The UK Government announced a significant escalation in measures last night in response to rising cases, following most of Europe into lockdown. However, we could soon see a shift of the virus epicentre. WHO spokeswoman Margaret Harris said there had been a “very large acceleration” in cases in the US and it has the “potential” to become the next Covid-19 hotspot. The US has seen more than 46,000 cases and 593 deaths with no widespread lockdowns. The US could soon be setting unwanted records as its polarised health system begins to feel the impact.
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Buildings & construction
• Howdens Joinery – In light of the new government guidance, and in order to protect the wellbeing of our people and our customers, we have decided to close temporarily all our UK depots with immediate effect. Our depots in Continental Europe are also closed.
We will continue to review the new guidance as it emerges and will update further in due course. We will seek to explore ways in which we can support our customers.
• Springfield Properties – The Covid-19 outbreak has not negatively affected the Group's completions or reservations to date. However, the Covid-19 situation is rapidly evolving and the Group notes the statement made by First Minister Nicola Sturgeon on 23 March 2020 advising the closing of building sites across Scotland. Further guidance is expected to be given by the Scottish Government on this matter and the Group will update the market in due course.
Net debt as of 30 November 2019 was £56.0m. The Group has a £67m credit facility with Bank of Scotland, with whom it has an excellent relationship and has maintained a very constructive dialogue over the past few weeks regarding the bank's support and availability of additional funding if required.
While the Group maintains a strong financial position, given the rising level of uncertainty as to how the situation will develop, alongside other measures that the Group intends to take to preserve its cash position, the Board has decided to withdraw the proposed interim dividend of 1.4 pence per share (amounting to a saving of £1.4m), announced on 27 February 2020. The interim dividend will therefore not be paid on 26 March 2020 as previously scheduled.
• Redrow# – “Trading has remained resilient in the first 12 weeks of the second half to 20 March 2020, with the value of net reservations up £121m at £525m compared to last year. The weekly reservation rate per outlet has averaged 0.86 against 0.72 last year over the same 12-week period. Our order book is very strong, currently standing at over £1.4bn. Last week net private reservations were in line with the previous year at 95 plots, but visitors to site were substantially down and the cancellation rate increased. As the Government's escalating measures to contain the spread of the virus take effect, it is inevitable our sales rate will be seriously impaired over the coming weeks and build output will be significantly affected by labour and material shortages. We also expect outlet openings to slip as local authorities delay planning committee meetings.
We have a strong balance sheet together with £250m of committed facilities and we are working proactively to protect our cash flow. Net debt currently stands at £116m and we expect this to reduce substantially over the coming month as a high volume of homes legally complete. We have put on hold activity in the land market and we are working to reduce actively our work in progress levels across our sites.
Given the ongoing uncertainty, we have also decided to cancel our 10.5p interim dividend amounting to £37m which was due to be paid on 9 April 2020 to holders of ordinary shares on the register at the close of business on 6 March 2020.”
• Eurocell# – “We will be temporarily closing our manufacturing plants, branch network, distribution and recycling operations with immediate effect. The shutdown will be carefully controlled, in order to leave us well placed to recommence operations and trading when it is appropriate to do so.
We have a strong balance sheet, and in March 2020 we were pleased to increase our bank facility to £75 million. We maintain a conservative approach to debt in order to ensure good liquidity and to manage any emerging risks. Net debt at 31 December 2019 was £34.6 million (on a pre-IFRS 16 basis).
Taking into account the closure and current level of uncertainty, the Board has taken the decision to cancel the final dividend payment of 6.4p per ordinary share that was proposed with the announcement of our 2019 full year results on 13 March 2020. Further prudent actions we have taken to preserve cash include deferral of non-essential operating costs and the vast majority of planned capital expenditure whilst our operations remain closed. We will also make use of any tax payment relief, the Coronavirus Job Retention Scheme and other Government measures as they become available.”
• Shaftesbury – Following recent UK Government actions to halt the spread of the virus, across the West End, shops, restaurants, cafés, and bars have temporarily closed and office workers are working from home.
We are supporting our commercial occupiers with solutions, including rent deferral, to help to ease their short-term cash flow issues, so they are in a position to resume trading once the current restrictions are lifted.
Shaftesbury has a well-financed Balance Sheet with 24% LTV1, no debt maturities until May 2022, diversified sources of finance, and a weighted average debt maturity of 8.8 years.
Strategy to preserve liquidity over coming months:
• Moratorium on all non-essential expenditure, new schemes and acquisitions, other than by exception.
• £150 million has been drawn against our committed revolving credit facilities as part of a prudent approach to cash management, increasing our available cash to c. £179 million.
• After capital and acquisition commitments, total available liquidity (cash and undrawn revolving credit facilities) is around £170 million.
Full year EPRA earnings (year ending 30 September 2020) are now expected to be significantly below current market expectations, although, given the uncertainty over the length of time until normal conditions begin to return, it is not possible at this stage to quantify the impact.
To preserve liquidity, no interim dividend will be declared at the half year. The dividend position for the full year will be kept under review.
31 March 2020 valuation likely to include a statement from the independent valuers highlighting the material uncertainty, given the current situation.
• Taylor Wimpey – Our UK operations have only been meaningfully impacted in very recent days. Our small Spanish business also has faced disruption over the past few days as it has responded to the government imposed shut down.
Cash preservation and 2020 dividend update – In order to conserve cash and increase our flexibility, we are taking measures to manage our working capital very tightly and have stopped all discretionary land spend. In addition, we have taken the prudent step of drawing down our previously unutilised Revolving Credit Facility (RCF) of £550 million, resulting in a gross cash position of £807 million and net cash of £165 million as at 23 March 2020.
We have taken rapid proactive measures to protect the balance sheet in the short term. However, we are likely to face weeks or months of uncertainty, including periods of inactivity that will limit our ability to complete on homes and therefore generate cash.
Until the extent and duration of the disruption is better understood, the Board believes conserving cash is in the best interests of the long-term sustainability of the business. Whilst our ordinary dividend of at least c£250 million per annum, has been stress tested and is payable though a 'normal' downturn, the global Covid-19 pandemic goes beyond normal and even severe cyclical swings and represents an exceptional case.
Accordingly, we have taken the decision to cancel the 2020 final dividend of 3.80 pence per share (c.£125 million) that was due to be paid on 15 May and the planned special dividend payment of 10.99 pence per share (c.£360 million) that was due to be paid on 10 July, both of which were subject to shareholder approval.
In light of the significantly changed circumstances, we also suspend our previous guidance for 2020. We will assess our medium term targets when there is greater clarity on the length and impact of the current crisis.
Retail
• Mulberry – “The Board has carefully considered the potential impact of Covid-19 on the Company's trading performance, including running various scenarios as to the possible impact on sales, profits, and cash flows.
Whilst the Board remains confident in the strength of the Mulberry brand, recent trading in our stores, particularly in the UK, has been severely impacted by the Covid-19 crisis. On 21 March 2020, the Board took the decision to close Mulberry stores in the UK until further notice. It notes the latest UK Government advice and is working on its implementation throughout the Company's operations. In addition, the Company is reviewing its international portfolio of stores on a case-by-case basis.
The Company's current financial year ends on 28 March 2020. In its half year results announcement released on 13 November 2019, the Company highlighted that it expected to be profitable and cash generative in the second half of the year. As a result of the impact on the Company's trading of Covid-19, the Board now expects the Company to make a small loss in the second half.
Given the rapidly evolving nature of the situation, is not possible to provide meaningful guidance on the Company's future performance.
Financing – Mulberry has a robust balance sheet with net cash as at 20 March 2020 of £8.8m. The Company has additional liquidity through its £19.0m of undrawn bank facilities and maintains a positive dialogue with its lenders with regard to optimising its operational flexibility and banking covenants. The Company has a supportive majority shareholder and welcomes the measures announced by the Government to support UK businesses through this challenging time. Given the current circumstances, the Board has determined that it is appropriate to suspend all shareholder distributions until further notice.’
• McColl’s – All our stores are currently open and well-placed to serve our communities. We have put in place a range of policies designed to protect our colleagues and customers, keep our stores open and trading safely, and to enable our head office to support our stores via remote working arrangements.
Since the Covid-19 outbreak in the UK, the Group has responded proactively to current strong demand. We continue to work with our wholesale partners, whilst investigating complementary channels, to supply the essential products our customers need at this time.
Financing and liquidity – We retain a supportive relationship with our lending banks, and, as previously announced on 28th February 2020, the Group's bank facilities have been successfully amended and extended to a revised maturity date in May 2022.
Notwithstanding the increased demand we are currently experiencing and, given the high degree of uncertainty relating to the Covid-19 outbreak, the Group is taking proactive actions to preserve cash, manage working capital, maximise liquidity, and phase capital expenditure appropriately. We have also prudently modelled a range of potential future downs
• Angling Direct – The Company confirms that each of its retail stores are now closed until further notice. However, the Company's distribution centre will continue to function and the Company's online offering remains operational.
The Company notes the measures of support that have been put in place by the Government and expects to be a beneficiary of all that are applicable to the Company.
• Dunelm Group# – The company has confirmed it will ‘temporarily close down our entire customer facing operations today in order to understand and comply with the new restrictions and guidelines.
We have also taken actions to protect the cash resources of the business. This includes our decision to cancel the interim dividend, which was due to be paid in April. Our capital policy is unchanged and we remain committed to returning surplus cash to our shareholders. In light of the extraordinary circumstances, the Board believes it is important to retain the cash in the business until further certainty is gained.
Financial position – The Group has access to £175m of financing facilities through a committed RCF of £165m (maturing in March 2023) and a £10m overdraft.
As at 21 March 2020, our net cash position was £11m, comprising a drawdown of £14m against our RCF facility and £25m cash.
The Board has taken the decision to draw down in full against its RCF given the heightened levels of uncertainty and will place surplus cash on deposit. The Group continues to expect that it will satisfy its covenant requirements at the FY20 year-end.’
• Games Workshop# – In March since the Covid-19 outbreak has spread more widely, the Group's performance globally has been impacted.
In response to official guidance announced today in both the UK and US, we will be temporarily closing globally all of our stores, headquarters, factory and warehouses with immediate effect.
• JD Sports# – “As of now, essentially all of our stores are closed in UK, United States and Europe. In a typical week, at this time of the year, we would expect the stores that are closed to contribute substantially all of the Group's physical store sales.
Whilst our trading websites continue to accept and fulfil orders and, whilst we have seen a resilient performance to date in most territories, this represents a comparatively small mitigation in terms of overall profit contribution.
As would be expected, we are pursuing a number of measures to preserve capital across all aspects of our business and thereby limit the level of cash burn. In this regard, the Board welcomes the various public sector initiatives that have been announced to date in the territories where it operates.
At this stage, given the current uncertainty and the potential for further government action where our fascias are still able to trade, the Board does not believe it appropriate to provide financial guidance for the current financial year ending 30 January 2021. Further, the Board notes the request from the Financial Conduct Authority over the weekend for all listed companies to observe a moratorium on the publication of Preliminary Financial Statements ('Results) for at least two weeks. Given the potential for this request to be extended beyond this initial period, which would then cover the Group's previously published reporting date of 15 April 2020, we believe it is prudent to announce a delay now to the publication of the Group's Results for the period to 1 February 2020. We will announce a revised date for the publication of the Results in due course but, at this stage, we would anticipate that this revised date will be in the second half of May. This revised date would also allow the Group to provide greater clarity of the impact of Covid-19 on the Group's performance for the current year to 30 January 2021.
The Board is satisfied that the combination of a strong balance sheet, net cash resources and the substantial working capital facilities available to the Group in its various territories are more than adequate to meet the cash deficiencies which may reasonably be anticipated during the closure periods in our various territories.”
• Applegreen “has traded strongly and in line with management expectations for the first 10 weeks of 2020. However, footfall and volumes have been impacted in the last two weeks as governments and customers take increasing measures to contain the spread of the virus.
Currently, all of our stores remain open and we are working hard to protect the health and safety of our people as well as provide an essential service in the communities in which we operate. We have implemented an extensive range of measures to safeguard our people and communities across our three regions. The Group's supply chain has remained fully operational and its strong customer service levels have been maintained.
Given the ongoing uncertainty, we are unable to quantify the impact of Covid-19 on our financial and trading performance at this stage, however we expect a material reduction to profitability for the current financial year. The scale is dependent on how the situation develops and over what timeframe, and the impact of further measures taken by the governments in the markets in which we operate.
Short-term actions to conserve cash – In response to this unprecedented and uncertain environment, the Group is taking a number of actions to protect profitability and conserve cash:
• Deferring development capital expenditure;
• Reducing operating cost base;
• Tight management of working capital, including stock levels;
• Implementation of a recruitment freeze;
• Deferring executive director bonuses;
• Availing of newly introduced government relief measures; and
• Opening negotiations with landlords on rental holidays.
In addition to the above, in order to preserve liquidity, the Board has decided not to recommend a final dividend in relation to 2019 at its forthcoming AGM. Our banks remain supportive and we will update the market more fully in the preliminary results statement.’
• Pets at Home – As a provider of pet care products and services, our stores, website and veterinary practices will remain open so we can focus our energies on providing essential pet products and emergency health care at a time when pets will play an increasingly vital role in our daily lives. We have closed all of our grooming salons, with those colleagues redeployed to support our store teams.
The welfare of our colleagues, Partners, customers and pets remains our first priority. We have implemented all Government advice regarding social distancing across our business, and are fully committed to serving the needs of UK pet owners through this unprecedented period.
• Pendragon “announces today that, in light of the current situation with Covid-19 and in line with the latest advice from HM Government, it will be temporarily closing all of its retail sites across the UK.
The safety of colleagues and customers remains the Group’s absolute priority. Pendragon expects to furlough temporarily the majority of its colleagues within the UK motor and Car Store divisions during this period, with only certain key roles continuing for the time being.
The Group is currently assessing the extent to which it can continue its repair and maintenance operations to support the UK’s essential services in the coming weeks and will endeavour to maintain these services as long as possible.
The Group has to date received measures of both financial and operational support from many of its key manufacturer partners and other suppliers and stakeholders, which, combined with the additional support announced by the UK Government such as the job retention scheme, rates holidays (c£15m pa benefit) and VAT deferral periods, will help protect the long-term health of both colleagues and the business. The Group will continue to engage with all stakeholders in order to identify opportunities to mitigate some of the challenges posed during this period. We are continuing to implement a number of measures to preserve cash across all areas of our business, including deferring capital expenditure and reducing our variable cost base. Bank net debt as at 23 March 2020 was £105m against a total facility size of £235m.
In line with the update given with the Group’s FY19 results on the 18 March 2020, it remains too early to quantify accurately what the impact of Covid-19 may be on the FY20 Group results. However, based on the rapidly evolving events over the past week, culminating in this temporary, full shut-down of our dealer network, existing financial guidance for the year ending 31 December 2020 is withdrawn until the Group has greater certainty over the both the duration and extent of the current situation.”
• Aston Martin Lagonda – For the full year, sports car wholesales were already planned to be materially lower than 2019 as the Company focuses on reducing dealer inventories to a luxury norm. Currently about a third of the dealer network is closed and a third operating with limited capacity and this level may increase. Of the 18 dealers in China, some of which were closed earlier in the year, all but one are now open.
Third production trial DBX's have been built at St Athan and final testing to ensure robust quality for customers continues. The order book has continued to build and deliveries are still planned to start in the summer 2020, subject to factories and suppliers returning to normal operations.
Development of Aston Martin Valkyrie continues with first deliveries still currently planned for H2 2020.
As previously communicated on 13 March, the virus had impacted customer demand in China and APAC and is now impacting demand in other markets increasing uncertainties and risks to the financial performance of the Company in 2020.
The Company is taking a number of actions to manage proactively across its supply chain and business more broadly, such as:
• Temporarily suspending production at its UK manufacturing facilities from tomorrow, 25 March until 20 April, subject to review of the rapidly-changing circumstances. Production shutdowns would usually have been planned for a combined two weeks over Easter and in May.
• Working with its suppliers and business partners to be ready to deliver production to meet demand following the suspension.
• Taking actions to control and re-phase both operating costs (such as marketing) and capital expenditure in order to protect the Company's financial position.
Mining
• Rio Tinto – Today, as a result of separate actions by the Premier of Quebec and the President of South Africa to contain the spread of Covid-19, Rio Tinto will slow down some of its operations.
At Richards Bay Minerals (RBM) in South Africa Rio Tinto will curtail production in compliance with a directive from the Government aimed at containing the spread of Covid-19. As a result, all mining operations at RBM will be halted by midnight on Thursday, 26 March, for 21 days.
In line with the President's directive, Rio Tinto will make arrangements for the furnaces to be put on care and maintenance in order to avoid damage to their continuous operations. At this time, it is too early to speculate on when operations will resume or on 2020 production guidance. Resumption of the construction of the Zulti South project will be delayed.
In Canada, because of the threat of Covid-19, the Premier of Quebec has announced the closure of all non-essential businesses from midnight on 24 March 2020 to 13 April. Rio Tinto understands that the Quebec government has designated industrial complexes including the aluminium sector and the mining industry as essential industries but instructed that they must reduce their business activity to the minimum. We will work with the government to comply with its directive in relation to our Quebec operations.
• Pan African Resources# – In consideration of the National Lockdown and its impact on the Group’s operations, FY2020 production guidance is suspended until the Company is in a better position to quantify the full impact of the lockdown. The Group’s liquidity position is robust, with immediately available facilities of U$20m. In addition, Rand Merchant Bank has already agreed, subject to final credit approval, to defer the last three tranches of the existing gold loan’s redemption, constituting 5000 ounces (U$7.8m), to the first quarter of the 2021 financial year. Furthermore, the Group has access to additional gold loan facilities of approximately U$11m, should it be required. In the event that the National Lockdown is extended for a prolonged period, the Company will look to reschedule its short-term senior debt obligations. The Company’s banking Consortium has also confirmed its support for the Group should further liquidity be required during this period.
• Gemfields Group – Due to the current global travel restrictions the Company cannot be certain when or if the ruby and emerald auctions scheduled for the coming months will take place. Consequently, the Company cannot at this time provide any certainty or guidance in relation to revenue generation and overall financial performance for the remainder of the year to 31 December 2020. The Board and management of the Company will continue to assess all options in relation to selling gemstones in the current climate and will provide further updates in due course It is important to note that the business has cash balances of approximately USD 73.5 million as at 28 February 2020.
Financial
• JTC has delayed its release of financial statements in line with government guidance. The company highlight the key features of business ‘that are relevant to the current situation:
• Highly visible recurring revenue that is not linked to the assets we administer. Around 90% of revenue is recurring with an average client lifespan of 10 years and negligible mid-life attrition. To date, we have not seen any material impact on revenue from Covid-19.
• Strong cash conversion. JTC is a highly cash generative business with a stable, capital light cost base and margins of c30percentage underlying EBITDA. We use our cash prudently to reinvest in the business, facilitate inorganic growth and support our dividend policy.
• A robust balance sheet relative to our facility of £150m, with no debt falling due until 2023. Headroom on leverage at year end was c. 50% of our banking covenant.
• Prudent debt levels. We are comfortable with our leverage level and have maintained it within our guidance range of 1.5x to 2.0x underlying EBITDA to net debt.
• Ability to deliver 'business as usual' service to clients under prolonged business continuity conditions. We are a people business enabled by technology. Our well-invested global platform, including our IT infrastructure, means that all employees globally are able to remote work seamlessly as required.
• Experienced management team. We have a track record spanning 32 years and have demonstrated our resilience and ability to grow through several periods of substantial external change.
• Shared Ownership model. At JTC, every employee is an owner of the business and we are privileged to have such a dedicated and talented workforce who have already demonstrated how committed they are to the interests of our clients and other stakeholders.’
• Alpha FMC has delayed its release of financial statements in line with government guidance. The company highlight the key features of business ‘that are relevant to the current situation:
The Covid-19 position continues to evolve and the Group is closely monitoring the overall situation, which, over time, will likely impact Alpha's new business win rate into the next financial year. The Group is taking sensible cost saving measures across the business given this period of uncertainty. We have paused hiring across the Group and we see remote working bringing benefits of flexibility, collaboration and even the ability to resource projects across geographies as efficiently as possible. As at today, the Group has a strong £15m cash position on its balance sheet and an undrawn revolving credit facility of £5m.
• Amigo Holdings – In light of the UK government's efforts to combat Covid-19 and given the ongoing uncertainty that the economic implications of Covid-19 could have for our customer base, Amigo has taken the decision to pause temporarily all new lending activity, except for lending to key workers in exceptional circumstances.
The Amigo employees freed up from the pause in lending activity will transition into other teams to increase the capacity of the teams that talk to our existing customers, particularly where customers have a need for forbearance, given changes in their financial circumstance. We will reassess our approach to new lending on a regular basis.
• Gateley – Suspended financial guidance going forward.
Media
• LTG has delayed its release of financial statements in line with government guidance. The company highlighted its ‘Actions in response to Covid-19: • In light of the potential impact of Covid-19, management has taken proactive measures to prioritise the strong liquidity and net cash position of the Group and to follow WHO and government guidance to protect the safety of our workforce, customers and partners
• To sustain our position of strength, the Board is adopting a prudent approach to shareholder distributions, and will postpone the final dividend (proposed at 0.50 pence per share) until market conditions stabilise
• We have postponed Director cash bonuses until market conditions stabilise; however, we will honour our substantial bonus payments to our staff to reflect their significant and positive contribution to our performance in 2019
• We will fund the deferred consideration of BreezyHR through shares in lieu of cash payment of $4.0 million due at end of March 2020
• We have taken a number of other measures to protect LTG's strong financial position including a reduction in marketing, travel and capital expenditure budgets. We have also postponed salary increases for all staff until 2021, terminated the majority of contractors and implemented a recruitment freeze
• We estimate the combined cash saving in 2020 from these measures is in excess of £13.0 million
• Covid-19 creates uncertainty for the remainder of the financial year but the Board has further cash preservation measures that it is willing to implement if appropriate, recognising that maintaining our dedicated and talented workforce is a key priority in anticipation of the upturn
• Ebiquity – Following the request by the FCA that all listed companies observe a moratorium on the publication of preliminary financial statements for at least two weeks, the preliminary results for Ebiquity will be delayed from the previously planned date of publication on Thursday 26th March 2020.
Ebiquity's global business is continuing to deliver services to clients as usual, with staff in most of our offices worldwide now working remotely, supported by our global IT systems. We are pleased though that our staff in China and Singapore are now returning to office-based working.
As previously announced on 19 February 2020, Ebiquity's trading for the year ended 31 December 2019 was in line with expectations with the second half performance trend similar to the first half of the year. Whilst the audit is not yet complete, if announcing preliminary results today, Ebiquity would be expecting to report, on a going concern basis, revenue of £68.7 million and Adjusted Operating Profit of £6.2 million.
Following the disposal of Ad Intel in January 2019, Ebiquity has a considerably stronger balance sheet. Net debt at 31 December 2019 was £5.8 million, (compared to £28 million prior to the disposal of Ad Intel). At that date, its cash balances were £8.2m. The Group has committed banking facilities of £24 million, whose maturity date is in 2023, of which £14 million was drawn down as at 31 December 2019.
Trading in the current year has started in line with the Board's expectations. However, the rapidly developing Covid-19 global outbreak is clearly creating uncertainty over the coming months for our clients' businesses, which cover many sectors and geographies, as well as our own. The Board therefore believes it prudent at this stage to withdraw guidance on the Group's overall performance in 2020.
• YouGov – The company has delayed its reporting delay yin line with FRC guidance. It also noted that there had been ‘No material impact to our business to-date from the Covid-19 global outbreak, however it is too early to estimate what impact it may have on client budgets over the coming months’
• Ocean Outdoor – “Given the uncertainty of the situation, it is not possible to forecast to what extent Coronavirus will impact this year's performance. Whilst the Group had not provided any financial guidance for 2020, previously published market expectations are no longer applicable.
The Group has no material debt, a strong balance sheet with net cash of approximately £20m, and adequate liquidity even under these uncertain circumstances. Nonetheless, the Group is in discussions with lenders to further bolster its liquidity position.
Over the past two weeks, Ocean has moved quickly to significantly mitigate the impact, including cutting all discretionary spend, reducing employee hours, approaching suppliers and landlords and introducing other cash conservation measures. The Group is constantly monitoring its cash flow. At this stage, it is too uncertain to comment on the precise outlook for 2020.
To protect jobs, Ocean's Netherlands and UK businesses are reducing the staff working week effective from 1 April 2020, as well as introducing voluntary unpaid leave in some areas. In line with government advice, staff have also been asked to work from home, with our IT systems geared for remote access to operate effectively. At the same time, we continue to consolidate our operations in Ocean Nordics, with the integration of AdCityMedia now being fast tracked.”
Support Services
• Smart Metering Systems – With immediate effect, the Group has temporarily stopped all non-essential field work that includes the installation of smart meters until further notice. SMS will continue to provide full emergency field support and related activities and will maintain its extensive IT infrastructure that supports its existing meter and data asset base and the index-linked annual recurring revenues (ILARR) generated by these assets.
The Group has closed all its offices and warehouses, except for activities required to support emergency field activity and IT infrastructure which cannot be conducted remotely, with a majority of the workforce continuing to work and support customers from home.
SMS has also introduced increased protection measures to ensure the health and wellbeing of its staff, supply chain, customers and their consumers. This includes the establishment of Covid-19 Risk Assessment procedures, the distributing of extra Personal Protection Equipment (PPE), and strict social distancing guidelines for all field and office-based employees who continue to work. These measures, combined with the Group's IT infrastructure, ensures it can continue to meet emergency works whilst reducing the risks to an absolute minimum.
On 12 March 2020, the Group announced that it had conditionally sold a minority of the Group's meter assets for a total gross cash consideration of £291 million. On completion, the net cash consideration of £282 million will be applied towards the immediate repayment of amounts outstanding under the Group's existing £420 million debt facility and will result in a positive net
In addition, following completion of the disposal, the Group will have retained ILARR of £73.2 million as at 29 February 2020, all of which remains unaffected by the temporary measures being taken. The Covid-19 situation is evolving rapidly and whilst the impact on the short-term financial performance of the business cannot be accurately quantified at this time, the combination of the Group's robust balance sheet, high-quality, index-linked recurring revenue streams and a contracted order book of c.2 million smart meters ensures that the longer-term impact on the Group will be minimal. SMS will continue to monitor the situation and provide a further update as appropriate.
• RPS – In the first two months of the current financial year there was no material Covid-19 impact on RPS’ trading. Net bank debt as at 28 February was £109.7 million (1 March 2019: £91.3 million, 31 December 2019 £94.1 million). The increase in net bank debt since the year end (31 December 2019) arises mainly from a working capital outflow which follows the normal pattern for this time of the year. The headroom in respect of committed bank facilities as at the end of February 2020 was £33.0 million.
Although a certain amount of client work can be performed off-site, it is inevitable that Covid-19 will adversely affect our business. As the situation evolves, we will continue to update the market. To manage the anticipated volatility arising from Covid-19 the Board has made several decisions to reduce costs and contain cash outflow including the following:
Cancellation of the proposed final dividend of 2.00 pence per ordinary share which was announced on 19 February 2020 and would have been payable on 15 May 2020, totalling £4.5 million.
Suspension of all planned work on the further implementation of the Group's new ERP system, which was due to be rolled out in the remainder of Australia later this year, and in UK and Ireland in early 2021. This cessation of works will have a cash flow saving of approximately £5.0 million in FY 2020.
Deferral of all 2020 salary increases and 2019 senior leadership bonus payments.
Cessation of all non-essential capex and discretionary operating expenditure.
Industrials
• Zotefoams# – Following an extended closure post Chinese New Year, our China-based customers and our own relatively small processing facility for T-FIT® technical insulation in China returned to work at the beginning of March. As at today's date, all Group foam production facilities are open and fully operational and we have not experienced any significant disruption in supply chains to Zotefoams. The global outbreak of Covid-19 is a constantly developing situation and we are not in a position at this stage to speculate on the duration nor its future impact on the broader global customer base of the Group. We continue to monitor developments closely and have put appropriate measures in place to minimise disruption where possible.
In these circumstances and in anticipation of likely reduced demand levels in the short term, we are actively focused on cash and cost management actions that are prudent, but also ensure the Group is well placed to benefit when market conditions recover. These actions include appropriate and targeted cost reduction measures across the business and the deferral of capital expenditure.
Due to the current uncertainty, the Board intends to suspend dividend payments in the short term.
The Group's banking arrangements offer ample headroom, with undrawn facilities of £17.7m as at 31 December 2019. The current leverage level is due to the coincidence in timing of the market downturn in Polyolefin Foams and the expenditure on the Group's capacity expansion projects. The Group's banking facilities include a net debt to EBITDA ('leverage') covenant of 3.0x, tested semi-annually, and as at 31 December 2019 Group leverage was 2.0x. The Group has now secured agreement with its banks to amend the leverage covenant from 3.0x to 4.0x for the 30 June test, to provide additional comfort and flexibility.
• Gooch & Housego “announces that as a result of Covid-19 related legal orders issued in the States of Ohio and California the Company's facility in Cleveland, Ohio is now closed for a temporary period; this is in addition to its Fremont, California facility, whose temporary closure was announced on 17 March 2020.
During this period staff from Cleveland and Fremont facilities who are able to homework will continue to do so. Work will continue on essential maintenance, inventory management and supplying the small number of customers that are within the exempt sectors.
The legal order issued by the State of Ohio is effective through 6 April 2020, the order issued by the State of California is effective until further notice and we are awaiting further details on similar stay at home orders in Maryland and Massachusetts.
The Group's Moorpark, California, Baltimore, Maryland and Boston, Massachusetts facilities are not affected by the State of California, Maryland or Massachusetts orders in the same way as they operate substantially within an exempt sector.
The Group believes that it is likely that a similar order maybe issued in the coming days in the State of New Hampshire where our other US facility is located. G&H anticipates that the impact of such an order on the Group's operations in Keene, New Hampshire would be limited given a significant proportion of the products and services provided by the facility are expected to be exempt from the scope of the order.
It is difficult to provide financial guidance at the current time. Nevertheless the effect of these orders will be to shift the balance of revenue generated by the Company to an increased H2 weighting or, depending upon the duration of the situation, potentially in to the Group's next financial year, which would lead to a reduction in our previous estimates for the current year's performance.”
Technology
• CloudCall Group – As a result of the FCA's guidance on the publication of preliminary results, the Board is postponing the publication of its annual results for the year ended 31 December 2019.
A significant proportion of the Group's revenue stream is repeatable and recurring in nature, which combined with net renewal rates in excess of 100%, does provide the Group with good forward visibility of 2020 revenues at this early stage of the year. However due to the current uncertainty caused by Covid-19, CloudCall expects there will be an impact on the expected sales growth for the year, although the exact extent of this impact remains difficult to quantify at this stage.
CloudCall remains well capitalised, with gross cash of £11.1m at 31 December, and a further £2m available via its existing credit facility, the Board remains confident that CloudCall has sufficient cash to enable it to trade its way through this period of global uncertainty. The Board have already begun to review its immediate investment plans over the near term, to ensure the Group effectively manages its cost base and cash reserves in line with the evolving situation.
• Pebble Beach Systems – On 10 February 2020 we signed a 12-month extension to the current £9.5 million loan agreement securing the facility until 30 November 2021. We have a good working relationship with our bank and are in regular dialogue with them during these uncertain times.
2020 had started well with initial growth in our pipeline and order intake in line with management expectation of building on the success of the past two years. In the past few weeks, it has become increasingly clear that the events surrounding the Coronavirus have the potential to impact upon us. Management have undertaken a risk assessment of the potential impact of the virus to identify and implement any actions to mitigate said risk. As part of that review we have assessed that it is unlikely that our customers will see a material downturn in demand; possibly they may experience an increase in demand as people turn towards media for information and entertainment during a time of isolation and uncertainty. At the same time our ongoing focus on automation and remote support has allowed us to adapt to the global need to complete project implementations remotely.
At this time management does not believe that the virus necessitates any change to our strategy for growth but given the impact Coronavirus is having across the world, we will continue to monitor the situation very closely.
• IQE# – Concerns over the spread of Coronavirus (Covid-19) are currently creating significant near-term uncertainty across global markets. At the time of this announcement, IQE’s production has not been affected by any disruption. All our sites continue to operate as normal and as stated above, IQE is trading in line with expectations.
There is a still-evolving risk to future production at IQE or at others within our supply chains. However, as a critical technology supplier, IQE is less likely to be affected by ‘lockdown’ scenarios than other businesses. This is evidenced by our classification as a critical infrastructure provider in both the States of Pennsylvania and Massachusetts where the Department of Homeland Security deems IQE to have a “special responsibility to maintain (our) normal work schedule”.
The effects of Coronavirus on global economic output in 2020 and on semiconductor demand are as yet uncertain. Given the significant current levels of uncertainty, we are unable to provide more explicit guidance at this point in time.
The Group has access to material debt facilities should it be required in the event of a significant downturn. IQE has a long-standing and trusted relationship with our bankers HSBC who remain supportive. We are in close ongoing dialogue regarding the evolving effects of Coronavirus on supply chains and markets. In the event of a significant slowdown, we will work proactively with HSBC to ensure the ongoing liquidity of the Group.
Leisure
• 888 – While it is unclear how this fast-moving situation will evolve over the coming months, the postponement and cancellation of sporting events will affect 888's Sport vertical, which accounted for 16% of revenue in 2019.
There is currently evidence of increased customer activity in the Group's Casino and Poker products that might, in part, compensate for the sports betting disruption for a period of time. However, in the event of a prolonged period of global macro-economic uncertainty, it is possible that consumer spending across the Group's online gaming product verticals may also become impacted. Should severe disruption to global sporting events continue until September 2020, the Board estimates a potential impact on Group EBITDA in the current financial year of up to high single digit millions of dollars.be anticipated during the closure periods in our various territories.
• Whitbread – “Trading in the period subsequent to the year-end has been materially adversely impacted by Covid-19. Following the Government's recent announcements on social distancing, all our pubs and restaurants were temporarily closed with effect from 20 March 2020. In light of the announcement and clear guidance from the Prime Minister yesterday, we are expecting to begin the process of temporarily closing all our Premier Inn hotels in the UK with immediate effect. Our hotels in Germany will also close. We are in discussions with the UK Government regarding the use of some hotels, in locations near hospitals, to support front-line key workers.
The situation is rapidly changing and at this point it is not possible to predict the full extent of the market downturn and the impact on the business's revenues. Whitbread entered the year with a strong balance sheet and access to significant liquidity. There is material headroom on our funding facilities, and we will be paying all our rent payments this quarter. In addition, the business is backed by a valuable freehold property estate. However, given the unprecedented situation, we have taken a number of decisive actions to reduce cash outflows during this period:
• All discretionary P&L spend has been eliminated, including our room refurbishment plans, marketing, non-essential training and staff recruitment and the postponement of the previously announced incremental investment of £25m;
• We are planning to place a significant number of our site teams on a temporary furlough. All employees remain on full pay, and we are working through the details of the recently announced Government support package, which should pay up to 80% of the salaries of those furloughed employees;
• Repairs and maintenance capital expenditure has been reduced to a minimum, with the business now only incurring costs where there is a legal or health and safety requirement to do so;
• All non-committed development capital expenditure has been cancelled. This includes all refurbishments, extensions, freehold builds and acquisitions in the UK and Germany. Capital expenditure will only be incurred where there is a contractual obligation to do so, and / or a site is significantly complete;
• The Board has decided not to declare a dividend for the full year FY20.
The details of these proposals are still being confirmed and further information will be provided at our full year results presentation, currently scheduled for the end of April.
It is possible that closure of our hotels and restaurants (other than those which will stay open to support key workers), as a result of the Government's instructions, may amount to a technical event of default under our banking arrangements and certain other financial obligations of the Group. We are working with all relevant parties to seek waivers wherever this is required or prudent.”
Transport
• Boeing – Boeing is temporarily halting production at its Washington state jetliner factory. The planemaker said it will shut facilities across Seattle’s Puget Sound region for 14 days from Wednesday. During that time it will carry out a deep clean of its buildings and equipment.
Events
• The organisers of the Tokyo 2020 Olympic Games have agreed to a one-year postponement of the event. Japan's Prime Minister Shinzo Abe said the International Olympic Committee (IOC) had agreed to the delay. The games were set to run from 24 July to 9 August.
• Rugby’s Champions and Challenge Cup competitions have been postponed.
• All football in Spain, including La Liga, has been put on hold indefinitely.
Other
• Golf courses in England, Wales and Northern Ireland will shut following the latest government measures.
• Jordan, which indefinitely extended a round-the-clock curfew on Monday, is to begin distributing bread, water and fuel.
• In Iran the authorities have announced an extension by at least another month to temporary leave already granted to some 85,000 prisoners. British-Iranian charity worker Nazanin Zaghari-Ratcliffe is among those who have been released.
• UAE authorities have called for all Emirati students abroad to return home within 48 hours, and for members of the public to stay at home apart from in exceptional circumstances.
• Senegal and Ivory Coast have declared states of emergency over the outbreak of the coronavirus.
• Thailand: a month-long state of emergency will start on Thursday, which will include curfews and checkpoints.
• Australian Prime Minister Scott Morrison announced the new restriction on business operations and travels. From midnight Wednesday, these activities and businesses will no longer be allowed to continue: Amusement parks and arcades, Indoor and outdoor play centres, Community and recreation centres, health clubs, fitness centres, yoga, barre, spin facilities, saunas, wellness centres, Public swimming pools, Galleries, museums, national institutions, historic sites, libraries, community centres, Auction houses, Real estate auctions and open house inspections In-store beauty therapy, tanning, waxing, nail salons and tattoo parlours, spa and massage parlours (excluding allied-health-related services, like physiotherapy), Food courts within shopping centres will only be able to sell takeaway. Shopping centres themselves will remain open.
