Government measures are large and welcome, with the promise of lending and the suspension of business rates very helpful for the most affected sectors. Despite the firepower, this has not comforted equity markets, with further sharp slides today. The government needs to address this given the massive knock-on effect from the loss of value in terms of savings and pensions. The freezing of real estate funds emphasises the point.
Today
Cases - 15,744 Deaths - 817
Total
Cases - 198,407 Deaths - 7,977
Headlines
• Morrison’s – to hire 3,500 people to boost home delivery
• AGM planning – guidance from ICSA
• Eurovision Song Contest cancelled
• Nicola Sturgeon – says Scottish schools may not reopen before summer
• Glastonbury cancelled
• Cannes Lions – postponed
• US:Canada – border closed to non-essential traffic
• Property funds suspended – by BMO, Kames, SLA, Janus Henderson and Aviva
Company news
• Ascential said the Cannes Lion festival “will take place in October 2020. Approximately 75% of Ascential’s annual revenues are delivered through robust digital subscriptions and platforms, advisory and benchmark revenue streams. Approximately 25% of annual revenues are derived from destination events income, mainly the Cannes Lions festival (which traditionally takes place in June) and Money20/20 events in Amsterdam (in June) and Las Vegas (in October). We are pleased to have received the support of our major customers on this decision to defer the Cannes Lions festival. Contracted customer delegate passes, award entries and sponsorship arrangements will be automatically transferred to the new dates. Any additional costs that may be incurred as a result of the postponement are not currently expected to be material. We will continue to engage closely with our customers in [the] coming months to assist them in planning for these revised dates, whilst also monitoring carefully continuing developments associated with the coronavirus outbreak and following World Health Organisation (WHO) and national government guidelines. A final decision has yet to be taken on whether to activate the previously-announced contingency dates for Money20/20 Europe and we continue to engage closely with customers and follow the advice of the Dutch government, the WHO and local authorities in Amsterdam. Trading continues to be in line with our previous guidance, and this reflects our heavy bias (c75% revenues) towards digital subscriptions and platforms, advisory and benchmark revenue streams. However, in light of the rapidly changing impact of the Covid-19 outbreak, the board has decided not to reconfirm financial guidance and has taken the prudent decision to put the share buy-back programme on hold for the time being.”
• Multiplan (mall operator in Brazil): “The four malls operated by the company in Rio de Janeiro will suspend their activities for a 15-day period, starting today, 18 March 2020, pursuant to State Decree No 46.973 of 16 March 2020. The opening of operations that provide essential services to society, such as food-related operations, pharmacies and health services, however, will remain optional. The shopping centre operated by the company in Porto Alegre, in accordance with Municipal Decree No 20.506 of 17 March 2020, will suspend its activities for a 30-day period, starting today, 18 March 2020. The opening of essential services to society, such as food-related operations, pharmacies and health services, however, will remain optional.”
• Barclays – According to the FD: “It’s going to be a tough year for earnings. Barclays might delay some of its investments and cut bonuses.” According to the CFO: “In a year like this, we have those levers available… obviously variable compensation is one.”
• Home Depot – Beginning Thursday 19 March, stores will now close daily at 6:00pm, while opening hours will remain unchanged. As an essential retailer to the communities it serves, The Home Depot is committed to keeping stores open just as it always does during times of crisis and natural disaster. Homeowners and businesses depend on The Home Depot for urgent needs such as hot water heaters, refrigerators, cleaning supplies, electrical and plumbing repairs, and harsh weather items like tarps, propane and batteries. The adjusted hours will give stores the ability to staff appropriately and provide additional time to restock shelves and perform cleaning. As many items across our store are in high demand, the company’s merchants and supply chain teams are prioritising replenishment and restocking as quickly as possible.”
• Marriott Vacations: “In its 26 February 2020 earning release, the company provided full-year 2020 guidance. Through 13 March, first quarter vacation ownership sales were up 10% compared to the same period last year. However, given the unprecedented and fluid nature of the situation, including other businesses closing their theme parks and ski resorts, the cancellations of leisure events and the closures of public beaches, as well as other federal, state and local government actions, the company has begun to see near-term cancellations of owner, exchange and rental reservations at its resort businesses and significant declines in its vacation ownership sales. We are therefore withdrawing our guidance until we get a better understanding of the duration of the reduced travel and the impact on our operations.”
• Triumph Group (US-based aero supplies) has “announced certain cost reduction initiatives of about US$75m beginning in FY21 to align capacity with expected demand due to the impact of the coronavirus outbreak. Cost reductions will result in the reduction of overhead and indirect staff and temporary workers; furloughs will be selectively implemented. To date, there has been no material impact to Triumph’s backlog or revenue as a result of Covid-19. All of Triumph’s factories and key suppliers remain operational.”
• McCarthy & Stone#: “Monday's announcement from the government setting out its response to the increasing number of cases, marks an escalation in the protective measures specified, including likely self-isolation for those over 70 years of age for an initial period of c3 months. At this stage, it is too early to speculate on the full extent of the resulting impact on our financial performance for the full year and beyond. However, we do anticipate an inevitable material impact on trading in the coming months. The board would like to reiterate that the business continues to maintain a strong balance sheet and it has taken action to fully draw down its £200m revolving cash facility, resulting in a current available cash balance of £127m. The board is currently evaluating a number of actions to balance the preservation of cash with the long-term needs of the business. Given the current need for prudent cash management, the board has decided to withdraw Resolution 4 in relation to the final dividend payment of 3.5p per ordinary share that was to be proposed at the forthcoming Annual General Meeting on 25 March 2020.”
• General Mills: “Our Q3 results were broadly in line with our expectations, except for the negative impact in Asia of the Covid-19 virus outbreak. General Mills plays a critical role in making food to meet the needs of our consumers, and I’m proud of the way we’ve partnered with our retail customers in recent weeks to service consumers’ increased demand for food at home during this unique time. Looking forward, we’ll remain agile to adapt to changing demand patterns around the world as circumstances with Covid-19 continue to develop.”
• Revolution Bars#: “In very recent days, the group has experienced a decline in LFL revenue following the increasing impact of Covid-19. Following the UK Government’s announcement late yesterday advising the public to stay away from bars and the actions of other governments, it is reasonable to expect the trading environment will be very challenging for the foreseeable future. As such, the board expects a material deterioration in trading performance for the remainder of the financial period ending 30 June 2020, however, given the continued high level of uncertainty it is not possible to quantify the precise impact at this time.
To help mitigate the impact of Covid-19 and preserve cash, the group is taking actions to remove cost and non-critical capex from the business. These measures include:
• Reduction in payroll costs across the business
• Review and reduction of unprofitable trading sessions
• Reduction in other variable costs such as entertainment and door staff
• Suspension of rent and deferral of business rates
• Requests to defer PAYE and VAT payments
The group welcomes the government’s support for the business rates holiday for 12 months announced late yesterday, but this does not go nearly far enough and we hope that there will be further measures in the coming days to provide assistance with payroll entitlements to gain surety for our employees, amongst other things.
The group's net debt position as at the end of week 37 (last week) was £10.5m in line with the board’s expectations. The board continues to monitor the group’s funding requirements closely and is proactively exploring all the options available.”
• Greencore: “Trading broadly in line with original expectations. Over the last ten days, the impact of Covid-19 has become more pronounced on the wider UK food industry, the grocery and on Greencore. While much is changing across UK society in response to the pandemic, it is apparent that the maintenance of a robust food system – at a manufacturing, distribution and grocery store level – will be an increasingly critical part of the national infrastructure, particularly as footfall reduces in foodservice and hospitality formats. Currently, from a demand perspective, group volumes are holding up well, albeit there is a pronounced change in mix across different parts of the product portfolio and across customers’ store formats.
As a business Greencore is committed to playing its part in keeping the UK fed, working with colleagues, suppliers and customers to maintain food through all scenarios. However, given the level of uncertainty, it is too early to predict the impact of Covid-19 on FY20 results.
The group’s cash generation has proceeded broadly in line with plan. The group retains substantial financial headroom, with significant access to cash and undrawn committed debt facilities and with no maturities in any facilities in the next 18 months.”
• Air Partner – The Covid-19 crisis began at the start of our financial year and so it is too early to judge the full year impact – either positively or negatively – with any degree of certainty at this point. As a result, it is no longer possible to provide financial guidance for the remainder of the financial year ending 31 January 2021. Across the group, costs are being tightly managed to preserve cash and to maintain sufficient working capital in the business to support customer demand through this crisis. Accordingly, the board expects that it will not be in a position to make a recommendation on dividend payments until the crisis has passed, and a clearer outlook has emerged.
• Superdry: “Today 78 stores across Europe are affected by government-mandated closures. This accounts for the majority of our European store estate which contributes ~40% of weekly sales forecasts.
In the UK and the US, stores remain largely open, but footfall has been significantly impacted, reducing on average ~25% week-on-week, as governments and customers take increasing measures to contain the spread of the virus. These key markets represent ~50% and 10% of weekly sales forecasts respectively.
Trading is likely to be significantly impacted by such measures, it has become clear that the company will not meet the guidance given on 10 January 2020. Accordingly the company is no longer giving formal guidance in relation to the FY20.”
• Gear4Music confirms that it does not expect the coronavirus outbreak to have an adverse impact on the group’s trading for the current financial year ending 31 March 2020. “As previously stated the company is confident results will be at least in line with the board’s expectations. Supply chains are currently operating as normal, and we have pre-planned for some disruption by way of tactical forward purchasing.”
• 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.”
• M&B: “Recent trading has been severely impacted by Covid-19 and the containment measures taken by the government, including the recommendation to avoid pubs and restaurants which is now expected to lead to a further significant downturn in sales.
Given the rapidly-evolving nature of the situation it is impossible to quantify the impact Covid-19 could have on our financial performance. However, we expect a significant reduction in our expected outturn for 2020, and given this uncertainty can no longer provide detailed guidance on the expected forward financial performance for the year.
We are working proactively to protect our trading and cash flow through a number of actions including suspension of the capital programme and reduction of costs across the business.”
• Boeing – As previously disclosed, on 6 February 2020, The Boeing Company (Boeing) entered into a two-year delayed draw term loan credit agreement with Citibank, NA (Citibank), JPMorgan Chase Bank, NA (JPMorgan), BofA Securities, Inc and Wells Fargo Securities, LLC as joint lead arrangers and joint book managers, Bank of America, NA and Wells Fargo Bank, National Association as documentation agents, JPMorgan as syndication agent and Citibank as administrative agent, and a syndicate of lenders as defined in the credit agreement. As of 13 March 2020, Boeing has fully drawn on the credit agreement, consisting of approximately US$13.8bn, which amount includes additional commitments made subsequent to the initial closing date. For additional information on the terms and conditions of the credit agreement, see Boeing’s Current Report on Form 8-K dated 6 February 2020. We continue to have access to revolving credit agreements entered into on 30 October 2019, which have also been disclosed. These facilities, which to date have not been drawn upon, provide us with additional liquidity as we navigate the current business challenges. For additional information on these credit facilities, see Boeing’s Current Report on Form 8-K dated 30 October 30 2019.
• Sainsbury’s is to ration all products. Three-item limits on all products and two-item limits on the items most in demand. It has also introduced special opening hours for the elderly and vulnerable.
• Asda is to ration in-demand products to two per customer and has asked shoppers to be considerate when making purchases.
• Toyota has announced that it is suspending production at its European plants, for two weeks. This includes its factory at Burnaston in Derbyshire and its engine facility in Deeside. The two UK plants employ c3,000 people. Staff will be put on paid leave.
• BMW has announced it’s winding down production at its European plants, as well as at a facility in South Africa. BMW has c6,000 manufacturing staff in the UK.
• Nissan has stopped vehicle production at its European and Indonesian plants. Its North American plants will remain in operation.
• Dacia (Romanian carmaker) has suspended production until 5 April.
• Suzuki is stopping production at its Hungarian factory from 23 March until 3 April.
• Honda says it will suspend production on vehicles at all production plants in North America beginning 23 March through 31 March. Honda says it will continue to pay the 27,000 employees affected by the pause in production.
• Rolls-Royce Motor Cars has suspended production at the company’s Goodwood-based manufacturing plant from Monday 23 March for two weeks.
• Gap is to temporarily close its Old Navy, Athleta, Banana Republic, Gap, Janie and Jack and Intermix stores across North America. The company is going to provide affected employees with pay and benefits during the period.
• Samsung is closing all its US stores and all its Canadian experience stores.
• Naked Wine – The company has suspended taking new orders after a spike in demand.
• Amazon is temporarily refusing to stock certain items in its warehouses to cope with demand for household essentials. The move will last until 5 April and cover warehouses in the US and Europe.
• Hochschild “is today announcing that due to the Peruvian government’s recent declaration of a state of emergency to contain the advancement of Covid-19, the company has temporarily halted operations at the Inmaculada and Pallancata mines. The state of emergency took effect on 16 March 2020 and is currently expected to last for a 15-day period after which time, subject to the government indicating its approval, the company intends to resume production at both mines. The San Jose mine in southern Argentina remains in operation.”
• Selfridges is closing its London, Birmingham and Manchester stores. The company made no indication when the shops may open again.
• Pret a Manger – From Thursday the chain will no longer allow customers to sit in-store, “to reduce points of contact” in shops.
• Royal Mail – CWU won’t call for strike action. It said that it’s proposing postal workers become an “additional emergency service during this national crisis”.
• Planet Fitness – Closing all corporate stores until 31 March.
#corporate client of Peel Hunt
Events
• Glastonbury Festival has been cancelled.
• Australia and New Zealand have scrapped annual Anzac Day commemoration events in Turkey.
• The French Open has been postponed until September. The event in Paris was due to be played from 24 May to 7 June, but instead will take place from 20 September to 4 October.
• PGA Championship has been postponed. The tournament was scheduled to take place at TPC Harding Park in San Francisco, California, from 11-17 May. No new date has been given.
• Eurovision Song Contest has been cancelled. The event was due to take place at Rotterdam’s 16,000 capacity Ahoy Arena, with the final on 16 May.
Other
• EU is banning all travellers from outside the bloc for 30 days.
• Nevada is shutting all non-essential businesses, including Las Vegas casinos.
• Health officials in South Korea have asked the public to postpone or cancel all non-essential overseas travels.
• In Iraq, a seven-day curfew has begun in the capital, Baghdad.
• Schools in California will likely remain closed for the rest of the school year, said Governor Gavin Newsom. Almost all of the state’s schools have closed, although this has not been mandated.
• The BBC said production on EastEnders, Casualty, Doctors, Holby City, Welsh drama Pobol y Cwm and BBC Scotland’s River City will all be halted.
• Neighbours, the Australian soap opera, has temporarily halted filming.
• Australia has banned ‘non-essential’ gatherings of more than 100 people.
• UAE has banned its citizens from travelling abroad.
• All schools in Scotland and Wales will close by Friday at the latest the Welsh Government has announced.
• The BBC has announced it will begin a new live series called Health Check UK Live on BBC One each day to address concerns of those in isolation.
• Poland’s Prime Minister Mateusz Morawiecki has announced a 212bn zloty (£43bn; US$52bn) fiscal package to help the country manage the impact of the spread of the coronavirus.
• The Spanish Government has confirmed it will close all the country’s hotels from Tuesday 24 March in response to the coronavirus outbreak.
