Coronavirus - Swallowing a bitter pill

The number of Jobcentre claimants in the UK increased from 1.2 million in March to 2.8 million in May.

This trend is likely to continue as businesses recalibrate their cost bases. When the recovery comes, some of these jobs will not return. A recent survey of global executives by EY found that 41% of respondents had invested in accelerating automation since the pandemic started. However, the uncomfortable truth is that this virus has made inevitable changes but it is worth remembering that one company’s capex is another’s revenue, and overall employment will again increase.


• Bank of England announces £100bn of QE.

• 7000 abattoir workers quarantined in Germany.

• Qantas has cancelled all international flights until late October.

• Australia lost 227,000 jobs in May.

• Beijing expert says latest outbreak under control.

• New Zealand confirms one new case.

• 2sisters factory closes for two weeks after an outbreak.

Company news

Food, Drinks & Household

• Hornby – “Revenue and gross margin for the financial year to 31 March 2020 were ahead of last year and in line
with forecasts. In light of the Covid-19 pandemic, the Board has taken prudent steps to prioritise the safety of our staff, their families and our customers and we are ensuring our compliance with relevant Government directives. The Group has registered to benefit from Government support schemes in countries where it operates, including deferments of taxes and social charges, grants and reliefs and selectively furloughing staff. It is not possible at this time to give financial guidance on the impact of the Covid-19 virus due to the uncertainty of its duration and impact. Whilst the Group will not be immune to the effect of the virus, it has started the new financial year in a strong position following the completion of the fund raising and the Board is adapting the business to operating in the new environment.”


• Restaurant Group – “In the last two weeks we have seen an increasing and material impact of Covid-19 across our businesses with Group like-for-like sales being down 12.5%. In particular, our Concessions business has been significantly impacted with like-for-like sales down 21.7% and getting worse by the day given International travel bans. Outlook: – The Restaurant Group’s key priority at these unprecedented times is the health and safety of our employees, customers and business partners. The Group has been reviewing the rapidly evolving situation relating to Covid-19 and has modelled a scenario of the potential financial outcome in the coming months.
It is now clear that the increasing effects of Covid-19 will result in a material reduction in our expectations for revenue and profit across the business for the first half of this financial year (the period ending 28th June 2020). Today, the Company is therefore providing guidance on the potential impact on our full year results of Covid-19. This guidance is predicated on the following revenue assumptions:

• An overall decline in Group like-for-like sales of 25% in FY2020 (assumed down 45% in the first half and 5% in the second half).

• A significant decline in our Concessions business (down 92% in Q2) with significant disruption persisting through the remainder of the year (down 31% in H2).

• A sustained reduction in footfall across Leisure, Pubs and Wagamama, with like-for-like sales across these businesses down 68% in Q2, including 10 weeks of shutdown, before normalising through H2.

In response to the uncertain environment, the Group is taking a number of actions to protect profitability and to conserve cash:

• The Group will reduce capital expenditure for 2020 by at least £45m from the previous guidance of £75m.

• The Group is highly focused on delivering maximum operational efficiency across all areas of our business over the course of 2020 and is targeting to save at least £45m.

• The Group will be working with landlords across all business areas to ensure that no minimum guarantees are enforced within Concessions, where rents are largely turnover based; and to ensure that the rent roll for 2020 across our other businesses equitably reflects the unique and unforeseeable situation. The forecast assumes at least a 50% reduction in fixed rent across all our Wagamama, Concessions, Pubs and Leisure restaurants, and reflects the business rates holiday for three quarters of 2020 as announced yesterday in the Chancellor's statement.

The Group will work with lending banks to seek covenant holidays throughout 2020 in order to preserve maximum flexibility to operate the business through this challenging period.

As a result, the Group currently estimates Adjusted EBITDA for the financial year ended 27 December 2020 to be between £95m and £105m with leverage (pre-IFRS 16 net debt to EBITDA) of between 2.2x and 2.5x.

Under this scenario, we would retain a minimum of £75m of cash liquidity throughout the remainder of the 2020 financial year. The Group estimates that in the event that the entire group is in shutdown for a period in excess of that assumed above, then the adverse impact on cash would be no more than £15m for each further month of shutdown.

Clearly the situation is evolving rapidly and there is no certainty around the severity and duration of the impact on the business. The Company is continuing to consider its funding options, both equity and debt, on an ongoing basis.

The Restaurant Group is fundamentally a resilient business with a strong asset base, substantial cash liquidity and strong cash flow.
The Group has a strong management team in place and the capability to adapt and respond quickly to changing market conditions.

The Board remains confident in the strategy over the longer term and believes the Group will be well positioned to benefit from the normalisation in trade with its diversified set of brands.”

Real Estate

• NewRiver REIT – “It is too early to quantify the impact of Covid-19 on the Company's operations. A significant part of the Board’s financial focus for the foreseeable future must therefore be on liquidity and trading through to more normalised conditions. To that end, the Board has decided not to pay the fourth quarter dividend for the financial year ending 31 March 2020. The total dividend paid for the year ending 31 March 2020 will therefore be 16.2 pence per share. The impact of this decision is to preserve an additional £17 million of cash. The Company will update shareholders on dividends at the time of the announcement of the Full Year Results. The Board wishes to return to a consistent programme of dividend payments as quickly as possible, but this can only be done on the return to normalised trading conditions. The Board considers this to be the most prudent course of action until the impact of Covid-19 becomes clearer.

Operational update – Safety and Wellbeing – In this rapidly evolving situation, the safety and wellbeing of NewRiver's staff, occupiers, tenants and pub partners, and the customers who visit our assets, are a major priority. Currently, all our retail assets and almost all our community pubs are operational, and we stand ready to act on the latest advice from the UK Government.

Retail portfolio – NewRiver's retail portfolio, mainly comprising community shopping centres and retail parks, represented 77% of our total portfolio by valuation and 70% of our net property 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. This underscores the vital role that our assets play in meeting the everyday needs of consumers. The resilience of our portfolio positioning is reflected in a 660 bps outperformance of the UK footfall benchmark over the week ended 15 March, with a year-on-year footfall decline of -0.7% across our shopping centres. In addition, the Company has in the last few days exchanged contracts on two new lettings, with a major discounter at Sprucefield Retail Park and a food & grocery retailer at Wakes Retail Park. NewRiver continues to benefit from no exposure to department stores, and limited exposure to mid-market fashion and casual dining operators, which are some of the sub-sectors most impacted by Covid-19.

Community pub portfolio – Our community pub portfolio, which includes a number of Co-op convenience stores, represented 23% of our portfolio by valuation and 30% of our net property income, as at 30 September 2019. Most of our community pubs operate under the “Leased & Tenanted” model, whereby individual occupiers have control over whether sites remain open, although we are engaging closely with our occupiers to provide support and ensure adherence to the latest UK Government advice. The majority of our 'Operator Managed' pubs remain open and trading, although we are currently assessing UK Government advice and will take all necessary steps to ensure occupier and customer safety.

In addition, the occupiers across our retail and community pub portfolios also stand to benefit from the measures announced by the UK Government on 17 March, giving all retail, hospitality and leisure businesses in England a 100% business rates holiday for the next 12 months, and providing £25,000 grants to businesses in the same sectors with rateable values between £15,000 and £51,000. For our retail portfolio alone, these measures are expected to save our occupiers over £40 million. Almost all our community pubs have a rateable value below £51,000, so this will provide further indirect benefit to our portfolio, and NewRiver's own business rates bill across its community pubs portfolio will be reduced by £1 million.

NewRiver remains a financially sound business with a capital structure that is well placed to absorb a prolonged period of uncertainty, and we welcome the measures outlined by the UK Government on 17 March to provide financial support for the retail and hospitality sectors.”

• Safestore – “Safestore has delivered another strong financial performance in the first half of the financial year, driven by organic growth and two acquisitions that were completed at the start of the year. Reported Group revenue increased 9.0% at CER2 with like-for-like revenue growing by 5.9%. The Group’s like-for-like average occupancy grew by 3.7% with the like-forlike average storage rate up 2.1% at CER. Like-for-like EBITDA margin, on a CER basis, grew by 1.6ppts to 58.2% (2019: 56.6%).

Our operational performance across all regions of the UK has been strong in the period resulting in a 5.8% increase in like-for-like revenue. Enquiry generation and store team conversion have both performed well across all regions of the UK, resulting in like-for-like average occupancy growing by 3.8% in the period whilst the UK like-for-like average rate grew by 1.9%. The UK experienced an occupancy outflow after the Covid-19 lockdown was announced on 23 March and like-for-like closing occupancy at the period end was down 0.3ppts at 71.6% (2019: 71.9%) but like-for-like revenue in April 2020 was still up 2.0% on the previous year in the month. The occupancy outflow was driven by larger units which typically pay a lower rate. Since the period end, which broadly coincided with some government relaxation of the lockdown, the occupancy performance of the business has improved and rate has remained strong such that like-for-like revenue for May 2020 was also up on the previous year.

In Paris, our trading performance has been strong with like-for-like revenue growing by 5.9%. This was driven by our average like-for-like occupancy performance which increased by 3.1% compared to the prior year and likefor-like average rate which grew by 3.1% as well. Paris experienced an occupancy outflow after the Covid-19 lockdown was announced in the middle of March 2020 and like-for-like closing occupancy at the period end was down 0.3ppts at 77.4% (2019: 77.7%) but like-for-like revenue in April 2020 was still up 4.7% on the previous year in the month. Since the period end, the occupancy performance of the business has improved significantly with net occupancy inflows during the month of May 2020, as compared to outflows in the prior year, and the rate has remained strong such that like-forlike revenue for May 2020 was also up on the previous year.

Group underlying EBITDA of £45.9m increased 11.4% at CER on the prior year and 10.9% on a reported basis, reflecting the impact of the 1.8% strengthening of the average Euro exchange rate, compared to the prior period, on the profit earned on our Paris business. Rent costs increased as a result of the acquisition of leasehold stores in Barcelona and London in the period and, as a result, adjusted diluted EPRA EPS7 grew by 7.4% in the period to 14.5p (2019: 13.5p).

Our property portfolio valuation (excluding investment properties under construction) has increased by £119.4m since October 2019 to £1,451.2m. The increase comprises £28.1m of additions and reclassifications, £18.8m of acquisitions, a positive currency impact of £3.9m and a £68.6m revaluation gain (equivalent to 5.2% of the valuation at October 2019) driven by the operational performance of the business, leasehold renewals and store extensions. The Group’s external valuers, Cushman & Wakefield Debenham Tie Leung Limited (‘C&W’), valued 53% of the portfolio at April 2020 with a Directors’ valuation being carried out, with the assistance of C&W, on the remaining 47%. In the context of Covid-19, and consistent with other Real Estate companies, C&W have inserted a ‘material valuation uncertainty’ clause into its valuation report which is detailed in Note 15 of the Financial Statements.

Reflecting the Group’s good trading performance, the Board is pleased to recommend a 7.3% increase in the interim dividend to 5.9p per share (2019: 5.5p).

Outlook – As we have entered into our third quarter, we have been monitoring closely the trading performance of all our geographies as Covid-19 lockdown restrictions have been relaxed to varying degrees. We are encouraged by what we have seen so far, with our Paris and Spanish businesses returning to normal levels of trading with enquiries, new lets and occupancy back above pre-lockdown levels and up year-on-year on a like-forlike basis. The UK trading performance has improved significantly since the period end with like-for-like enquires now back above last year and occupancy growing since the period end.

As of 15 June 2020, closing Group like-for-like occupancy is up 1.3% compared to April 2020 and Group like-for-like CER revenue for the period from 1 May 2020 to 15 June 2020 is up 0.4% year-on-year.

Work to complete our Sheffield site, which is due to open for business in the coming days, has recommenced as has work in Paris at our Magenta store. The delay to each of these stores will be under two months. In addition, our extensions at Bedford, Barking and Chingford are planned to open by early Autumn 2020.

Our strong and flexible balance sheet and healthy cash generation mean the business has significant liquidity and we will continue to look for opportunities to take advantage of further selective development and acquisition opportunities in our key markets, subject to our rigorous investment criteria.

We will continue to monitor carefully and closely any economic impact of Covid-19 on our internal forecasts over the coming months. However, our business model remains highly resilient with multiple drivers of demand and we believe the group, whilst not entirely immune, is strongly positioned to withstand any economic downturn. As it currently stands, the Board anticipates earnings for the full year being in line with its expectations.”

Support Services

• CareTech– “We have continued to deliver the highest standards of care during the Covid-19 pandemic and the Group has played a vital role in ensuring our services remain fully operational. The majority of service users we care for are children and adults with learning disabilities, mental health diagnoses and/or with challenging behaviours. Less than 3% of our service users fall into the formal NHS high-risk category groups for Covid-19, such as those with underlying health conditions, which is very different to that of elderly care services which have been significantly impacted by the virus.

In these unprecedented times, our focus has been on delivering safe services and the health, safety and wellbeing of our employees and service users. A Covid-19 taskforce, comprising both divisional leadership and members of the Group Executive Team, was set up at the outset of the pandemic outbreak. Through the use of a dynamic risk assessment tool we have been able to provide real time monitoring and support across all of our services as well as ensuring that we have a business continuity plan at each site. This covers arrangements to provide staff cover between services, utilising extra staff as necessary and overall reducing agency workers. Following the latest Government and Public Health guidance, we have strict precautions in place at our sites including enhanced levels of cleaning, additional hygiene facilities and social distancing. Enhanced precautions and safety checks have also been set up and only essential visits are taking place with oversight being provided remotely where possible and appropriate. Through all of the above and the incredible dedication of our staff, support teams and management, we continue to provide excellent support and care to those in our services.

To recognise the cost pressures on social care providers caused by Covid-19, higher sickness absence rates, personal protective equipment (PPE) costs and higher administration costs, additional funding of £1.6bn was announced by the Local Government Association in mid-March 2020. The Group is working closely with all Local Authorities in establishing a dedicated funding arrangement to support our services which will be collected during the second half. As a consequence, we are confident of meeting market expectations for the full year 2020.”


• Blue Prism – “In the immediate term Blue Prism has noted some headwinds from the Covid-19 pandemic, with customers focusing on business continuity and so delays to conversions and lower deal sizes. These impacts are expected to be temporary and over time the focus placed on business operations, continuity and systems by the pandemic may prove to accelerate the development of the market. Blue Prism has been encouraged by the critical work its product has been undertaking in this market environment which includes, amongst many other use cases:

• Working with multiple UK NHS (National Health Service) trusts on processes including admissions, communications, outpatients support and administrative functions.

• Processing of Covid-19 interventions such as mortgage holidays for global financial institutions.

In time these use cases may work to further highlight the potential of the Digital Workforce as a critical component of the 21st Century organisation.

Blue Prism believes its product is very well suited to help drive ongoing trends towards distributed and remote working, benefitting from centralised control, shareable objects and processes and market leading security levels. For example, the UK NHS has used a private area of the Blue Prism Digital Exchange (DX) to set up a shareable repository of processes that can be adopted by individual trusts, developing common processes and speeding up automation roadmaps.

Although there has been some evidence of immediate Covid-19 related slowdown in the past few months, the overwhelming dynamics point to a market with underlying structural growth. This is supported by some notable new entrants including Microsoft. Blue Prism continues to believe it is sufficiently differentiated from other players in the RPA market by its unique product and approach. Blue Prism expects that the size and appeal of the RPA market will continue to attract entrants, particularly as customer demand and awareness grows. While its positioning remains unchanged, the Group monitors the market constantly for new developments.”

• Volex – “In Integrated Manufacturing Services, which is now the larger of our two divisions, we saw growth across all our main market segments of data centre connectivity, medical and industrial equipment. Demand from customers in our largest geographic market, North America, was particularly strong during the period, as we were able to utilise non-China production to support tariff-free supply. Going forward we expect continued growth in Integrated Manufacturing Services as we acquire new customers that seek exposure to a global partner like Volex. We are already seeing the benefits that scale can bring through our recent acquisitions of MC Electronics, Silcotec and Servatron, and are working with customers on a number of new development projects as a direct result of these acquisitions.

In Power Products, our revenue reduced as we took the decision to lessen exposure to lower-margin business, and instead focus on higher-margin customers and products. This resulted in an overall improvement in profitability and provides us with funds to invest in new production capacity outside of China and to continue our success in the electric vehicle segment. We continue to see more opportunities in electric vehicles for Volex and expect a number of new vehicle programmes to launch in the coming year supported by Volex technology.

We were particularly pleased with the improvement in gross margin during the year from 19.8% to 23.2% despite continued cost inflation and competitive pressures on pricing. The improvement in gross margin occurred across both our operating divisions and is a result of the hard work by management to rationalise our production site and office footprint, and a continuous focus on improving profitability across all of our locations, product lines and customers.

Underlying operating expenses at $59.0 million increased by 13.7% year on year. This was due to the acquisitions made during the year and also as a result of our strong financial performance triggering increased bonus payments for our staff.

Cost inflation is a common theme across all of the countries in which we operate and we are therefore continuing to invest in automation across the Group to mitigate this. In addition, the effect of US import tariffs on Chinese production has resulted in Volex moving certain production capacity to alternative locations outside of China, which has resulted in additional administrative and investment costs for the Group.

Overall underlying operating profit for the year was $31.6 million, up 46.3% from $21.6 million in the prior year.

Outlook – Through this period of unprecedented uncertainty, Volex has implemented a series of plans and actions set to protect the safety and health of our employees and wider communities, at the same time as reducing our costs and protecting our cash flows. We entered this period with a very strong balance sheet and ample liquidity. The Group has continued to generate strong cash flows in the first two months of our financial year. We are continuing to invest back into the business for future growth and margin enhancement.

As anticipated in the 16 April 2020 announcement, our 'essential' business status has allowed Volex to keep operating throughout the period, supporting our customers' requirements. Despite experiencing labour shortages caused by compliance with local government restrictions, such as employee shielding and self-isolation, the overall situation is now improving as these government restrictions ease, with all Volex facilities open, and the number of employees in self-isolation reducing.

Unaudited revenue for the four months ended May 2020 was $126.2 million, 4% ahead of the same period a year earlier. During this period, the business has performed ahead of expectations, although we are now seeing areas of weakness primarily in the medical equipment installation sector, as hospitals around the world remain closed for non-critical medical procedures. In our electric vehicle business, after weakness in March and April due to customer factory closures, we are starting to see a recovery. Our consumer and data centre businesses continue to perform well.

However, the duration and breadth of the market disruption arising from this situation remains unclear and therefore we do not believe it is appropriate to provide financial guidance for the current year at this early stage.”


• Stagecoach – “Continues to take appropriate action to maximise financial flexibility as it negotiates the continuing challenges and uncertainty around Covid-19 and the UK's recovery. We have taken the precautionary measure of agreeing a covenant waiver for the periods ending 31 October 2020 and 1 May 2021 with our group of lending banks for our facilities expiring March 2025. As an alternative to the covenants, we have agreed minimum liquidity thresholds at 31 October 2020 and 1 May 2021.

Combined with the other actions outlined in our announcements on 23 March, 3 April and 28 May, the Group has strong liquidity, with available cash and undrawn, committed bank facilities of over £800m.”


• National Grid – “Covid-19 has had a significant impact on the way in which we work. At the end of March, as the crisis unfolded, we successfully implemented our business continuity plans in the UK and US. This included taking action to change working habits quickly and safely, including a risk assessment of all our operational projects. In addition, we issued new working guidance to our field force that included measures such as limits on team sizes, changes to rotas, revised cleaning arrangements, and single occupancy in vehicles. We have continued to work successfully with these ‘lockdown’ constraints and social distancing requirements since the end of March. For example, in April, our teams in Massachusetts rapidly restored power to 142,000 customers following a significant storm, with 95% of our affected customers reconnected within 24 hours.

Away from the field, our dedicated control room staff have worked tirelessly, some sequestered away from their families. In the UK, we set up sleeping pods and recreation centres on site for those staff in isolation, and this was replicated across our businesses in the US. Our digital infrastructure is also playing a key role in enabling new ways of working, as around half of our employees across the organisation have been successfully working from home.

Keeping electricity and gas flowing – Against this backdrop, we have been focused on maintaining reliable flows of electricity and gas. Demand has reduced across all our jurisdictions, with the increase in residential demand more than offset by lower levels of industrial, commercial, and business demand. In the UK, we saw record low levels of transmission system demand on the electricity network at 14.5GW over the recent Spring Bank Holiday weekend and again at the end of May. To ensure the ESO can continue to safely and reliably manage the system at these unprecedented low demand levels, it has put in place a suite of additional balancing services. It is continuing to work closely with Ofgem and industry on ways to ease pressures on customers from potential increases in balancing costs.

In the US, across our service territories, we have seen an 8% decrease in gas consumption between mid-March and the end of April. For electricity, we have seen a 6% decrease in consumption between mid-March and the end of May, although this is comprised of a 5% increase in residential usage, and a 9% decrease in Industrial and Commercial usage.

Supporting our communities – We are acutely aware of the impact Covid-19 has had on the communities where we operate. Our teams have stepped forward with multiple initiatives, including financial donations to help the most vulnerable. In the UK, we have made donations to support key charities delivering aid; in the US, we have provided funding for customers experiencing financial hardship and for community-based organisations. In April, we made a donation to the University Hospitals Birmingham Charity appeal in the UK that provides vital support to both patients and staff. The donation will be used to purchase almost 400 tablet computers that will be used by patients to help them speak to relatives while in isolation. In the US, our teams upgraded gas supply in record time to help turn a college gym into a 1,000-bed hospital on Long Island.

Supporting our customers – We are also providing support and assistance to our customers. In the US, where we collect directly from end consumers, we took several actions following discussions with regulators. We suspended debt collection and disconnections across all our US service territories. We deferred rate increases in our upstate New York business, Niagara Mohawk (NIMO), that were due to take effect on 1 April; and we delayed the NIMO rate filing, originally planned at the end of April, as we look to minimise the impact on bills when many customers are experiencing economic hardship. We have also offered flexible bill plans and arrangements for overdue bills, as well as eligibility discounts dependent on household income and size.

In the UK, we are working with other network companies and Ofgem to help suppliers address financial challenges caused by Covid-19, without imposing additional burdens on consumers. We have extended credit terms for eligible suppliers to help our most vulnerable customers, and we are also working with Ofgem to identify how we can help our customers bear increased balancing costs associated with securely managing the system.

Financial impact on our business – As lockdown measures began to take hold towards the end of 2019/20, incremental costs due to Covid-19 were limited on the Group. However, the help we are giving our customers, and the additional costs that Covid-19 has brought, will lead to a financial impact for 2020/21. We currently estimate the impact of Covid-19 on underlying operating profit to be around £400 million, with a potential impact of up to £1 billion on cash flow by the end of this financial year. We have seen only a small impact on our investment programme, and whilst we have slowed down some works given restrictions and working within new guidelines, we still expect to invest around £5 billion this financial year.

As we highlight in our Forward Guidance section below, these estimates assume a scenario of continued gradual easing of lockdowns across our territories, together with cost recovery mechanisms that continue to be based on regulatory precedent. If other scenarios play out through the course of the year, then this could have a range of impacts on cash flows and earnings, which could be different from our current assessment. However, whilst we expect to see a financial impact in the near term, ultimately we see limited economic impact from Covid-19 for the Group.

Of the £400 million underlying operating profit impact we expect to see in 2020/21, whilst we do expect to see some additional costs in the UK, and a limited impact in our NGV business, most of the impact will come from our US business. The impact in the US is driven by three, broadly similar, impacts: (1) the deferral of rate increases, (2) Covid-19 related costs, and (3) higher bad debt charges.

Higher levels of operating costs due to Covid-19 relate to areas such as higher IT costs, higher cleaning costs, costs to sequester critical teams to maintain system integrity, and PPE and health screening costs to enable return to work. The lower capitalisation of workforce costs related to an amendment in capital programmes also has an impact. In the US, we are working to recover incremental Covid-19 costs going forward.

With a weaker economic backdrop, we also anticipate bad debt costs to rise in 2020/21. This follows the £117 million additional provision for bad debts we have accounted for in 2019/20, and we currently estimate a slightly bigger impact in 2020/21. Whilst we receive allowances for bad debts across all our operating businesses, we expect forecast levels of bad debt to be above this allowance in 2020/21. We would anticipate recovering bad debts, above our regulatory allowances, through future rate plans.

The weaker economic backdrop is also likely to lead to lower customer revenue collections in the US by year end, impacting cash flow. This should be recoverable in time either as we fully resume our collection activity across our jurisdictions, or through recovery in future rate cases if receivables turn in to bad debts, as described above.

As well as potential lower US customer revenue collection affecting cash flow in 2020/21, we currently assume additional revenue shortfall in the UK and US due to Covid-19 that will impact both headline earnings and cash flow. These impacts come from areas where we have (or will have) regulatory mechanisms in place, thereby classified as timing impacts, such as, (1) lower demand in the UK and US, and (2) customer assistance programmes in the UK.

Lower levels of energy usage due to Covid-19 may impact our revenue collection within year, and therefore headline earnings, although we expect limited economic impact as almost all our revenues are decoupled from demand across the UK and US. This means that any under-collection is primarily a timing one and we expect to recover revenues through existing regulatory mechanisms in the medium term.

Similarly, in the UK, we are participating in a scheme that has been set up to help some of the smaller energy supply customers. This involves the relaxation of network charge payment terms for suppliers and shippers who are facing cash flow challenges as a result of Covid-19. We view these measures to strengthen and support the market positively. The open letter from Ofgem proposes all network charges are repayable in the current financial year and allows us to recover any unsettled amounts in the 2021/22 financial year.

In the UK, the ESO is also working with Ofgem and industry on ways in which it could help ease pressures on its customers from the potential increase in balancing costs. We would expect any programme to be put in place to be consistent with current regulatory practice, with any deferrals of costs to be recovered over time.”

Lifting restrictions

• Denmark will allow citizens from European countries with low infections to enter the country from 27 June. EU and Schengen countries, including the UK, would be individually assessed based on objective criteria, the ministry said.

• The Czech Republic’s health minister, Adam Vojtech, has said face masks will no longer be obligatory even in enclosed spaces including public transport from 1 July.

• Scotland has announced that all shops except those in indoor shopping centres will be allowed to reopen. Also from Monday, face coverings will be mandatory on public transport. On the same date, dentists will be able to reopen for urgent care, contact sports are allowed to restart but behind closed doors, places of worship can open for individual prayer, and the construction sector can continue to restart.

• Social distancing rules are to be relaxed in French pre-schools and nurseries to allow all children to return from 22 June.


• Up to 7000 people have been told to quarantine in Germany after a new outbreak in an abattoir. More than 650 people have tested positive for the virus at the meat processing plant in Gütersloh, in the north-west of the country. Operations at the site have been suspended since Wednesday afternoon.

• Qantas has cancelled all international flights until late October, except for those to New Zealand.

• The Bank of England, the UK’s central bank, has announced £100bn in fresh stimulus to support the UK economy. It also kept the benchmark interest rate on hold at 0.1%. The new stimulus will take the form of quantitative easing.

• Some 489 medics have died in Russia after contracting coronavirus, the country’s health watchdog, Roszdravnadzor, has said.

• The World Health Organization hopes that hundreds of millions of doses of coronavirus vaccine can be produced this year and 2 billion doses by the end of 2021, chief scientist Soumya Swaminathan said.

• Norwegian salmon exports to China fell by 34% last week (to 240 tonnes), Norway’s state-owned seafood marketing organisation said on Thursday. The decline came as imports of salmon to China were halted towards the end of the week when the novel coronavirus was discovered at stalls processing the fish at a major Beijing wholesale food market.

• Australia lost a further 227,000 jobs between April and May, resulting in a total loss of 835,000 jobs in seasonally adjusted terms since March and a 0.7% jump in unemployment to 7.1%.

• Spanish Prime Minister Pedro Sanchez has unveiled a €4.25bn plan to support the country's tourism industry. Tourism accounts for over 12% of its economy.

• Beijing has brought its latest coronavirus outbreak under control according to Wu Zunyou, the chief epidemiologist of China’s Center for Diseases Prevention and Control. The city has recorded 158 infections since confirming the first on 11 June in its worst outbreak since early February.

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