Headlines
• Switzerland, Jamaica and Czechia added to UK’s quarantine list
• Germany bans large gatherings until 2021
• African Centres for Disease Control reports 20% drop in new cases
• UK R number remains between 0.9 and 1.1
Financial
• Amigo – “During the first quarter of our financial year, Amigo granted Covid-19 related payment holidays to approximately 47,000 customers. Payment holidays granted to borrowers during this period provided both a payment and interest holiday of up to three months with no increase in monthly instalments when the payments resume. The term of the loan is effectively extended by the duration of the payment holiday. No interest or principal is waived and it is instead deferred to future periods.
By deferring contractual repayments without charging interest or increasing the value of future monthly instalments, the present value of the future cash flows for customers with Covid-19 payment holidays is reduced. In accordance with the asset modification and effective interest rate requirements of IFRS 9, a modification loss has been recognised based on the estimated change in the present value of contractual cash flows that arises from the Covid-19 payment plans granted up to 30 June 2020. This resulted in a modification loss of £16.0m being recognised in the quarter, £12.9m of which is recognised in revenue, with the remainder recognised in impairment.
Post our first quarter end, extensions to Covid-19 payment holidays for a further period of up to three months have been offered to customers, which is in line with revised regulatory requirements. For the first three months of the payment holiday no interest accruals were applied to customer balances; from three to six months interest begins to accrue. The timing impact of these changes will be reflected in our results for the second quarter.
Collections remain robust at 86% of pre-Covid-19 expectations as at 31 July 2020. This includes the early settlement of some customer loans. Amigo has adequate liquidity to continue to fund operations and support its customers, with over £145m unrestricted cash held as at 31 July 2020, despite payment of the half-yearly interest on our senior secured notes. The board, with management across the business, is putting measures in place, including updated scorecards and revised credit policies, to enable a return to prudent lending to customers outside of key worker positions by the end of 2020. Amigo plays an important role in providing financial inclusion to our customers, who may be excluded by mainstream lenders.
We are preparing to restart lending on a prudent basis by the end of 2020. However, until we do so, and until we have more clarity on the financial impact of Covid-19, the board considers it too early to issue guidance for this financial year. We have a strong cash position. Despite the special Covid-19 relief programme, cash collection has remained robust and we are well positioned to manage the challenges of the Covid-19 pandemic.”
• Manx Financial – “Thus far, the Isle of Man economy is bearing up well under the strain of Covid-19 and our local new business growth shows no signs of diminishing. The UK, however, is experiencing considerable uncertainty with the biggest fall in quarterly Gross Domestic Product on record at 20.4% for Quarter 2 this year. Thus, it is difficult for me to provide a clear steer as to our full-year outcome in this changing environment. We have, however, started the beginning of the year in great shape and we are lucky in having a diverse range of financial services upon which to rely. I am also confident that worthwhile acquisition opportunities will emerge during the inevitable shakeout to come.
The bank’s appointments as accredited lenders to the various government backed schemes will serve as an impetus to secure second-half lending growth, and we will continue to protect our existing loan book as far as possible by helping any customer in difficulty with revised payment planning or similar forbearance. Our recent streamlining and cost-cutting exercises will make a positive impact on profits for the second half and beyond. Meanwhile, we will continue to strengthen our balance sheet by maintaining adequate liquidity and ensuring our provisioning regime is both appropriate and prudent.”
Food, Drinks & Household
• Benchmark – “Conditions across our multiple locations around the world vary and we have procedures in place to address local constraints. We are maintaining our focus on cost and cash management, which together with our tried and tested flexible operating processes, give us resilience for the next phase of the pandemic and the uncertainty associated with it.”
Industrials
• Essentra# – “Trading trends in all three divisions improving through Q2
• Covid-19 had a significant impact on underlying markets in which Components operates, but revenue and order intake trend improved through Q2
• Resilient performance in Packaging division with new business secured during HY 2020 and the division delivered growth in May and June
Filters division made strong progress on game changers with commencement of new outsourcing contracts in Q2 helping to return division to growth in June
• All 71 manufacturing and warehouse facilities are fully operational.
Heading into H2 2020, the macro economic environment continues to remain uncertain. However, while our Components division is more exposed to industrial segments with a certain degree of cyclicality, much of our group serves end -markets that are non -cyclical in nature.
We have delivered a resilient financial performance in the first half of the financial year, despite the pandemic. Although the timing and profile of recovery remains uncertain – and barring a major second wave to the pandemic – based on recent trading and internal forecasts, our current expectation for the year to 31 December 2020 is that the resilient performance seen to date will continue with revenue and adjusted operating profit within current range of analyst expectations.
On a divisional basis, the outlook for H2 suggests that; Components will see a continuation in the improvement on LFL trends, Filters will see a continued trend of year -on -year growth driven in part by outsourcing contract volumes, and in Packaging – due to some recent softness seen in certain end markets owing to a supply chain adjustment resulting from a reduction in prescriptions and surgeries through lockdown periods – Q3 should be broadly flat with a return to growth anticipated for Q4. ”
Retail
• Tandem – “As previously reported it has been a strong year for bicycles and outdoor products. Despite the reduction in FOB business, turnover and profit before and after tax for the six months to 30 June 2020 are expected to be ahead of the prior year.
The supply chain, particularly for bicycles, remains under pressure with strong global demand on suppliers and increased lead times. In addition, national retailers continue to be cautious in their buying decisions. As anticipated, group revenue fell behind the prior year during the summer period as a result of the lack of national retailer FOB orders and a limited supply of bicycles. However, margin from domestic business has remained strong during the period with lower overheads as a result of the Covid -19 impact. As a consequence it is difficult to confidently forecast the full year result at this stage. ”
Other
• A new study of children with coronavirus in hospitals across England, Wales and Scotland, published in the BMJ, has shown their risk of needing treatment for Covid -19 is “tiny” and of needing critical care “even tinier”.
• Germany has banned large gatherings until the end of this year, amid rising coronavirus cases in Europe. Under the new rules, German football fans will not be allowed back into stadiums until 2021. Regulations on mask -wearing will also be toughened. Mass gatherings including festivals, concerts and big sporting events will remain prohibited.
• According to new research by academics at Cardiff University and the University of Southampton, nine out of ten people in the country who have worked from home during lockdown want to continue to do so. Working from home in the UK rose from 6% of employees before the start of the pandemic up to 43% in April, with results indicating that productivity mostly remained stable compared with the six months before.
• The Dutch government has brought forward the date by which all mink farms must be permanently closed. The mink breeding industry in the Netherlands had originally been told to shut down by 2024 for animal rights reasons, but all farms will now have to close by next March. The government has reportedly set aside €180m to compensate farmers for the early closures.
• Amsterdam and Rotterdam have been running a pilot scheme this month requiring face coverings in the busiest areas. The two biggest Dutch cities have now decided to drop the trial from Monday.
• The Royal Schiphol Group – which employs 3,000 people and owns airports in Amsterdam, Rotterdam and Eindhoven – said it will cut several hundred jobs as a result of the loss of traffic amid the coronavirus pandemic. In an update on trading in the first half of the year, the company said it had seen a 62% drop in passenger traffic from the same period a year ago, leading to a loss of €246m ($292m). In the first half of 2019, it posted a profit of €133m.
• London’s Gatwick Airport has said demand for air travel might not return to pre-pandemic levels until 2025. The group lost £321m in the first six months of this year and passenger numbers fell from 22.2 million to 7.5 million over the same period.
• The African Centres for Disease Control and Prevention reported a 20% drop in new cases on the continent in the last week - but the public health body has urged caution, saying it may be down to less-widespread testing in some countries.
• An estimated 28,200 people in private households in England had Covid-19 during 14-20 August, according to new figures from the Office for National Statistics. This estimate is broadly unchanged from the previous week of 7-13 August, equivalent to around 0.05% of the population.
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