Headlines
• France to implement reciprocal 14-day quarantine for UK travellers.
• US FDA gives emergency authorisation for the use of plasma treatment.
• Tesco to create 16,000 new jobs to cater for online demand.
• France and Italy record their highest number of daily cases since May.
• South Korea tightens social distancing requirements.
Buildings & Construction
• Henry Boot# – “Following the Board resetting the Group’s financial expectations for 2020, we are slightly ahead of current internal forecasts despite the CV-19 impact. We have achieved a profit of £7.2m (June 2019: £24.1m) in the first half of the year, primarily supported by our land promotion business which completed on nine sites in H1. We continue to closely manage our financial position, maintaining a robust balance sheet, with our NAV per share resilient at 232p and as of 30 June 2020 our net cash position stood at £42.3m.
We currently have a minority of employees still on furlough but as activity levels increase, this number is reducing and, by the end of August, we aim to withdraw from the scheme. Although activity levels within our operations are increasing, we are not confident that levels will equal those seen pre-CV-19, for some time. On that basis we have made the difficult decision to undertake restructuring plans, which will result in redundancies in the construction division.
After a successful trial period, we reopened two offices in June and now have a phased reopening plan for most of our regional network. We will continue with this phased approach for offices, to ensure we are returning people in the safe manner that our sites and depots undertook. As we shape our Group for the future and remain agile during this pandemic we are taking an interest in technological developments, which can further advance our services to clients and adopting new working practices that have proved to be effective for our employees. Finally, despite the challenges faced in the current climate, we remain focused on acting as a responsible business. We have maintained contact with all the communities we operate in and have donated to the National Emergencies Trust, who's appeal is supporting people in need of aid during this pandemic.”
Healthcare
• IXICO – “Announces that, despite Covid-19, it is achieving stronger than anticipated growth across the second half of the year. The Company is benefiting from continued operational leverage, generated by revenue growth and investments made to drive scale and efficiency.
Given the performance in the period to date, the Board expects revenues for the full year to 30 September 2020 to be in line with, or slightly ahead of, current market expectations, representing growth of more than 20% compared to the prior year. Further, the Board anticipates that earnings before interest, tax, depreciation, and amortisation (EBITDA) will be materially ahead of current market expectations.
This enhancement of financial performance expectations for FY20 further underpins the Company’s confidence in its ability to invest to deliver further profitable medium and long-term growth.”
• LidCO – “Provides the following pre-close trading update for the six months ended 31 July 2020 (‘H1’), ahead of its interim results which are expected to be announced on 13 October 2020.
LiDCO continues to support healthcare providers to improve patient outcomes while reducing the cost of care, and in H1 successfully responded to exceptional demand related to the Covid-19 pandemic to achieve a record first half performance.
International experts treating Covid-19 patients have concluded that hemodynamic optimisation plays a major role in the management of the complex interaction of respiratory and cardiovascular factors. LiDCO provides a market leading solution, via either the arterial line or noninvasively, to support the diagnostic and therapy-guiding functional hemodynamic tests as recommended by Covid-19 frontline experts and global guidelines.
In H1, total revenues (including third party products) increased by 75% to £6.2m (2019: £3.5m) with LiDCO product revenues up 83% to £6.1m (2019: £3.3m). This exceptionally strong sales growth was due to increased demand for advanced hemodynamic monitors as healthcare providers expanded critical care services to deal with the Covid-19 pandemic, primarily in the UK where LiDCO is market leader.
As a result of the strong top line growth, LiDCO achieved net positive cash inflow of £1.8m in H1 (2019: £0.5m net outflow). The Company had £3.1m of cash as at 31 July 2020 and has no borrowings. Given the strong cash inflow in H1, the Board decided not to continue to take advantage of the UK Government's option to defer VAT payments and brought these payments up to date by 31 July 2020.
As widely reported, there has been a significant postponement in the number of elective surgery procedures during the pandemic. Over the last three years, the Company’s key commercial strategy has been to sign up customers for its Software as a Service (SaaS) HUP business model, in which customers pay an annual license fee that is independent of the number of patients treated. HUP customers continue to benefit from this model by not having to pay any extra costs to redeploy LiDCO haemodynamic monitors from use in elective surgeries to providing critical care to Covid -19 patients. In parallel, the Company continues to benefit from the predictable, contracted HUP revenue stream, as well as additional demand from customers taking out new HUP contracts. In the period, HUP revenues increased by 83% to £1.5m (2019: £0.8m). Where customers remained on the pay per patient model, the postponement of elective surgeries led to a reduction in consumable sales by around one fifth compared to H1 2019, but the additional HUP revenues more than offset this reduction. Total LiDCO product recurring revenue in H1 was up 12% to £2.8m (2019: £2.5m).
Geographically, LiDCO product sales grew by 157% in H1 in the UK to £4.1m (2019: £1.6m). UK hospitals invested in growing their critical care provision by acquiring new monitors to meet anticipated needs. Distribution markets also grew, by 41% to £1.2m (2019: £0.8m), with the greatest demand coming from Asia. In the USA, hospitals were focussed on preparing for or dealing with Covid -19, which suppressed capital sales and the finalisation of a number of potential new HUP contracts, although recurring revenues grew slightly compared with the first half of last year. This increase was driven by the carry -through from strong growth in HUP contracts during the prior year, which offset declines in per patient disposables due to the reduced number of elective surgeries in H1.”
Industrials
• Coral Products – “These Q1 -2020 results were despite a near 25% fall in sales in the comparative period in the previous year, all of which stems from the trading conditions surrounding Covid -19.
When sales return to historical levels, as and when Covid -19 begins to fade, then the contribution from the increased sales should further improve profitability.
Cash management remains a priority but with the receipt of the £1m Coronavirus Business Interruption Loan (notified 14 May 2020) the Company has significantly reduced creditor pressure whilst remaining within its agreed facilities and loan covenants.
The Board is confident, subject to the Covid -19 caveat below that cash flow should further improve over the remainder of the financial year.
The prevailing uncertainties arising from the ongoing Covid -19 crisis and the danger of a secondary wave which could lead to further deterioration in trading conditions prevents the Board from giving any further guidance on the outcome for the current financial year.”
Leisure
• Safestay – “On 29 May 2020, in conjunction with the announcement of the Company’s final results for the year ended 31 December 2019, the Company updated the market on its financial position and outlook. That announcement explained the material uncertainty which has resulted from the impact of the Covid -19 virus on the economy and the hospitality industry and the company now sets out its revised plan as it adapts to the prolongation of the pandemic beyond June and the current travel restrictions in parts of Europe and across the globe. The perceived likelihood of a second wave, impacting further the tourism sector after the summer of 2020 is increasing, and this has persuaded the Company to take further actions to safeguard the Group’s financial position. Additional cost saving measures have recently been implemented, including further negotiations with landlords to obtain additional rent reduction following the £0.4m rent relief granted in the period between April to July 2020, and all costs will continue to be reviewed on an ongoing basis.
The Directors believe that Safestay has the infrastructure in place to manage the re-opening of hostels and re-engagement with its customers and that ultimately, Safestay will find the route to returning its portfolio of hostels to pre-Covid-19 occupancy levels. Safestay has been at the forefront of the modernisation of the hostel market over the last five years. The Group generated significant cash from its operations in 2019 and its strategy to develop and expand the premium hostel offering within the UK and through its European acquisitions was proving a successful formula pre-crisis, and the Directors believe that it will continue to appeal to the Group’s customer base again once the world has moved past the current crisis.
The Company has built a forecast under two alternative indicative scenarios:
A base case which applies the following assumptions:
• All hostels re-open by October 2020
• 25 per cent occupancy (versus 90 per cen. in 2019) for the months of August and September 2020 (based on open units rather than total units), rising to 30 per cent occupancy in the last quarter of 2020, and 40 per cent occupancy (versus 65 per cent in 2020) for the months of January and February 2021; and
• An average occupancy 5 per cent lower than in 2019 for the rest of 2021.
A low case which applies the following assumptions:
• All hostels re-open by October 2020 except for London Kensington Holland Park and Barcelona Gothic which would open in 2021;
• 20 per cent occupancy (versus 90 per cent in 2019) for the months of August and September 2020 (based on open units rather than total units), reducing to 15 per cent occupancy in the last quarter of 2020 assuming a second wave of infection, and 25 per cent. occupancy (versus 65 per cent in 2020) for the months of January and February 2021; and
• An average occupancy 15 per cent lower than in 2019 for the rest of 2021.
The Group’s hostels break even when the average occupancy reaches approximately 57%. Under both indicative scenarios, the hostels reach this occupancy level from March 2021.
Current Trading
During the lockdown period, management organised 24/7 security in all hostels and all properties have been serviced, maintained, and cleaned. The job retention schemes have allowed the Company to keep essential staff employed, and therefore the Group has the ability to resume activity in all hostels as soon as authorised by relevant jurisdictions and provided that resuming activity makes financial sense. Moreover, following the acquisition of 14 hostels in the last three years, the Group’s teams have gained experience in opening hostels in a very short timeframe and limited resource, as demanded by the current situation.
The re-opening of hostels is subject to the restrictions in each market, and the Group’s sales team is initially focused on just domestic customers while international travel remains limited. Under the slogan, ‘Stay Safe at Safestay’ the priority is to inform guests of the safety measures that are in place. A detailed description of the safety protocols and the operational measures in place is made available to the Group’s guests via the Company's website. Rooms are only being sold to individuals or groups who are known to each other.
The Group re-opened its Berlin hotel on 26 May 2020, the Vienna hostel on 10 June 2020, and all other hostels will have re -opened by 28 August, except for London Kensington Holland Park and Barcelona Gothic hostels which will only re -open when there is considered to be sufficient demand to profitably operate more than one hostel in London, and two in Barcelona.
On average, in July 2020, 30 per cent of the Group’s bed stock was available and 16 per cent of such bed stock was occupied. The average occupancy for the Group’s bed stock rose to 24 per cent and 27 per cent of available bed stock respectively in the first and second weeks of August The Directors are encouraged that the data up to 16 August 2020 shows that occupancy levels are gradually increasing week after week after hostels have re -opened. The five hostels (Pisa, Berlin, Vienna, Warsaw, Brussels) which have been re-opened for more than five weeks have achieved 31 per cent occupancy on average in their third week since re-opening, and 39 per cent occupancy on average in their fourth week since re-opening.
Whereas under normal circumstances, 28 per cent of the Group’s business is from group bookings made months in advance, and 72 per cent from individual guest bookings made two months in advance on average, the current business is made essentially of last minute bookings, which makes future bookings more difficult to predict.”
• J D Wetherspoon – “Apart from a small number of development sites, and pubs in airports and stations, Wetherspoon reopened all its pubs in England, Scotland and Wales as soon as permitted.
Some airport and station pubs have now reopened, but some remain closed. 844 pubs are now open, out of a total of 873.
LFL bar and food sales are -16.9% for the 44 days to 16 August 2020.
Sales have gradually improved, with a rapid acceleration recently, largely due to subsidised food, coffee and soft drinks in the early part of the week.
Sales have also been helped by the addition of extra outside seating. Landlords, landowners and local and licensing authorities have been extremely flexible in accommodating extra outside space – which has helped Wetherspoon and the licensed trade generally. The company nonetheless expects a period of more subdued sales once the scheme for subsidised early -week meals and drinks ends.
VAT
The ‘on-trade’ (mainly pubs and restaurants) has been the subject of a much more onerous tax regime in recent decades than the ‘off-trade’ (mainly supermarkets). Pubs and restaurants have been paying VAT on food sales of 20% and supermarkets zero.
In addition, pubs have been paying about 20p per pint of business rates versus about 2p for supermarkets.
This tax differential has created an increasing gap between on-trade and offtrade pricing, as VAT rates increased from 8% 40 years ago to 20% today.
Supermarkets appear to have used their VAT advantage in respect of food to subsidise lower beer prices, in particular, and have taken approximately half of pub beer sales in that period.
Pubs, restaurants, cafes and coffee shops are integral to the success of high streets. As well as benefitting high streets and the public, tax equality would make general economic sense – it is an important principle of taxation that taxes should be fair and equitable.
It makes no sense for supermarkets, often operating outside town centres, to have a tax advantage. The Chancellor, Rishi Sunak, has recently closed the VAT gap between the on and off-trade, by temporarily reducing VAT on food sales in the on-trade to 5%.
If this major step towards tax equality is maintained in the long term, it will result in a significant increase in investment and employment in the on-trade.”
Retail
• Motorpoint – “Over the last 11 weeks, the period which the Group’s retail sites have been fully reopened, the Board has seen its key operational and trading metrics comfortably ahead of the equivalent period last year.
The Board has been encouraged by this momentum, which has been achieved across the Group’s combined customer channels including its 13 retail sites, online channel and its Home Delivery proposition. Supply of stock and margin remains strong.
In light of the significant uncertainty which remains as a result of the pandemic and the sustainability of any recovery in consumer confidence, it remains too early to reinstate guidance at this stage. However, the Board believes that
Motorpoint is very well positioned to build on the opportunities in the year ahead.”
Support Services
• Bunzl – “Group revenue for the first half of 2020 was £4,846.3 million (2019 H1: £4,528.4 million), an increase of 7.0%, and adjusted operating profit was up 12.6% to £340.8 million (2019 H1: £302.7 million). Adjusted earnings per share were 70.1p (2019 H1: 60.4p), an increase of 16.1%.
Overall currency translation had a minimal impact on the Group’s reported results, increasing revenue by 0.3% but decreasing profits and earnings by between 0% and 1%. The positive translation impact of the weakening of sterling against the US dollar, euro and Canadian dollar was largely offset by the adverse impact of the strengthening of sterling against the Australian dollar and Brazilian real. At constant exchange rates, revenue increased by 6.7% and adjusted operating profit rose by 13.0% with the Group operating margin up 40 basis points to 7.0%. Adjusted earnings per share were up 16.4%.
As a result of a higher net margin in the underlying business, the return on average operating capital increased to 39.7% (31 December 2019: 36.9%) and the return on invested capital rose to 14.4% (31 December 2019: 13.6%).
The Covid-19 pandemic has had a significant operational impact on us globally which has required our colleagues across the Group to change the way we do business and interact with our customers. However, our ability to respond successfully to the demands placed on our businesses with agility, flexibility and speed, combined with the significant benefits we are able to derive from the strength and depth of our supply chain and the expertise provided by our sourcing operation based in Shanghai, have together allowed us to deliver a very strong set of results with double digit percentage increases in adjusted operating profit and adjusted earnings per share. Given this we have decided to repay employee-related government support packages and bring forward the settlement of tax deferrals where possible to do so as referred to in the pre-close statement in June.”
Lifting restrictions
• A further easing of lockdown restrictions in Scotland from today means organised outdoor contact sports can resume and bingo halls, amusement arcades, casinos, funfairs and snooker halls can reopen.
Other
• France will soon impose a 14-day quarantine on all arrivals from the UK, to mirror the restrictions imposed by the British government earlier this month on people arriving from France.
• Tesco is to create 16,000 new jobs after lockdown led to ‘exceptional growth’ in its online business. The new posts will include 10,000 staff to pick customer orders from shelves and 3,000 delivery drivers.
• According to the travel industry trade body ABTA, the pandemic has already led to the loss of around 39,000 jobs. About 65% of travel firms have had to make redundancies or start a consultation process.
• Bailiffs are resuming operations in England and Wales from today, collecting unpaid council tax bills and parking fines after a five-month suspension owing to coronavirus.
• Portugal has been put back on the UK’s safe to travel list. Since the change came into effect on Saturday, hotel reservations in the Algarve have climbed by 13%, the Portuguese Hotels Association (AHP) reported – reaching 63% of last year’s level.
• Nigeria’s economy has shrunk by 6.1% in the second quarter of 2020, due to lockdowns decreasing business activity at home and abroad.
• The US Food and Drug administration has given emergency authorisation for the use of blood plasma.
• The number of daily coronavirus cases recorded in Italy has nearly doubled in the past five days, rising to more than 1,200 on Sunday.
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