As economies close and markets tumble, regulators are increasingly tearing up rule books to ensure that jobs are protected, businesses stay alive and that they don’t make things worse. The US Treasury has announced initiatives providing US$300bn of new financing, but needs to act to support businesses and individuals. Treasury Secretary Mnuchin has said that the administration could consider taking equity stakes. We see this as a sensible move to ensure companies are supported. Proactive efforts by governments could materially limit the damage and enable companies to raise funds.
• Mnuchin – has talked about US Treasury taking equity stakes
• ECB – postpones cricket season until at least 28 May
• Tunisia army – to enforce curfew
• All new jury trials in England and Wales have been suspended
• Hong Kong bans visitors for two weeks
• Emirates – cargo traffic still busy
• Team Canada not sending athletes to Tokyo
• GE – reduces workforce by 10%
• Reclaim on season & advance rail fares announced
• Increase in working tax credits by £1,000
FCA reporting standards
FCA yesterday issued guidance making a “strong request” for issuers to delay publication of their preliminary results for at least two weeks.
The ask – The FCA want as many companies as possible to use this to reduce the risk that, in using it, companies are perceived as weak. They are looking to us and other investment banks to help, so we are urging our clients to delay prelim publications. Clients will reference the FCA request in their announcements. A number of our clients will be releasing announcements on this in the coming days.
AIM – This does not formally apply to AIM companies, but AIM Regs have put out guidance tonight saying that if AIM companies follow Main Market convention by using prelims, they would be expected to follow the FCA guidance.
Building & construction
• Saint-Gobain – “In terms of its business activity, Saint-Gobain is quickly adapting to the evolution in demand, aiming for operational continuity, depending on the health situation and on government decisions in each country, whilst reducing costs (reduction of teams, partial unemployment or stoppages) and prioritising the health of its stakeholders: • In our distribution activities, which mostly serve trade professionals rather than the general public, the group has adjusted its service offering to customers over the last few days, with new procedures in terms of orders for collection, delivery and via online and telephone orders; in particular, certain brands in France that were closed for a few days have progressively recommenced business.
• In our manufacturing activities, sites have made the necessary adjustments given the impacts of the crisis on the value chain, in particular in the automotive market. The operation of our factories is continuously adapted as the situation evolves, in a very flexible manner within the new organisation. In this respect, all of our Chinese factories have restarted operations following the rapid improvement in demand.
Given the context, Saint-Gobain is taking all necessary actions to limit the effects of the pandemic on its operating profit and cash as much as possible:
• Much greater decrease in capex than the €200m reduction initially planned for 2020 vs 2019 by deferring all possible projects that were scheduled in the coming months.
• Adaptation of cost structure and postponement of expenses, using local measures where appropriate, in particular unemployment and partial unemployment.
• Ever tighter monitoring of working capital evolution.
The group has a very solid financial position and has the necessary cash and financing in place to cope with the consequences of the pandemic. As of 31 December 2019 the group’s cash and cash equivalents stood at €5.0bn. In addition, the financing sources available to the group have recently been further reinforced given the current context:
• A new syndicated credit line of €2.5bn, in addition to the confirmed and undrawn back-up credit lines of €4.0bn.
• Access to the new Pandemic Emergency Purchase Program (PEPP) launched by the European Central Bank on 18 March 2020.
• James Halstead said its businesses are operating as usual and the company is able to meet needs of customers, despite an evolving and challenging situation due to Covid-19. “The distribution businesses are well stocked, our factories are operational, our supply chains are robust and with the exception of localised issues we can meet current business requirements," the company said.
• Public sector clients have been ordered to settle construction bills straight away and still pay for work even if sites are suspended.
The Cabinet Office has issued a new procurement policy note in the wake of the coronavirus crisis. It orders all public sector clients to:
• Urgently review their contract portfolio and inform suppliers who they believe are at risk that they will continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June.
• Put in place the mppropriate payment measures to support supplier cash flow; this might include a range of approaches such as forward ordering, payment in advance/pre-payment, interim payments and payment on order (not receipt).
• If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
• To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors.
• Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place in slower time) in order to maintain cash flow in the supply chain and protect jobs.
The emergency guidance comes into force immediately and will last until June 30.
• Tungsten – “Trading remains in line with the guidance outlined in the Q3 Trading Update, issued on 25 February 2020, for the financial year ending April 2020. We continue to progress new client and partner contracts and are in the final stages of a number of such discussions. The board remain confident that as the company nears the completion of this year of transformation, it remains well positioned for future growth next year.
In considering the impact of the ongoing Covid-19 pandemic the Board believes that the company is well placed to navigate through the disruption, due to over 90% of current revenues being recurring and under multi-year contracts through our subscription based model. We continue to manage cash flow and receivables closely. As at 10 March 2020 we had approximately £2.2m net cash. We have significant headroom with a further £3m available under our £4m committed Revolving Credit Facility.
In the last week, we have been contacted by a number of our largest global buyers who are looking to increase their electronic invoice volumes through us as part of their response to the global pandemic. This action is being driven by an urgent concern that office closures mean many paper documents can no longer be effectively distributed and processed by a widely dispersed home based workforce. These buyers include a number of fast moving consumer goods companies who are providing products in high demand right now, and who see Tungsten as having the perfect online digital platform to meet their current needs.
The Board believes this represents a positive and significant development for Tungsten, albeit that certain buyers may in time suffer from a temporary reduction in invoice volumes as a result of supply chain disruption.”
Food, drinks & household
• Britvic – Prior to the recent developments, trading in the quarter was broadly in line with our expectations. The recently announced closure of on trade outlets and restrictions in people movement in each of our markets will however significantly affect consumption both in outlet and on the go. We therefore anticipate a material impact to the company's revenue and earnings in 2020.
While it is too soon to accurately determine the full effects of the rapidly evolving situation, including the depth and duration of any necessary restrictions, we have modelled a number of possible outcomes. These include the impact of Out of Home closures, restrictions on movement, and differing potential supply and demand implications for our Grocery business. All elements in our supply chain are currently working and while our modelling anticipates some minor potential disruption, it does not include a significant supply chain discontinuity, such as the enforced closure of all or a substantial part of any of our major production or distribution sites. Nor does it include significantly elevated levels of bad debt.
Based on our modelling work to date, in the event that these conditions persist across our key markets of GB, Ireland, France and Brazil, our best estimate of the impact for the Group is a reduction in EBITA of between £12m and £18m per calendar month.
The above figures include a number of actions we are taking to mitigate the profit impact through cost control and reduced discretionary spend across our business, including A&P. We are also taking further actions to ensure the security of our cash flow, including the deferral of capital expenditure and closely managing our working capital, while also seeking to give appropriate support to customers and suppliers.
Britvic starts from a strong financial position, as a highly cash generative business with a robust balance sheet. Our Net Debt to EBITDA at the end of FY19 was 2.1x. We have an open and strong relationship with a broad and supportive banking group, and we are a long-standing issuer in the private placement market. This combination provides access to c£1bn of facilities, which will help us to absorb the impacts of the scenarios outlined above.
We recently successfully refinanced our £400m revolving credit facility up to 2025, with the potential to extend the maturity to 2027 with lender consent. There is also an accordion mechanism in place to increase the RCF size by up to another £200m (again with lender consent). In addition, we have access to £600m of private placement notes, of which we recently refinanced £150m. Covenants are set at 3.5x Net Debt to EBITDA and 3x EBITDA to Net Interest Expense (which was at a comfortable 14x at the end of FY19).
In addition, we will explore the newly announced Covid Commercial Financing Facility (CCFF) from the Bank of England. Finally, we remain fully engaged with all of our lenders, and should we require further headroom or flexibility, we are confident we could achieve this.
Our interim dividend is due to be proposed in our interim results on May 20. While all the above gives us confidence in our funding arrangements, the uncertainty that surrounds us and pace of change means that we will reflect, at the appropriate time, with the best available up to date information, whether it is in our shareholders' best interests for us to recommend or postpone the interim dividend.
• Byotrol – We have seen a very substantial increase in demand for the full range of our infection prevention and control technologies over the last seven weeks, following broad recognition of the Covid-19 outbreak in Europe. Firm orders currently sit at £1.7m for deliveries to end of June, with many more orders still being processed. Historically our order book at this time of year has been around £0.35m.
We have been working very hard with our contract manufacturers to increase availability of our products and satisfy the exceptional demand. These manufacturers have themselves all been dealing with supply chain constraints, initially and especially in packaging materials (most of which originate in China), and increasingly now in commodity chemicals as the crisis accelerates.
Byotrol's results to 31 March 2020 are now expected to exceed the guidance given at the time of our interim results, where we confirmed our expectations of positive EBITDA for the full year. The exact outturn will depend on the extent to which we can complete orders before the cut-off on 31 March.
• Coca Cola European Partners – We continue to build finished goods and raw material inventory; we are shifting resource to meet changing customer demand from the Away-from-Home (AFH) channel to the Home channel; we are prioritising core SKUs and we are managing through logistical challenges alongside developing further contingency plans. Furthermore, we are working with our community partners to support them through this difficult time.
To protect our business and manage cash at this time, we are actively working through all measures we can take. As the situation is unprecedented and rapidly evolving, it is not possible today to accurately predict the impact on our business. We have, however, started to see an increasing impact on the AFH channel with some volume moving to the Home channel. We are modelling, incorporating learnings from other Coca-Cola bottlers, the effects of differing revenue and volume impacts in these channels, but it is too early to draw conclusions.
We are also reviewing our variable operating expenditure, including reducing discretionary spend in areas such as marketing, promotions, seasonal labour and merchandising, and delaying discretionary capital expenditure. Measures will continue to adapt as the situation evolves.
Whilst we remain confident that the post pandemic future of the business remains strong, the significant uncertainty in relation to the duration and impact of the situation on our markets, leads us to believe it is appropriate to withdraw our guidance for the current financial year. In addition, to keep CCEP well positioned and preserve maximum flexibility during this challenging period, we will suspend our share buyback programme until further notice.
Regarding cash returns to shareholders:
• Share buyback: to date we have repurchased c€130 million of the €1 billion share buyback programme announced last month. As highlighted above, this will be suspended until further notice
• Dividend: CCEP has paid its 2019 dividends. In line with CCEP's normal cadence, the board will take a decision on the 2020 interim dividend at the time of the Q1 trading update on 28 April 2020
CCEP remains well positioned given its current financial position and maintains a strong balance sheet with net debt/adjusted EBITDA as at 31 December 2019 of 2.7 times. CCEP has strong cash generation and good access to liquidity, with c€1.8 billion available.
• Colefax# – Trading up until mid-March was in line with management expectations reflecting customer activity predating the early stages of the Covid-19 pandemic. Until there is greater clarity about the full impact of the pandemic, it is very difficult to give accurate guidance on the future sales impact but it is likely to be significant. The Group has a strong balance sheet and the Board's priority is to conserve cash and manage the Group through the crisis as prudently as possible.
As a result of the uncertainty surrounding the future impact of the Covid-19 pandemic the Board of Colefax Group Plc has taken the decision to cancel payment of the interim dividend of 2.60p per share, which was due to be paid to shareholders on 9 April 2020.’
• Medica – The current impact of Covid-19 on revenue growth for the rest of the year is as yet unknown. The situation is unfolding and difficult to forecast at present. However, there are early signs of a reduction in NightHawk cases of c30percentage as people self-isolate (reduced A&E admission). The Company will provide updates as appropriate as the situation becomes clearer.
Medica has activated its contingency plans and has been able to demonstrate that the Company can continue to provide its operational service remotely from home and maintain service levels. Medica's entire business model is focused around reporters 'working from home' and, as a result, our reporters are well-placed to continue to deliver the service despite the challenges.
Importantly, Medica has reacted quickly to the situation and is working closely with its NHS clients to invoke contingency planning and offer a pro bono 'pass through' service to enable their radiologists to report from home. This will allow reporters to report hospital cases using their Medica systems during daytime hours, as well as to continue to fulfil their reporting sessions with Medica.
As stated, at this stage, we are unclear about the precise impact on Medica in the new financial year. However, the Company could envisage a scenario where the pandemic could lead to a reduction in activity and capacity for the following reasons:
• Reduction in NightHawk cases as people self-isolate (reduced A&E admission)
• Reduction in non-essential elective routine cases (excludes cases such as oncology)
• Reduction in Medica sessions as radiologists are doing more shifts to support hospital
• Impact of sickness on ability to process and report studies
However, there are also possible mitigating factors:
• Hospitals could shift more non-urgent cases to Medica
• Reporters able to work remotely for Medica and cancelling leave of absence could lead to an increase in reporting capacity
• Increase in routine work from deferred elective procedures (catch-up) later in year
• Novacyt: “Is pleased to announce that the US Food and Drug Administration (FDA) has issued an Emergency Use Authorization (EUA) for its Covid-19 test. As a result, hospitals and laboratories in the US will be able to use the test for clinical diagnosis of Covid-19. The test is available for immediate distribution into the US market.
Primerdesign, the Company's molecular diagnostics division, launched the Covid-19 test as a research use only (RUO) test on 31 January 2020 and as a CE-Mark test on 17 February 2020. The benefits of the Primerdesign test include:
• Proven high performance characteristics
• Provides results in less than two hours
• Being lyophilised (freeze-dried), it is stable to be shipped at ambient temperature
• Can be used on multiple ubiquitous clinical laboratory instrument platforms
The Company is also pleased to announce that its RUO Covid-19 test has also been approved by the Indonesian Ministry of Health, which opens another new market for its test.”
• Uniphar – The business performance of the Group is ahead of our expectations year to date and there has been limited disruption to our business up to now. In the last 20 days, we have seen a significant spike in demand across all of our three divisions as Government and the wider healthcare sector ramp up preparations to deal with the forecasted increase in Covid-19 patients across Europe in the coming weeks.
Our non-operational staff are currently working successfully from home, utilising the Group's significant IT and digital platforms. We are working closely with our upstream and downstream partners, including government bodies and state agencies to ensure that the essential services we provide continue to operate to the highest service levels possible throughout the Covid-19 crisis.
As we prepare for the full impact of the Covid-19 crisis in the next 12 weeks, we expect to continue to see increased volumes across the Group, with likely increases in cost to serve as we invest in additional resources to manage significantly higher volumes, while at the same time dealing with reduced availability of manpower due to potential sick leave or self-isolation/quarantine situations arising. Due to reprioritisation of resources within hospitals and other healthcare facilities we are preparing for a possible delay in medical device revenue, if certain 'non-urgent' elective surgeries have to be postponed. The net impact of a 3-month disruption, should it occur, could result in a reduction of 2020 EBITDA in the region of €5m. We would, however, expect that this would be recovered in future periods as and when healthcare systems return to normal.
• Cepheid – FDA approves bedside Covid-19 test. This is the first test that can be used at the point of care, meaning providers don’t have to send patient samples to a separate lab to be processed and then come back to the hospital or provider’s office. Cepheid said it expects to start shipping tests next week.
• Directa Plus – The announcement by the Italian Government to close down all productive activity that is not "strictly necessary, crucial, indispensable, to guarantee us essential goods and services." Directa Plus is classified as a chemical company in Italy and as such is exempt from any restrictions and will continue to operate its core business.
The Company continues to actively support the Italian authorities, at both local and national level, in their struggle to combat the Covid-19 emergency by making available its technologies. Directa Plus's graphene is non-toxic and its bacteriostatic properties could be used in the production of medical devices such as masks, gloves and gowns to ensure better prevention properties for the spread of the virus.
• Deere & Company today announced it is withdrawing financial guidance for 2020 that it had put out as recently as February 27, 2020. Its subsidiary, John Deere Capital Corporation is also withdrawing its 2020 outlook.
• Osram does not expect to achieve its corporate targets for the current 2020 financial year and the company has withdrawn its financial guidance. “Given the unprecedented operational and financial challenges posed by the spread of Covid-19 and the uncertain developments in the coming weeks, the economic impact of the pandemic on Osram, however, can neither be adequately determined nor reliably quantified at this time,” Osram said in the statement. “The Covid-19 pandemic and the global response measures taken in this context, in particular the increasing number of production shutdowns by customers of and the disruption of global supply chains, are expected to have a significant impact on the world economy and in particular on the global automotive industry,” Osram said. “This will also affect demand in business units Opto Semiconductors and Automotive, whose activities in automotive business accounted for more than 50% of group’s sales in the 2019 financial year.
• General Electric – The air travel situation has resulted in a significant reduction in demand at GE Aerospace. As a consequence, it is firing 10% of the GE Aviation workforce and there will be a temporary lack of work impacting 50% of its US maintenance, repair and overhaul employees for the next 90 days. Its healthcare business is trying to add as much capacity as possible.
• Syncona – Comments from Martin Murphy, CEO: “Covid-19 will have a major impact across the healthcare systems where we are running our clinical studies. Healthcare systems are working to focus their resources on managing Covid-19 patients and, as a result, certain elective procedures and clinical trials will be de-prioritised while the peak epidemic is managed. Syncona fully supports these decisions.
As a consequence of these developments, our companies have made or are considering appropriate plans for delays to clinical trials. While it is hard to forecast the precise impact, we would anticipate delays to a number of our clinical stage programmes of at least three months. Whilst the duration and level of disruption from Covid-19 across the industry remains uncertain at this time, we are working closely with our portfolio companies to minimise disruption, avoid unnecessary burdens on health services, and ensure the safety of their employees and the patients taking part in clinical studies.
Our capital base of approximately £780 million provides us with a differentiated ability to fund our companies through a prolonged period of widespread disruption and diligence new opportunities. While Covid-19 represents an unparalleled challenge to the public health system, it is important to remember that the need for medicines in other diseases continues undiminished and, once the Covid-19 situation has stabilised, clinical development activity will continue. With Syncona's support, our companies are well positioned to be resilient over the longer term as they look to realise their ambitions and our vision to deliver transformational treatments to patients in areas of high unmet medical need.”
• Fulham Shore – “Until recently we were on target to meet or slightly exceed market expectations for the current financial year. Due to decelerating trading in February and March from the impact of Covid-19, we now anticipate that we will marginally undershoot those expectations.
The majority of our Franco Manca and The Real Greek restaurants were closed temporarily as of Friday 20 March 2020. This was a result of a direct instruction from the UK Government.
Some of our sites remain open, continuing to serve our customers through our delivery, take away and click and collect services. Above all, throughout this period we continue to work hard to ensure the health and safety of our team members, our customers and our partners.
We are following the UK Government's and health authorities' guidelines. Our dine-in restaurants will remain closed until the UK Government advises otherwise.
We are therefore in the unhappy position of having to reduce all of our costs to a minimum. These include, amongst others, property and staffing costs. We are likely, however, to benefit from the business rates holiday and the assistance to be provided by the Coronavirus Job Retention Scheme for the employees of our closed restaurants. We have also taken the decision to halt all but our basic capital expenditure in order to better manage our cash flow.
We are working with our many partners, landlords, HM Revenue and Customs and our staff to reduce our outgoings to the basic minimum as we note much of the UK Government's business support plans will not pay out for some weeks yet. Our lenders are supportive and we have sufficient undrawn facilities available to manage the business through any anticipated period of closure.”
• Fuller, Smith & Turner – Fuller's has temporarily closed its entire Managed and Tenanted pub estate from the close of business on Friday 20 March 2020.
Given the uncertainty as to when our estate will re-open, we are not in a position to give guidance on the financial impact of Covid-19 on our business at this juncture, except to say that we anticipate a material reduction in our trading performance. Clearly the quantum of this will depend upon the duration of the temporary closure of the Group's pubs and hotels and any subsequent measures imposed by the Government.
Fuller's is in a strong financial position. We have an excellent relationship and open dialogue with our lending banks, and the Company is well financed with a healthy balance sheet and significant liquidity headroom. Furthermore, the Group has a high-quality asset base of premium pubs and hotels, which is 89% freehold by book value.
The Group is taking a prudent approach and pre-emptive action, where possible, to further preserve cash and reduce overhead costs through a range of measures including delaying the start of larger capital expenditure projects. In addition, we will also be carefully considering our dividend policy in due course.
• Gym Group# confirms that as of 10pm on Friday 20 March all 179 of its sites were closed following Her Majesty's Government's announcement earlier that evening.
• Tasty confirms that it has closed all of its 56 restaurants for in-store dining for the foreseeable future: “The restaurants will remain closed until the Company receives guidance from the UK Government to the effect that restaurants are permitted to re-open.
In the meantime, the Company is offering takeaway and delivery services, where available, until such time as the Government announces that it is prohibited from doing so or the Company decides that it is not viable to continue the services. In addition, free takeaway meals are currently being offered by the Company to NHS and emergency services staff.
The Company will seek to mitigate the revenue loss by implementing cost-cutting measures such as cessation of capital expenditure and seeking preferential terms from landlords and suppliers as well as relying on Government support for employees' pay and VAT and business rate holidays. Concurrently, the Company is taking measures to ensure staff retention where possible.
Given the Company's existing cash position with no debt, the Directors confirm that during the period of shutdown and assuming it is successful in implementing the cost cutting and cash preservation measures referred to above, it has sufficient financial resources for the foreseeable future.”
• Ten Entertainment# – We ceased operations with immediate effect at midnight on Friday 20th March. We had contingency plans for closure which went smoothly. We will be working in the interim to ensure that we are fully secure, and all sites have been fully cleaned and are ready to open at short notice, once permitted.
We currently have cash balance of £20.5m, a further overdraft facility of £2m and undrawn RCF funds of an additional £2.8m. This totals a liquidity headroom of over £25m. In addition, we are pleased that the generous and impactful set of measures that the Government have now confirmed, such as rates relief and support with employee pay, will further strengthen our position. We are currently reviewing the detail of these measures. We are already in close discussions with our bank, landlords and key business partners, with whom we have worked for many years, and who are already demonstrating keen support.
The Board has already ceased all future capital investment on projects that are not already under construction and has put its property acquisition strategy on hold. In accordance with the Government's announcement on Friday 20th March, the vast majority of the company's employees will be furloughed. Other cash conservation measures are being developed and these will be deployed as soon as possible.
The Board are confident that a combination of our own self-help actions, our financing facility and Government support, will provide liquidity comfortably beyond the end of the calendar year.
The Group has previously announced on 15th January that it expects 2019 Group adjusted EBITDA, on a going concern basis, to be in line with the range of market expectations, the consensus of which is approximately £23.6m. There is no change to this guidance.
• Time Out – In accordance with the announcement by the FCA on 22 March 2020, in which it requested all listed companies observe a moratorium on the publication of preliminary financial statements, it will not be releasing its preliminary results for the year ended 31 December 2019 on 26 March 2020 as scheduled. The Covid-19 pandemic has had a significant effect on trading with the temporary closure of all six Time Out Markets and a slowing of advertising revenues. Given the material uncertainty of the situation it is not currently possible to quantify the full trading impact of the outbreak. In the meantime, the Group has cash reserves of £11.4m, as at 29 February 2020 and an undrawn debt facility of £18m, alongside various cost mitigations and other available options.
• Bonhill: “The Covid-19 pandemic is causing significant disruption to the Financial Services, Technology and Diversity communities that we serve in our four key geographies, being the UK, Europe, North America and Asia. We have been managing the impact of the virus on our business in Asia since earlier this year which has proven beneficial in our ability to manage the recent rapid escalation of Covid-19 in those other regions.
Current trading - In light of recent developments and the conditions in which the Group is now operating, the Board provides the following update:
• At the end of 2019, approximately 40 per cent. of the Group's revenue (£24.2m) was derived from events activity across our four key geographies.
• As announced in its trading update released on 20 January 2020, the Company started 2020 well with particularly strong forward bookings in the UK and US following the decisive UK General Election result, greater clarity on Brexit and the well-publicised issues in UK fund management caused by a high-profile fund failure.
• In 2020, we have run 16 events, but as the impact of Covid-19 has increased this has scaled down, particularly this month, and we have no events scheduled until May 2020 at the earliest.
• The vast majority of our UK, US, European and Asian events have been postponed until May 2020 at the earliest or more commonly to the third and fourth quarters of 2020; specifically the events deferred to the second half were expected to generate total revenues of £5.0m, comprising approximately £1.8m in the US, £1.7m in the UK, £1.2m in Europe and £0.3m in Asia.
• A very small number of events generating a total revenue of approximately £0.2m have been cancelled but are expected to return in 2021.
• The impact of the various postponed and cancelled events will vary by geography, but the Company will incur one-off cancellation fees of approximately £0.3m.
• The combined impact of Covid-19 on our events business will be to lower expected revenue by £5.2m and gross profit by £3.1m for the first half of the Company's financial year ending 31 December 2020. As previously described, revenues of £5.0m have been postponed until the second half of FY20.
• Three events have been moved to a webinar format which have been well received by clients who seek to maintain dialogue with their core community. More events will utilise webinar formats if appropriate.
• We have seen a surge of interest in our Small Business offering. It had already been performing ahead of budget in the year to date and has seen a five-fold increase in traffic on a daily basis, with March 18 2020 showing over 250,000 visitors generating 360,000 page views, which is a reflection of the need for information in uncertain times by a core community and the role we play in supporting those communities.
• Last year, we made annualised cost savings of £1.5m and in response to Covid-19 we have had to undertake further significant cost savings across the Group resulting in a 15% reduction in roles in the UK and European businesses. This will result in further annualised savings of £1.5m. The Group now operates in one site in the UK and has the benefit of shared, IT, Finance, marketing and event operations services.
• Across the Group, costs are being tightly managed, and we are taking actions to conserve cash. As at 20 March 2020, the Group had a total cash balance of £1.6m and a vendor loan of $3.1 million repayable in monthly instalments until August 2021.
Other than those referred to above, all of our remaining events are currently expected to go ahead as planned in Q3 or Q4 2020. The situation is evolving on a daily basis, and we will continue to work hard to mitigate the impact that the outbreak is having on the Company. We would like to thank all of our sponsors, suppliers and delegates for their support.
Outlook, dividend and 2019 full year results -…it is no longer possible for the Board to provide financial guidance for FY2020.
Given the lack of certainty on the outcome of FY2020 and our actions to conserve cash, the Board is suspending dividend payments until the outlook is clearer and more normal trading conditions have resumed. In the short term, the Board will consult with and update shareholders following release of the Company's unaudited results for the year ended 31 December 2019, which are expected to be announced tomorrow, 24 March 2020, and seek to explore the various support measures recently proposed by the UK Government.”
• Hyve – Due to the various restrictions that have been, or are likely to be, put in place by governments in many of our respective markets, we are activating a large-scale postponement plan per region. This is larger than had been anticipated at the time of our 5 March coronavirus update. Should the situation deteriorate, further events will need to be moved. The Group has been in regular contact with venue providers and key customers and will continue to postpone to another date in the current financial year where possible.
We have been undertaking a number of proactive cost-cutting and cash flow management measures to ensure that cash outflows are minimised and working capital is managed as effectively as possible through this period of disruption and uncertainty. We are in constructive dialogue with our lenders in relation to covenant headroom and facility flexibility. We have access to total committed debt facilities of £250m which we have fully drawn in order to maximise flexibility in terms of short-term liquidity, providing the Group with significant cash resources at hand.
• ITV – The recent restrictions on working practices are now having a significant impact on ITV Studios' ability to film productions. We have had to pause a significant number of productions in the UK and internationally, which we are doing in a systematic manner to ensure that we are well placed to resume production as soon as we are able to and to minimise the costs of disruption. We are implementing contingency plans to enable us to continue to produce as many programmes as possible, particularly our news output and live productions. It is too early to quantify the impact of this on ITV Studios' revenue and profit. This depends on how long the restrictions are in place.
ITV Studios cost base is largely variable. We expect to benefit from an additional offset due to increased demand for library sales. As a leading global distributor, we are well placed to deliver this, with a high quality library and strong relationships with broadcasters and platform owners. Demand for quality content remains strong and therefore we continue to work on our development slate and we are ready to resume production as soon as we are able. As one of the largest international producers of unscripted content which has a shorter lead time, we will be able to ramp up production quickly.
The additional measures implemented by Government, which have led to the closure of shops, factories and entertainment facilities, have had an increasing impact on our advertising revenues and therefore forecasts for March and April have deteriorated since we last updated the market on 16th March. We have seen further deferrals in advertising which are now coming from across the advertiser categories rather than just in travel and we are staying in close contact and working constructively with our client and agency partners. The situation remains dynamic and therefore we are not in a position today to give guidance for March or April. We will update again at our Q1 Trading Update in May. Over a full year each 1% decline in total advertising revenue reduces revenue and profit by c£17 million, before any mitigation.
Management is very focused on cash and has implemented measures to reduce our costs and to tightly manage our cash flow. We have reviewed our programming spend in light of the weaker advertising environment and we expect to reduce our programme budget by at least £100m. This reflects savings from sport including the postponement of Euro 2020, the late delivery of commissioned programming and active decisions to reduce our spend. We have also taken steps to reduce discretionary spending by £20m in 2020. This is in addition to the £10m of savings already guided for 2020. Further, we have identified £30m of savings in our capex.
Given the current uncertainty we are withdrawing our market guidance for 2020. In addition, the Board has decided that it is prudent not to propose the final dividend of 5.4 pence per ordinary share (£216 million in total) for the year ended 31 December 2019 at the forthcoming AGM, and to withdraw its previously announced intention to pay an 8p full year dividend for 2020. The savings from not paying the 2019 final dividend, taken with the cash impact of our cost and capex savings, will ensure that more than £300m of cash will be retained within the business. The Board recognises the importance of the dividend to our shareholders and will consider the quantum of any interim dividend for 2020 in light of this and of circumstances at that stage.
As we stated on 16th March 2020, ITV has good access to liquidity. We have £150m of unrestricted cash, a £630 million Revolving Credit Facility expiring in December 2023, of which £100 million is currently drawn, and a £300 million undrawn bilateral facility expiring in June 2021. In addition, we have no bond repayments until September 2022.
We will continue to execute our strategy over the medium term and will carefully monitor our ongoing investment in the ITV Hub, Planet V and BritBox in 2020, as we continue to build a digital media and entertainment company.
• Pearson – The closure of the majority of Pearson VUE test centres until the middle of April means 2020 operating profit would be down £25m to £35m, the publisher said. US student assessments being postponed or waived had also seen operating profit impacted by around £15m so far.
“If the crisis broadens, it could also impact our English franchise business in Brazil,” Pearson warned. “We are making both variable and discretionary cost savings to partially mitigate these impacts and are considering further actions.”
Pearson said a £350m share buyback programme was now being paused, with around £167m of the shares on offer completed so far.
• Bacanora – The first Covid-19 case in Sonora, Mexico was confirmed last week and in response, the local Sonora government has put in place measures to combat the spread of Covid-19 which includes closing of schools and all non-essential business operations as well as cancelling events of more than 10 people. Accordingly, Bacanora's administrative staff, based in Hermosillo, are now working remotely. The pilot plant will continue to operate on day shift until the next batch of kiln and lithium samples are shipped to the USA and China, or until the Company is required to temporarily close its operations following a government directive. In the UK head office and Zinnwald project in Germany, all staff are now working remotely.
• Yellow Cake “wishes to reassure the company's shareholders that it is currently unaffected by Covid-19 both operationally and financially and notes that the uranium price has remained resilient.
Given its focus on maintaining a minimal cost base, Yellow Cake's executive team are already home-based and it has no physical operations. Yellow Cake also benefits from an extremely strong capital position. It has sufficient working capital for at least two years before the need to raise any additional funds and it has no debt or hedges on the balance sheet.”
• Eastinco Mining – “further to the Announcement on Enhanced Covid-19 Prevention Measures from the Rwanda's Office of the Prime Minister on Saturday 21 March 2020 it will it has suspended mining operations in country…..Whilst the period of shut down is for an initial two week period the Directors expect that operations may be required to shut down for a longer period and are operating accordingly, However, we will update shareholders when further news is issued by the Prime Minister of Rwanda as to when we are allow to resume mining and exploration activities.”
• Barkby – Whilst UK trading conditions are expected to remain challenging due to the impact of Covid-19, especially for Barkby Pubs and Workshop Coffee, which are expected to be impacted, the Board are very confident that the diversified nature of the Group's activities mean the Group is well placed to face the current crisis. However, these are uncertain and unprecedented times, and the Board now prudently expects EBITDA to be around £3.5m for FY20.
Due to the impact of Covid-19 on Group earnings and to preserve the Group's cash position, the Executive Directors will take an immediate 40% pay cut and our Non-Executive Directors have agreed to take a 100% pay cut. These measures will be reviewed in July 2020. The Directors have considered the Group's cash position in the event of a prolonged disruption to the economy resulting from Covid-19 and are confident that the Group can maintain sufficient working capital headroom into the foreseeable future.
• New River Retail# – The Company improved its financial position further at the end of last week to £75m of unrestricted cash balances and £45m of committed undrawn credit facilities, providing £120m of available liquidity. The Company has already undertaken extensive scenario testing, factoring in the loss of income from its pub portfolio, which confirms that NewRiver has significant covenant headroom and a capital structure that is well placed to absorb a prolonged period of uncertainty.
One such scenario in our testing is that the Company does not receive any pub income for the next six months, and a reduced income beyond this, whilst the pub business rebuilds. It also assumes that there is a significant reduction in the Company's retail portfolio income for the next 12 months. In this scenario, the Company's analysis shows that it will have in excess of £50 million of cash and £45 million of undrawn credit facilities after 12 months. Based on this analysis, the Company is confident that it will remain compliant with its financial covenants for the next 12 months. The Company has no bank or refinancing events until August 2023.
The Company was pleased to note the recent announcements by the UK Government aimed at providing financial assistance to businesses impacted by Covid-19:
• The UK Government's business rates holiday will apply to the entire pub portfolio, which will save the Company and its tenants an estimated £5 million in cash flow over the next 12 months.
• We are supporting our pub partners and tenants who employ staff to enable them to apply for the Coronavirus Job Retention Scheme, whereby 80% of the wage costs of employees who are unable to fulfil their role due to Covid-19 will be borne by the UK Government.
• To protect against the possibility that market conditions remain challenging for the next 18 months or more the Company is working with its advisors to apply for the Covid Corporate Financing Facility programme using its Investment Grade credit rating.
We are also currently working with our insurance brokers and insurers to make a claim for the business disruption caused by Covid-19 and for loss of rent.
NewRiver remains a financially sound business with a liquidity position and capital structure that is well placed to absorb a prolonged period of uncertainty. It is worth noting that NewRiver's retail portfolio represented 70% of the Company's net rental income as at 30 September 2019. This portfolio is focused on occupiers in the food & grocery, health & beauty, discounter and essential services sub-sectors, and almost two-thirds of our retail assets are anchored by a major food and grocery brand. Given the fast-changing situation, the Company will provide the market with further updates in due course.
• AB Foods – As at 16 March 2020, Primark stores representing 20 percent of selling space and 30 percent of sales were closed. Since then, and following the closure on Sunday of all stores in the UK which represented 41 percent of sales, all 376 stores in 12 countries are now closed until further notice. This represents a loss of some £650m of net sales per month.
A variety of work streams have been established to mitigate the effect of the contribution lost from these sales and all expenditure is being reviewed. In the first instance we have implemented a significant reduction in discretionary spend. We are making good progress in also reducing fixed costs following discussions with counterparties, in particular landlords, and welcome the recently announced government support in the countries in which our stores operate. As a result, we currently estimate being able to recover some 50 percent of total operating costs.
To manage Primark stock we have also regrettably informed suppliers that we will stop placing new orders.
The group has a strong balance sheet, substantial cash liquidity with some £800m of net cash at the half year, together with a revolving credit facility of some £1.1bn. Therefore, total available liquidity is £1.9bn.
• Card Factory – We have decided to close temporarily all of our shops from the end of business today.
• In response to the material changes we anticipate in demand, we are taking a number of mitigating steps to manage our cost base and cash flow. These actions include:
• Detailed review of our investment plan across the Group. Significant reductions in non-essential capex have been identified, with any investments focused on a small number of key projects that remain important to the Group's long-term strategic objectives
• New store openings have been significantly restricted, and limited to those where we are legally committed to complete. This stands at seven stores, and these openings will be delayed until the second half of the year
• Deferral of replacement equipment in our manufacturing plant
• We have taken a number of steps and are in ongoing discussions with landlords to reduce net cash outflow, thereby increasing our short-term financial flexibility. We will continue to keep this under review
• Operational spend will be focused on essential maintenance work in the trading stores. Discretionary operational spend, such as point of sale and marketing spend, travel costs and costs related to distribution and packaging will be closely monitored and limited
• Considering the likely prolonged impact on consumer demand, the Board will not be declaring a final ordinary dividend for the year ended 31st January 2020
We note and appreciate the various actions taken by the Government to support businesses and their employees. The reduction in business rates provides a monthly cash saving of £2.0m, while the deferral of all HMRC payments to the end of June 2020 contributes positively to the short-term cash flow. The announced support for payment of wages for colleagues is welcomed.
Net debt at the end of February 2020 stood at £137.0m. Card Factory has access to a £200m revolving credit facility (expiring in 2023) with its current lenders, with whom it has maintained a very constructive dialogue over the past few weeks, regarding the availability of additional funding if required.
• John Lewis – Temporarily closing all of its 50 John Lewis shops at close of business on Monday 23 March as a result of the impact of Coronavirus. Johnlewis.com will continue to operate as normal, alongside Waitrose shops and waitrose.com.
The Government's decision to introduce a business rates holiday will save the Partnership around £160m over the next 12 months, and in addition, VAT and wages support is welcomed.
We have reduced our total net debts by more than £1bn over the past five years and doubled our level of liquidity over the same period. We currently have approximately £1.5bn of liquidity, consisting of over £950m cash and £500m of undrawn committed credit facilities. Our current scenario, which takes into account the temporary closure of our John Lewis department stores, and models a significant net cash outflow in the year, shows that we have sufficient liquidity. However, we are not complacent; the scale of the societal and business impact of Coronavirus is like nothing we have seen in recent times.
• We will continue to take further steps to protect our liquidity as far as possible by reducing expenditure such as:
• Reducing our capital and investment expenditure through postponing or pausing projects and change activity. We had originally anticipated spending more than £500m this year which will be scaled back significantly.
• Deferring or cancelling discretionary spend. We currently have more than £500m of annual discretionary revenue spend. We are reducing non-essential spend at all levels, freezing non-essential recruitment and reducing marketing spend.
• Reducing the supply pipeline in general merchandise to reflect the impact of our temporary shop closures.
• N Brown – At this stage, there is no way of predicting the impact the virus will have on our sales, nor how long the pandemic will last and what effect it will have on customer behaviour. Trading for the first two weeks of the new financial year was in line with expectations. However, during the last week we have seen a very significant and sudden reduction in customer demand with daily product sales down in excess of 40% compared to expectations. Whilst it is impossible to give accurate guidance, we are anticipating a material reduction in demand through FY21.
As a result, the Company has taken a number of immediate and proactive measures to reduce costs and preserve liquidity, including:
• A significant reduction in marketing expenditure with immediate effect and for the foreseeable future if market conditions do not improve;
• Stopping and deferring all non-essential capital expenditure. This will have little or no impact on the short-term performance of the business;
• Working collaboratively with HMRC to secure the deferral of all tax and national insurance payments;
• Stopping stock purchases immediately, thereby aligning stock levels for SS20 with reduced customer demand. Going forward, we will be re-evaluating our stock intake plans; and Freezing all recruitment and reviewing organisational structures.
Our objective in relation to all of these actions is to preserve liquidity in the business and allow us to manage the business effectively and prudently through this highly uncertain period. In addition, the Group is exploring all options in relation to the Government and Bank of England support packages for business.
Liquidity the Group has financing facilities in place totalling £652.5m, comprising:
• A securitisation facility secured by a charge over certain eligible customer receivables which is without recourse to any of the Group's other assets, and which is committed to December 2021. The facility is £500m but the amount that can be drawn under the facility is lower than this and depends on the level of eligible customer receivables at any one point in time;
• A Revolving Credit Facility ("RCF") of £125m which is committed to September 2021; and
• An overdraft of £27.5m.
As at 20 March 2020 the Group was drawn on the securitisation facility, to the maximum extent possible, being £414.7m and fully drawn down on the RCF of £125.0m. It had also drawn down £9.0m on the overdraft and held cash balances of £46.3m.
Whilst the Group is currently in compliance with its existing banking covenants, the downside scenario modelling we have conducted for Covid-19, involving a significant and sustained reduction in customer demand, indicates the need for amendments to existing banking covenants, changes in the way our securitisation facility operates and potentially additional facilities. The Group is progressing proactive, collaborative discussions with its long-standing, supportive lenders and is exploring options in relation to maximising the value of its significant unlevered debtor book. In addition, the Group is also exploring options in relation to its unencumbered freehold properties with an original cost of £58.3m.
Dividend – As a result of the initial impact of Covid-19 the Board will not be recommending a final dividend for the financial year ended 29 February 2020 and will suspend dividend payments for the foreseeable future.
FY20 guidance - It is, extremely difficult to quantify the expected impact as reliable and detailed forecasts cannot yet be made.
The Group is currently reviewing the potential impact of Covid-19 on its FY20 IFRS9 bad debt provision in light of significantly worse future macro-economic scenarios which impact the provision model.
Whilst the Board cannot be certain of the impact of Covid-19 on the Groups FY20 IFRS 9 Bad debt provision, the Board expects the Group's adjusted profit before tax to be lower than the previously guided range of £70m to £72m.
The Board had expected to release its Full Year Results for the year ended 29 February 2020 on 29 April 2020. However, due to working restrictions affecting both the Company and the Auditors, there is likely to be a delay to the publication of the results. A further announcement will be made in due course.
FY21 guidance - Given the current acute uncertainty, the Board does not believe it appropriate to provide financial guidance for the financial year ending 27 February 2021. Whilst Covid-19 will have a very significant impact on the Group's business, the Board remains confident in N Brown's proposition and the markets it serves.
• Ted Baker – Sale and Leaseback of Ted Baker's Headquarters consideration for the Sale is £78.75 million.
The Group is in ongoing dialogue with Government, both directly and through relevant trade associations, about the further support required for workers and businesses in the retail industry during these difficult and uncertain times.
The Group is also not hesitating and is acting now to take a series of steps to reduce costs and protect cash flow, including suspending all non-essential capital expenditure, stopping discretionary operating expenses, and severely restricting travel. All available opportunities to agree rescheduling or reduction of payments are being explored with parties such as HMRC, where the Government has already signalled flexibility, landlords, and suppliers. This is in addition to the actions on cost and people reductions that the Group announced on 26 February 2020.
The 100% business rates holiday for the next 12 months, which was announced by the UK Government to support retail businesses, is welcomed and the Group awaits further clarification of the details of this policy. Ted Baker paid UK business rates of £6.2m in FY 2020.
To date, there has been minimal disruption to the Group's supply chain, with the significant majority of its factories in China now operational. The Group does not currently envisage supply disruptions and inventory levels are sufficient.
The vast majority of the Group's retail stores and concessions are now closed (384 locations closed out of a total 416 locations globally). These represented approximately 68% of Ted Baker's Global Retail sales in FY2020.
• Watches of Switzerland – As a result of the Covid-19 outbreak, during this period, the Group's travel and tourism business were adversely impacted by reduced footfall. This impacted the Group's trading in stores located within the airports, in London, and in Las Vegas. However, the Group was able to offset the impact through higher sales to domestic customers both in the UK and the US.
However, in light of the accelerated containment measures relating to the Covid-19 outbreak adopted by governments, the Group's store portfolio has been closed in the US as of 19 March 2020 and will be closed in the UK as of 23 March 2020. As a result, the Group currently expects total revenue for the year to 26 April 2020 to be in the range of £809 million to £812 million.
Given the current environment, the Group has taken steps to eliminate discretionary expenditure, reduce working capital and where possible, delay capital projects. Government measures announced of business rates suspension, employee cost support and tax payment deferrals, are expected to have a positive impact on cash planning. The Group has taken steps to ensure the continuity of the ecommerce proposition, with online operations expected to be continued as normal. The Group has a strong balance sheet (1.2x adjusted net debt/EBITDA as at 15 March 2020) and significant financial headroom and liquidity. These facilities and the actions implemented would enable the Group to manage through a prolonged period of store closures.
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