covid-19 impact modelling undertaken in March 2020.

The Q2 20 Trading Update in July will provide commentary on segment performance for the quarter.

Outlook - As announced on 27 April 2020, due to the rapidly evolving nature of the Covid-19 pandemic it is not possible to forecast the full extent of the impact on the Group and our markets. Therefore, RPS will not be providing guidance for the 2020 financial year until the duration and extent of this impact becomes clearer. RPS will continue to keep the market up to date’.


 Team17 Group – ‘The Company has experienced strong sales traction during the period. This good performance has been delivered against the backdrop of the global Covid-19 pandemic and subsequent lockdown. During these unprecedented times the Company has seen above-expected demand for its back catalogue, which has outperformed pre Covid-19 expectations, especially at the height of the lockdown during April and May.

In addition, further sales traction and increased playtime was generated across our more socially orientated or multi-player co-op and online games, which has enhanced earnings specifically on key franchise titles such as Worms, Overcooked and The Escapists alongside 2019 new game IPs Golf with Your Friends, Hell Let Loose and the recently released Moving Out.

Covid-19 update and key highlights H1 - Throughout the impact of Covid-19, our priority has been the safety and wellbeing of our Teamsters and our partners. We are extremely proud of how our teams moved to seamlessly switch to remote working as various lockdowns were imposed globally. Their performance has been terrific, and as a testament to how well the Company has responded, we will not be seeking a speedy return to office-based working until we are certain it will be permanent and most importantly safe.

Yippee Entertainment Limited (“Yippee”), which was acquired in January 2020, is now fully integrated with the team 100% focussed on Team17 games. In addition to Yippee actively recruiting as we seek to expand our second UK development studio location, we have also maintained our broader recruitment targets during the period.

Our successful greenlight process has thrived during the lockdown period with new highly successful virtual gaming events being held to combat the loss of physical events such as the Game Developers Conference and others, and we now have more games in later stage discussion than at any other time in our history. We continue to increase the number of games viewed and assessed and can confirm that we have signed an additional seven new games in the first half of the year for release in future years. This includes for the first-time partners in Mexico and Russia which is testament to how respected our award-winning games label is for delivering excellent results for our label partners around the world.

Importantly, our development and commercial teams have successfully launched three new games during remote working with Moving Out and Golf with Your Friends (console) being released as planned in April and May respectively. Furthermore, on 11 June 2020, Main Assembly was launched into early access on Steam. We have continued to support our back catalogue portfolio with a number of paid and free downloadable content throughout the first half which shows the strengths of our lifecycle management, QA, development, production and marketing teams across an ever-growing portfolio of 300+ digital revenue lines.

Outlook - Despite the challenges generated by Covid-19 we are delighted with an excellent start to FY20 and, as previously announced, we have a solid pipeline of new releases weighted towards the second half of 2020. We have more games in development across our label than at any time in our history, including owned IP and are engaging with more partners seeking to have their games be part of our label and continue to see more new gamers playing our games and franchises during Covid-19.

Gaming has historically shown good resistance in uncertain economic situations; however, we are in unprecedented times. We have started to see the unusually high levels of demand during April and May returning to a more normal level. Covid-19 has proven the resilience of the business during this period, however, there clearly remains a degree of uncertainty as to the longevity and socio-economic effects of Covid-19 on our markets. This, combined with next generation consoles and new IP launches across H2, creates a more unpredictable backdrop to maximise the best commercial opportunities for each game both digitally and physically.

As such, the Board believes it is too early to assess what impact the strong trading in recent months may have on the full year results given the unpredictable trading environment due to Covid-19. Team17 will announce half-year results for the six months ended 30 June 2020 on 10 September 2020’.


 Telecom Plus# – ‘Recent Trading - Performance since our trading update issued on 21 April has been encouraging, with churn remaining significantly below the elevated levels seen during the previous quarter. We are also seeing a progressive improvement in Partner activity and confidence as they become increasingly proficient at signing people up remotely for both our customer and Partner propositions.

The general disruption caused by the lockdown led to a small reduction in our net customer base during April and May, although this has now started to reverse, with new Partner recruitment running over 40% ahead of the same period last year.

These trends support our current expectation for a modest recovery in customer numbers over the coming months whilst the country remains in partial lockdown, with a gentle acceleration thereafter. Energy Prices - The level of the Price Cap is expected to fall on 1 October 2020 by around £100, significantly narrowing the gap between our standard energy prices (which are set at a sustainable discount to the Ofgem ‘fair price’) and the cheapest deals at the bottom of the market.

With many independent suppliers continuing to set their retail prices at whatever level is required to attract new customers on price comparison sites, irrespective of the impact this is having on their profitability and cashflow, we have started to see record losses (in aggregate amounting to over £450m) being reported in their latest published accounts. Over 20 suppliers have left the market over the last two years, and in the absence of strong balance sheets to absorb their continuing losses, further insolvencies seem inevitable.

Outlook - We remain uniquely well positioned to continue to build shareholder value over both the near term and the years ahead, with a diverse portfolio of essential household services, a motivated Partner network, a unique integrated multi-utility business model, market leading levels of customer retention, and a strong balance sheet. These attributes have enabled us to build an exceptionally high-quality customer base, and provide significant confidence over our future earnings stream.

The income opportunity we offer our Partners has historically proven highly resilient during recessionary periods, with increasing numbers of people looking to replace and/or supplement their traditional sources of income. This is expected to manifest itself in a further uplift in Partner recruitment and faster growth in new Members, as the economic reality of Covid-19 starts to bite.

Historically the Board has always provided forward guidance, and believe it is appropriate that we should continue to do so. However, we would emphasise that current uncertainties relating to the impact of Covid-19 make the range of possible outcomes for the current year much wider than usual.

On the assumption that social distancing restrictions continue to be progressively lifted (and are not subsequently retightened), and with a modest increase in bad debts, we expect the profit outturn for FY21 to be marginally below the level just reported for FY20, in line with previous guidance. On that basis, and in the absence of unforeseen circumstances, we expect to maintain the dividend at 57p per share for the current year’.


 Residential Secure Income – ‘The Company paid a final dividend of 3.10p per Ordinary Share for the financial year ended 31 October 2019, representing a 24% increase over the final dividend paid the previous year.

The global spread of the Covid-19 virus and the subsequent changes to social behaviour and economic policies have been the most significant considerations for investors over the period. The underperformance of high dividend yield stocks has been a notable feature across global equity markets. Despite strong evidence that the pressure to cut dividends in Japan is much less than many of its international peers, price weakness of stocks with higher distributions to shareholders has also been very apparent in Japan. This reflects the fact that many of the companies in question have business models which are potentially most exposed to the immediate changes in the behaviour of individuals and potentially the negative consequences of higher credit risk.

The most significant detractors to performance over the period have been stocks whose business focus is most exposed to the social and economic developments since the outbreak became a global pandemic. The rise in credit risk has negative ramifications for the financial and real estate sectors and the Company’s exposure to companies in these segments was detrimental to relative performance. The combined weighting in these sectors at the end of February was over 25%. The consequences of the restriction on social interaction has also been particularly relevant for the portfolio given its exposure to a number of companies in the leisure and consumer staples industries which have experienced unprecedented business conditions prevailing under international lockdowns and the domestic ‘State of Emergency’. The Company has had longstanding positions in many of the companies affected and despite some reductions in position sizing as the situation developed, the portfolio was unable to avoid the impact of the sharp share price falls.

The most significant share price declines and the majority of the recent aggregate underperformance has occurred in the Real Estate Investment Trust (“REIT”) sector. The holdings of the Company suffered disproportionately, given that two of the positions, Japan Hotel REIT and Invincible Investment, specialise almost exclusively in hotel assets. Operating trends for the accommodation industry in recent years have been favourable given the strong demand from domestic business and leisure travel together with the significant rise in the number of foreign visitors to Japan. Demand all but disappeared in the last quarter impacting the immediate operating and financial performance of these holdings. The near-term prospects are uncertain even if previous financial crises and natural disasters have demonstrated that positive trends are resilient in the long term. The REIT as an asset class has been an important positive contributor to the income growth and capital appreciation of the Company since inception and will continue to offer investment opportunities for the future.

The restriction on movement in many countries and more recently Japan has had a detrimental impact on a great number of companies across a broad spectrum of industries. Bridgestone and Tsubaki Nakashima have suffered from the reduction in automobile production; and, Japan’s leading online reservation booking company, from the instruction to remain at home and reduce social contact. Pola Orbis and Noevir, both leading, domestic cosmetic manufacturers, which might have been expected to offer stability in uncertain economic times, have experienced difficulties as their retail distribution channels have unusually been forced to close temporarily. Importantly, despite the obvious near-term challenges, these companies paid dividends as forecast for the fiscal year just completed and reconfirmed their ongoing commitment to future shareholder returns.

Some of the holdings mentioned above would have been positive contributors to performance to the end of February. This highlights the severity of the share price reaction once the Covid-19 virus developed into an international crisis. There were positive contributions from a number of the holdings in the portfolio notably established in the last twelve months. West Holdings, a provider of solar energy and related services, Kyowa Exeo, a communications network and social infrastructure construction company, Softbank, a mobile phone operator, SBI Holdings, a financial services company, and Hoya, a leading optical technology company, all performed well during the period.

Portfolio Positioning - The strategy generally experiences low trading activity due to its focus on the long-term fundamentals of the companies in which it invests. Substantial dislocations to the outlook such as those presented by the Covid-19 pandemic forced reappraisal of some of the assumptions relevant for each individual company. Any associated market volatility creates interesting opportunities as a result. The current period has been one such occasion. Concerns about a number of companies as the virus outbreak first spread in China resulted in further appraisal of Daiwa House, Inpex, Canon, Komatsu, Mabuchi Motor and Resona Holdings and particularly their willingness to continue to deliver incremental improvement in shareholder returns. Better opportunities were identified at telecommunication companies KDDI and Softbank Corp, solar energy provider West Holdings and technology related companies Hoya and Kyocera. The holdings in the REIT sector were in the process of being reconfigured ahead of the steep decline in the asset class with MCUBS Office REIT sold entirely and Invesco Office REIT being reduced after a strong appreciation of their respective share prices. New holdings were established in Star Asia Investment REIT, due to its exciting restructuring opportunities, and GLP J-REIT, which has an extensive portfolio of modern logistics properties.

Outlook -The companies in the portfolio have strong balance sheets and the majority have significant net cash positions. As such, first and foremost, their survival is not an issue. Undoubtedly short-term earnings are being affected with varying levels of severity. However, our belief in the long-term prospects for many of these well-managed companies is undiminished.

Japanese companies are arguably more accustomed to challenges presented by the current pandemic than their international peers due to the long period of financial repression in Japan and the nation’s susceptibility to natural disasters. These are often cited by Japanese corporate managers as reason for taking a more cautious approach to total shareholder returns. This prudence has been vindicated by the ability of most of these companies at least to expect to maintain dividend payments for the current fiscal year at a time when dividend cuts are becoming commonplace amongst their peers in Europe particularly, but also other regions.

Despite the difficult period for the Company resulting from this unprecedented and unpredictable event, there is much to be encouraged by at the individual company level with regard to the stability of dividends in these challenging times and the commitment to growth potential longer term which we believe will overcome the market volatility experienced in the short term’.


• The US Food and Drug Administration (FDA) has withdrawn the use of anti-malaria drug hydroxychloroquine as a treatment for coronavirus.

• Paddy Power and Ladbrokes were forced by the government to close their retail outlets in Ireland today, 24 hours after reopening. Independent firms are permitted to remain open. They were reportedly closed down due to their companies being listed as hospitality rather than retail.

• The number of UK workers on payrolls fell by more than 600,000 between March and May, according to the ONS.

• The Oscars ceremony due to take place on 28 February next year has been pushed back by two months.

• Beijing has tightened its travel restrictions, banning all close contacts of confirmed cases from leaving the city. Also all outbound taxi and car-hailing services, as well as some long-distance bus routes have been suspended.

Royal Ascot starts today behind closed doors, with jockeys wearing face masks.

• Doctors, nurses and carers have begun a strike in France. Unions say they have been delighted by the expressions of public support through the Covid-19 crisis but now they want action: specifically pay rises, a recruitment drive and more beds in hospitals.

• Peru’s economy sank 40% YoY in April. Mining makes up 60% of the country’s exports, and production was drastically scaled back because of the restrictions.

• TFL is increasing the congestion charge from £11.50 to £15 from next week.

• UK furlough claims top £20bn. Overall, 9.1m workers have been furloughed, adding up to a cost of £20.8bn up to 14 June, according to data from HM Revenue and Customs.

• The number of people out of work and claiming work-related benefits in the UK jumped 23% to 2.8m in May. The figure was only 1.24m in March.

• A steroid drug called dexamethasone can help save the lives of patients who are seriously ill with coronavirus. It cuts the risk of death by a third for patients on ventilators and by a fifth for those on oxygen.

• Testing in the Netherlands has shown 1.7% of the population confirmed positive. Over 1-15 June more than 113,800 tests were conducted; however, these tests were mainly for those who suspected they had symptoms.

• Pakistan has decided to shut down multiple districts in 20 main cities across the country. Officials say all areas with a higher infection rate will be completely sealed for two weeks, and restrictions will only be relaxed in those areas that show improvement.

#corporate client of Peel Hunt