A Dutch slaughterhouse was ordered to close (after a quarter of employees were found to have the virus) on the same day as the German Cabinet agreed a draft proposal to ban temporary workers at meat processing plants from January 2021.
The virus has shown that the poor conditions in many of these factories and migrant accommodations are making social distancing impossible. The industry is having to revise its working practices; these changes could be permanent. A bottleneck has formed, with ramifications across the supply chain. Many industries will be seeing similar problems and the mechanisms to release these blockages will be a good indicator of the changes to come.
Headlines
• A quarter of the US workforce have filed jobless claims
• Contact tracing system to be piloted in ten UK areas
• easyJet will resume some flights on 15 June
• Lufthansa discuss a US$10bn rescue with the German Government
Company news
Buildings & Construction
• Belvoir – “Early indications for April trading, during which all of the Group's offices were operating entirely under 'lock-down', have demonstrated the considerable resilience of our franchise networks.
At the end of April, the Group carried out a rent arrears survey of all franchisees, which has shown that less than 5% of tenants are in arrears on their rent compared with the usual 2% experienced by our networks, only a small increase and which is considerably less than the Board had expected. In April, estate agency completed on around a third of usual transaction levels, drawing from the pipeline of house sales agreed prior to the lock-down. The financial services division has demonstrated similar resilience amongst our financial advisers, who have drawn on their extensive client base for remortgages and income and life protection sales to deliver income levels in April on par with 2019. As a result, the overall April performance for the Group was significantly stronger than had been anticipated.
Encouragingly, as of 13 May, restrictions on the housing sector have been lifted earlier than the Group had anticipated and Group franchisees have been able to resume operating from their offices and to carry out physical appraisals and viewings, enabling both home-owners and tenants to move home – albeit with the necessary adjustments to observe safe working practices. Feedback to date suggests that the pipeline of agreed house sales has held up well and that there is a pent-up demand from tenants looking to move.
As reported at the time of our last final results at the end of March, we remain confident that the Group's balance sheet provides us with adequate liquidity to trade through this crisis and to continue to operate within our banking covenants for the foreseeable future. The Group has been able to continue to generate cash from operations with net debt at 20 May 2020 standing at £6.9m (31 December 2019: £6.9m) having deployed £2.0m of cash in January to acquire the Lovelle network and deferred payment of £0.5m VAT until Q1 2021.
Whilst it is still too early to predict how the housing market will be affected during the remainder of the year, the Board is confident of achieving its revised forecasts for 2020.”
• Countrywide – “As noted in the update provided on 30 April 2020, the Group saw a positive start through the end of February in agreed sales which continued during March, with the pipeline of agreed sales 9% ahead year-on-year through the first 12 weeks of the year. The pipeline remained resilient and stood at approximately £50 million, ahead year-on-year. Equally, we continued to see the benefits of the recurring income from approximately 86,000 properties we manage across the UK on behalf of private and investor landlords and our book of general insurance policies.
Following the Government's announcement on 12 May 2020 of the re-opening of the housing market in England, the Group has undertaken a comprehensive risk assessment of our business operations to ensure the health and safety of colleagues and customers, and begun phased re-opening for business across all of our operating channels, including physical branches and valuation visits in addition to the continuation of web-chat and telephony contact. We have accelerated the expansion of our virtual viewing offerings, adapting to social distancing measures, and we are offering our customers online mortgage advice. This way of working is resonating well with our colleagues and customers who are appreciative of this multi-channel choice of engagement, providing support and advice whilst allowing everyone to stay safe.
For the four months to 30 April 2020, the Group benefited from positive trading in the first quarter, and the strong pipeline build before lockdown. Adjusted EBITDA(4) to 30 April 2020 was significantly ahead of prior year for continuing operations(1), and the Group's cash position remains strong, with liquidity at 20 May 2020 of £60 million. In order to provide additional liquidity, the Group continues to explore the availability of funding available to large businesses under the Coronavirus Large Business Interruption Loan Scheme.”
• Henry Boot# – “Following our review and the pause in construction activity, all of our construction sites and plant sales centres are now open, adhering to the strict precautions, which have naturally affected our output and efficiency. The position is similar in the sites being operated by our development business. However, all recently completed developments are either pre-sold or let, and nearly all our committed developments are also pre-funded or pre-let. Our jointly owned Leeds-based housebuilder is also operating on all of its sites and, following the change in the Government's guidelines, has reopened its show homes.
The reduced activity affecting construction, housebuilding and plant hire has meant we are utilising the Government's Coronavirus Job Retention Scheme. A minority of our workforce have been furloughed and their pay has been topped up to 100% by the Group. In recent weeks, we have started to reduce the number of people furloughed as we adapt to new working ways and productivity increases.
Our land promotion business continues to operate remotely, identifying and promoting strategic land over the long term. There are several contracted sales due to complete in the near future, and the majority of these are with the UK's major housebuilders.”
Financial
• AJ Bell – “As a financial services business, we provide an essential service to our customers and recognise it is crucial for them to have full access to their investments during this difficult time, with many people relying on income from their savings, investments and pensions.
Having a highly-engaged workforce and flexible IT infrastructure has enabled us to respond quickly to the Covid-19 pandemic, as we approached a particularly busy tax year end. We have remained fully operational throughout the crisis, ensuring minimal disruption to our customers and this resilience is reflected in our strong new business figures.
This unwavering attention on our customers' needs has helped us deliver strong organic growth in revenue and profitability. Our customer numbers increased by a record 30,113 during the period and we saw net inflows of £2.5 billion to our core platform offering. Revenue increased 22% to £60.9 million and profit before tax increased 28% to £22.7 million. In light of this strong financial performance, the Board has declared an interim dividend of 1.50 pence per share. The Board recognises the importance that our investors place AJ Bell's progressive dividend history and reaffirms our ongoing commitment to this and our stated dividend policy for future dividend distributions.
The effects of the Covid-19 crisis are likely to be felt for a long time, although the precise impact it will have on markets, investor sentiment and economic policy is hard to predict. However, we have operated profitably during periods of market volatility and low interest rates before and our business model has proved very resilient. The long-term growth drivers of the platform market remain in place and our strong capital position, coupled with a buoyant trading performance mean the outlook for the future of the business remains positive.”
• Electra Private Equity – “The Covid-19 pandemic resulted in all of TGI's 87 stores being closed on 20 March 2020 before a partial resumption on 6 May for "click & collect" and deliveries from 24 stores with plans in place for a phased re-opening from July, or as early thereafter as is permitted. With an average footprint size of 6,860 sq ft, TGI's stores are significantly larger than most restaurants and bars. As such, whilst peak capacity will be constrained in the short term by social distancing requirements, through implementation of existing plans to spread demand beyond the approximately 15% of the week when demand is close to capacity, we are confident in a successful resumption.
The disruption to the market caused by Covid-19 on top of already challenging conditions will result in there being opportunities to acquire high quality sites for TGI stores. As a result, the two planned end of lease store closures later in 2020 have been accelerated and will not re-open. The two new store openings planned for H2 2020 have been rescheduled into H1 2021 and TGI will continue to pursue a sustainable store roll-out plan.
TGI is a profitable and highly cash generative business that we have maintained with modest leverage given its challenging markets. As such, having entered the close-down period with £36 million cash we are confident that TGI will emerge strongly and successfully navigate the evolving constraints and opportunities presented by macro Covid-19 exit strategies.”
• IntegraFin# – “Strong inflow growth has contributed to a year on year increase in Funds Under Direction (FUD), despite the Covid-19 pandemic causing substantial, downward movements in world equity markets from late February. Prior to these market falls, FUD growth had been solid.
The growth in net flows and higher daily average FUD over the period (£38.3bn) have driven strong revenue growth. Coupled with sensible expense management, this has enabled us to deliver an increase in profit before tax.
Performance in the second half of the year will very much depend upon the effects of measures taken to combat Covid-19 and their impact upon the economy, the equity markets, FUD and flows.
Against this backdrop, the business continues to be well positioned. The number of clients on the platform increased from 173k to 187k year on year, an increase of 8.1%. In the same period the number of advisers using the platform increased by 6.3%.
The welfare of our staff and the maintenance of services to clients are, of course, my primary concerns. All staff are currently working from home, from where they continue to do a fantastic job, providing as good a quality service as possible to clients and their advisers.
We are not utilising any schemes under the National Temporary Framework for State Aid and none of our staff have been furloughed.”
Food, Drinks & Household
• Hilton Food Group – “Overall the Group's trading has been in line with the Board's expectations. During the lockdown period arising from the Covid-19 pandemic, we have experienced increased demand and have worked closely with our market leading retail customers to meet their requirements. We are very grateful to our colleagues for their hard work and help to deliver increased production levels. At the same time, we have seen increased costs as we worked to ensure the safety of our employees by establishing a number of protocols to protect our people and minimise contact. As noted in our Preliminary Results statement, we also signed an agreement during this period to build a packing plant in Belgium to meet the red meat requirements of Delhaize, expected to commence production in September 2020.
In Western Europe we have made good progress in a number of markets. In both the UK and Ireland, turnover has grown strongly relative to last year in the red meat business boosted by the impact of higher meat purchases by consumers during the lockdown period as well as the move to supply 100% of Tesco's red meat requirements in the UK from mid 2019. Hilton Seafood UK has progressed well, where we have seen a shift from counter sales to centrally packed products. We have also seen growth in our Scandinavian markets as well as in the Dutch market. Hilton is well placed in the current climate as it almost exclusively serves the Retail sector. In Central Europe, we have seen turnover growth driven by red meats and fresh food, whilst in both the Portugal and Dalco Joint Ventures, the latter being our Holland based vegetarian producer, we have also seen growth.
In Australia, we have continued to see strong growth stemming from the combined effect of the ramp up in Queensland volume as well as increased demand for red meat. As noted at the year end, the completion of the New Zealand meat and fish plant has been delayed compared with our original estimates due to lockdown measures, as well as the continued quarantining of individuals entering New Zealand.”
Healthcare
• AstraZeneca – “AstraZeneca is advancing its ongoing response to address the unprecedented challenges of Covid-19, collaborating with a number of countries and multilateral organisations to make the University of Oxford's vaccine widely accessible around the world in an equitable manner.
The Company has concluded the first agreements for at least 400 million doses and has secured total manufacturing capacity for one billion doses so far and will begin first deliveries in September 2020. AstraZeneca aims to conclude further agreements supported by several parallel supply chains, which will expand capacity further over the next months to ensure the delivery of a globally accessible vaccine.
AstraZeneca today received support of more than $1bn from the US Biomedical Advanced Research and Development Authority (BARDA) for the development, production and delivery of the vaccine, starting in the fall. The development programme includes a Phase III clinical trial with 30,000 participants and a paediatric trial.
In addition, the Company is engaging with international organisations such as the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi the Vaccine Alliance and the World Health Organisation (WHO), for the fair allocation and distribution of the vaccine around the world. AstraZeneca is also in discussions with governments around the world to increase access. Furthermore, AstraZeneca is in discussions with the Serum Institute of India and other potential partners to increase production and distribution.
AstraZeneca recently joined forces with the UK Government to support Oxford University's vaccine and has progressed rapidly in its efforts to expand access around the world. The Company will supply the UK starting in September and is thankful for the Government's commitment and overall work on vaccines.
Pascal Soriot, Chief Executive Officer, said: "This pandemic is a global tragedy and it is a challenge for all of humanity. We need to defeat the virus together or it will continue to inflict huge personal suffering and leave long-lasting economic and social scars in every country around the world. We are so proud to be collaborating with Oxford University to turn their ground-breaking work into a medicine that can be produced on a global scale. We would like to thank the US and UK governments for their substantial support to accelerate the development and production of the vaccine. We will do everything in our power to make this vaccine quickly and widely available."
AstraZeneca has now finalised its licence agreement with Oxford University for the recombinant adenovirus vaccine. The licensing of the vaccine, formerly ChAdOx1 nCoV-19 and now known as AZD1222, follows the recent global development and distribution agreement with the University's Jenner Institute and the Oxford Vaccine Group. AstraZeneca has also agreed to support the establishment of a joint research centre at Oxford University for pandemic preparedness research.
A Phase I/II clinical trial of AZD1222 began last month to assess safety, immunogenicity and efficacy in over 1,000 healthy volunteers aged 18 to 55 years across several trial centres in southern England. Data from the trial is expected shortly which, if positive, would lead to late-stage trials in a number of countries. AstraZeneca recognises that the vaccine may not work but is committed to progressing the clinical program with speed and scaling up manufacturing at risk.
The Company's comprehensive pandemic response also includes rapid mobilisation of AstraZeneca's global research efforts to discover novel coronavirus-neutralising antibodies to prevent and treat progression of the Covid-19 disease, with the aim of reaching clinical trials in the next three to five months. Additionally, the Company has quickly moved into testing of new and existing medicines to treat the infection, including CALAVI and ACCORD trials underway for Calquence (acalabrutinib) and DARE-19 trial for Farxiga (dapagliflozin) in Covid-19 patients.”
• Beximco Pharmaceuticals – “Announces the launch of remdesivir (under the brand name Bemsivir), an antiviral drug, which has been recently granted Emergency Use Authorization by the U.S. Food and Drug Administration for the treatment of Covid-19. With this introduction, Beximco Pharma is the first company in the world to launch a generic version of remdesivir for the treatment of Covid-19.
The launch, which was anticipated in the Company's announcement on 4 May 2020, follows the grant of Emergency Use Authorisation by the Directorate General of Drug Administration (DGDA), the regulatory authority in Bangladesh, for Beximco Pharma's remdesivir IV injection (under the brand name Bemsivir) received on 21 May 2020. Emergency approvals will help to broaden the use of remdesivir in hospitalised patients, especially in developing and least developed countries where access to breakthrough, advanced drugs remains a major challenge.
Originally developed by Gilead Sciences, Inc, remdesivir is a direct acting antiviral drug that inhibits viral RNA synthesis. Remdesivir is administered intravenously and is authorised for the treatment of hospitalised patients with severe Covid-19 disease. Recent clinical trials have shown evidence that remdesivir helps severe Covid-19 patients recover faster.
Beximco Pharma is donating remdesivir (Bemsivir) to the Bangladesh Government for supply only to Government hospitals free of charge. Remdesivir (Bemsivir) will not be available through retail pharmacies, in compliance with the directives from the DGDA.”
• Shield Therapeutics# – “The business has continued to operate effectively since the introduction of the lockdown in the UK. Whilst we have closed both our London and Newcastle offices, all of our employees are able to continue working from home successfully. Generally, we are finding that the businesses with which we have close relationships are also operating effectively and so we have seen minimal disruption to our commercial progress.”
Industrials
• Essentra# – “Trading in Q1 showed some limited impact from the pandemic, whilst the effects have been more profound in April. Nonetheless, the outcome for April was in line with where the Company expected it to be at the start of the month.
Trading in Q1 – Group like-for-like (LFL) revenue declined 7% for the period.
Total Components LFL revenue was 5% down on the prior year period. This was reflective of the pandemic causing disruption in China earlier than in rest of the world (though the underlying Chinese business was back on track by the end of the quarter), a soft end-market backdrop in the US and wider spread disruption from the pandemic beginning to be felt towards the end of the quarter. Components Europe was only marginally down on prior period, the wider spread impact from the pandemic late in Q1 was offset by more robust trading earlier in the year.
In Packaging, LFL revenue was down 5% in the quarter. This reflects a tough prior year comparative – Q1 2019 was bolstered by short-term customer demand on the back of the new regulatory requirements as prescribed by the Falsified Medicines Directive, which took effect in Europe in early 2019. Additionally, growth was somewhat hindered by specific customer supply chain issues affecting Americas growth rates in Q1 2020.
Total Filters divisional revenue was 12% down on the prior year period, of which the core Filters business was down by 10%. This performance was broadly in line with expectations for the first quarter, given three short term factors; namely, the effect of the pandemic being felt earlier in the period in China, an impact towards the end of the period from government enforced facility closures, and the continued effect on prior period comparatives due to business disruption in the Middle East following the sanction compliance issues announced in our year end 2019 results. Trading in April and recent developments – Group like-for-like (LFL) revenue declined 17% in April.
In the Components division (which is more exposed to industrial cyclicality), April saw an accelerated slowdown in customer demand, particularly in Europe and the US. Conversely, Asia fared much better, as the epicentre for the outbreak shifted from East to West. Overall, the Components division LFL was 24% down on prior year in April. May performance-to-date looks to be in line or marginally ahead of performance seen in April. Components has continued to deliver high levels of service to customers through this period and its online offer has helped to differentiate the business during this period.
Underlying demand remained robust in both the Packaging and Filters divisions. As previously indicated in our announcement dated 27 March 2020, the greater risk for these two divisions from the pandemic related to supply chain performance and individual country temporary legislation. In line with this, April performance in both Packaging and Filters was somewhat affected by temporary facility closures, these have subsequently reopened.
The order book for Packaging is encouraging, and is higher than it was at the same point last year, on a LFL basis.
Filters continues to make progress on its strategic agenda, despite any restrictions caused by the pandemic. Namely, the commencement of our two 'gamechanger' outsourcing deals and the establishment of the China JV.”
Insurance
• Aviva – “We are still in the early stages of claims development on Covid-19 and so its ultimate impact on Aviva still has a high level of uncertainty attached to it. However, based on analysis as at 30 April, our estimate of Covid-19 related claims in our general insurance businesses, incorporating notified and projected claims, is £160 million net of reinsurance. This estimate incorporates the following components:
Business interruption: we estimate claims from business interruption of approximately £200 million, net of reinsurance across global GI. The vast majority of our commercial policies do not cover business interruption claims arising from Covid-19. However, we anticipate potential areas of exposure in certain specialist schemes and broker programmes, and we have paid claims in the UK and Canada where coverage exists. In the UK, we will work constructively with the FCA to ensure we can establish an expedited process that will bring much needed certainty to customers and insurers.
Other general insurance impacts: We anticipate claims may arise from some other general insurance products, including travel, surety, construction, and other commercial lines and we have made estimates for claims in these areas. We have also included an allowance for favourable impacts in other product lines, which are expected to offset Covid-19 claims partially across our international general insurance businesses. Aviva does not provide insurance for event cancellation or trade credit.
The continuing nature of the event means that these figures are subject to significant uncertainty. Our estimates assume the Government confinement measures are in place through to the end of the second quarter.”
• In the non-life business Aviva has introduced payments deferrals and premium rebates, particularly in the Motor book. The impact of these customer relief measures have not been quantified.
• Aviva expects sales volumes to for 2020 to be below initial expectations following the decline in new business sales in Q2 due to the lockdown.
• In the Life business, it is interesting to note that mortality claims are likely to be offset by longevity benefits.
• The solvency ratio stood at 182% as per the end of March. This is down from 206% at the end of 2019 with the drop explained by the impact of spread widening in the corporate bond portfolio and decline in interest rates.
• So far the credit rating downgrades across the corporate bond portfolio have been modest with just £10m of bond downgraded to high yield and 3% of the book downgraded by one letter.”
• Sabre Insurance – “Overall trading conditions are consistent with the update given recently with the full year results on 7 April, albeit in a turbulent market with continued uncertainty caused by the on-going Covid-19 crisis.
Premium volumes continue to be extremely volatile, driven both by consumer behaviour and competitor pricing activity. At the end of March our premium year-on-year was down by around 5% as we sought to enhance our margin by moving lower in our combined operating ratio target corridor and the initial impacts of Covid-19 emerged. Since late March, as the full social distancing measures impacted, we estimate that new business quotations in the market have been down by up to 25% on a weekly basis compared to 2019, primarily driven by the lack of car sales. At the end of April, year to date premiums were down around 15%, although we have seen an improvement in premium levels as May has progressed.
We have continued to see claims frequency reduce significantly throughout late March and April, although traffic does appear to be returning to the roads. From late April we introduced price decreases for new and renewal business following detailed analysis. In addition to supporting customers, these reductions reflect the lower costs due to reduced miles driven, whilst ensuring we continue to cover long-term claims and other cost inflation, and the potential for increased frequency and severity of claims as the social distancing measures are eased. Consequently, we have seen an increase in the premiums written in recent weeks – starting to reverse the trend seen in April.
With market volatility expected to continue at least until the current social distancing measures start to ease, and probably for several months thereafter, it remains difficult to forecast the full-year premium outcome with any certainty at this stage. However, we are confident that the year-on-year reduction in premium written reflects the temporary and unique market conditions and volatility. To that end, we will continue to execute our strategy of maintaining underwriting discipline, treating the top line as an output not a target. We believe this will ensure Sabre will be well positioned for growth at the appropriate time. We remain confident our combined operating ratio for the year will fall within our target corridor – although it will be some time before we can be confident exactly where – as claims costs potentially rebound as lockdown eases.”
Leisure
• Whitbread – “Trading in the period subsequent to the year-end has however been materially adversely impacted by Covid-19. In the 11-week period to 14 May 2020, total accommodation and F&B revenues were down 75% year-on-year. Following the closure of all of our restaurants and the majority of our
hotel network, on the Government's guidance, at the end of March, total accommodation and F&B revenues were down 99% in the last seven weeks. The Covid-19 situation is rapidly changing, and while we were able to reopen 16 hotels in Germany on 11 May 2020, our internal scenario planning currently assumes that our UK hotels and restaurants will remain closed, or operating at low levels of occupancy, until September. Demand recovery is then expected to be slow as social distancing restrictions are gradually relaxed.
Decisive action to protect the business and preserve cash – The business has a well-developed set of contingency plans. As the global pandemic progressed throughout February 2020, and then rapidly escalated in March 2020, the business deployed its contingency plans in full response to Covid-19. Following the series of Government announcements on social distancing in the week commencing 16 March 2020 and also the further announcements and guidance from the UK Prime Minister on 23 March 2020, the business implemented a range of operational actions to prioritise the safety and well-being of customers and staff, including:
• The temporary closure of all restaurant and pub operations on 21 March 2020
• The temporary closure of the majority of Premier Inn hotels in the UK and Germany, with 39 Premier Inn hotels in the UK remaining open specifically to provide accommodation for NHS staff and other front-line key workers.
We are an operationally leveraged business which benefits us in the good times, but in times like these will result in a material adverse impact on profitability. As previously guided, a 1% fall in RevPAR equates to a £12m-£15m adverse impact on earnings. This increases to £18m when the impact of the closure of restaurants is included and as fixed costs become a higher proportion of the overall cost base at lower revenue levels.
We have therefore taken immediate action to reduce cash outflows during this year:
• 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 have placed over 27,000 of our employees on temporary furlough, with the Government support package paying up to 80% and a maximum of £2,500 of the furloughed employees' salaries per employee per month
• Capital expenditure will only be incurred for essential hotel maintenance, or where a site is significantly complete, including the refurbishment and rebranding of the acquired Foremost hotels in Germany, and to maintain core IT programmes and infrastructure. After these actions, total capital expenditure for the year is expected to be c£250m
• Voluntary pay cuts have been taken by the Board and senior management team
• The Board has also decided not to declare a final dividend for the full year FY20 and to suspend future dividend payments until the Covid-19 situation is clearer and when the existing lender covenant waiver period ends.
We will also benefit from the Government's decision to stop the payment of business rates for a 12-month period, which would have cost c£120m over the year.
Whilst our reaction to the Covid-19 crisis has been robust, our actions have been taken with a view to the long-term impact on the business. We believe it is important to act responsibly in times of crisis and treat our stakeholders fairly. Examples of these actions include:
• Providing full cash refunds to our customers for all cancelled bookings
• Continuing to pay our suppliers, many of which are small or medium sized businesses, in a timely manner, including our March rent being paid on time and in full
• Furloughed staff remaining on full pay, as we pay the additional 20% of salaries on top of the Government furlough credit
• National minimum wage increases made for our hourly paid staff
• Supporting the community and national effort by making rooms available to NHS staff and other key workers at selected hotels, passing fleet delivery capacity to supermarkets and donating over 158 tonnes of food to charities following our restaurant closures
• Reducing Executive and Non-Executive Directors pay and a pay freeze for all other salaried staff.
Covid-19: Positioning the business for a successful recovery
Ready to reopen safely – We tentatively reopened 16 hotels in Germany on 11 May 2020, and our UK hotels and restaurants are ready to reopen when the Government advises. Our internal scenario planning assumes our UK hotels are closed, or at low levels of occupancy, until September 2020. When safe and practical to do so, we are able to reopen each of our hotels and restaurants quickly, in what will be a phased reopening to help match supply against levels of demand.
Our experience in operating the 39 hotels that are currently open for NHS staff has given us a head-start in implementing workable solutions for social distancing and enhanced hygiene measures. These include social distancing signage and protocols, health screening and illness response procedures, correct use and regular changing of PPE equipment and enhanced cleaning standards. Our operating model and end-to-end ownership will ensure that these new standards and ways of working can be rigorously enforced across our entire estate.
Our operational focus prior to, and during, the reopening phase includes increased engagement with our customers to help leverage brand loyalty and emphasise our high standards, maintaining our focus on both B2B and leisure customers, and the active management of our supply chain to ensure we are able to provide a near-full customer offering. We have introduced a wider range of cancellation options into our booking conditions, giving our customers greater confidence when they book. Overall, we believe our leading customer proposition positions us very well to attract customers in a post-lockdown environment, as customers seek value and are expected to rely on their most trusted brands.”
Real Estate
• Assura – “Healthcare provision in the UK has been transformed in recent weeks, as the NHS has responded to the requirements of dealing with a pandemic. The short-term focus on acute care has resulted in a dramatic drop-off in A&E attendance and most primary care provision is currently being delivered remotely. This is not sustainable in the long-term, and the backlog in non-Covid-19 treatments will clearly need to be addressed. In addition, it is likely that the adoption of technology will accelerate and there will be a greater openness to new ways of working and cooperation between primary and acute care, as providers look to shift more services away from hospitals. These emerging trends will only further highlight the urgent need for investment in primary care infrastructure.
As we emerge from this crisis, the NHS and its funding needs will be at the forefront of high-level discussions in Westminster and beyond. It is possible that healthcare funding will increase again in the near future, and ensuring that there is sufficient capacity to support this will likely become a key priority for the NHS.
However, the nature of its buildings in terms of design, sustainability, built-in technology, and flexibility will all need to be enhanced. Assura has a proud track record of innovation in primary care building design. This year, we have developed the UK's first medical centre built on cognitive supportive design principles, with a plan to adopt these principles across our estate in the future. We have continued to develop innovative approaches to the sustainability of our buildings, and we recently launched our 2030 health and wellbeing concept.
As the scale and nature of these evolving requirements become clearer, we are ideally placed to support the needs of the NHS. Assura has the financial strength, innovative wherewithal and necessary skills to meet these challenges. Despite the unprecedented level of uncertainty at the current time, we will continue to look forward to the future with confidence in Assura's prospects.”
• Regional REIT# – “We are pleased to be able to deliver a reassuring trading update for the first quarter of 2020, particularly in light of increasingly difficult market conditions as the effects of Covid-19 began to impact businesses across the UK in March. We are confident in the outlook for Regional REIT due to the unique features of our asset management platform that ensures a close working relationship with our diverse register of quality occupiers, of which some 50% are providing Government defined 'essential services'.
The quality and diversity of our portfolio properties and tenant register, supported by active asset management relationships has directly led to a first quarter 2020 rent collection of 93.9% received by the Company. This revenue strength should ensure that a sector leading level of income will continue to be paid to our shareholders for the foreseeable future.”
Retail
• Inchcape – “As of today, we are open in 25 markets (including Australia, Hong Kong and Ethiopia), and remain closed in eight markets (including UK, Singapore and Chile). Since our update on 7th April, while we have had no additional closures, trading has recommenced in several markets (including Belgium, Greece and Colombia.
Inchcape has taken prompt action to optimise cash flow, reduce costs and strengthen further our liquidity position in light of the current market environment. These actions include but were not limited to:
• Collaborating with OEMs to manage our inventory and extend payment terms across markets
• Board/ senior management taking a 20% reduction in fees/ salary during the second quarter
• Reducing discretionary costs (e.g. marketing, office, travel) and capital expenditure
• Successful in our application for the UK CCFF scheme
• Suspending our share buyback programme from 20th March (£30m completed of the £150m)
• Cancelling our final dividend (£70m) on 7th April
Our group-wide performance to the end of February was ahead of internal expectations, highlighting the resilience of the Group that had seen an impact of Covid-19 in Asia. In March, our operations in a number of markets started to close. Those markets that have remained open (accounting for c30% of our 2019 sales) operated at a much-reduced level (roughly half of prior year) in April. Overall, Group revenues in April were down 76% LFL, mainly due to the disruption caused by Covid-19. The impact of closures on profitability will be pronounced, and result in a drop-through to operating profit of approximately 10% of lost revenues.
Following the onset of the virus, the Company moved quickly to adjust working practices, encouraging working from home where practical, implementing physical distancing and ensuring strict hygiene practices in the workplace. While the situation remains dynamic, as restrictions begin to ease it is expected that the ramp-up of business activity will be gradual. With the effects of Covid-19 likely to result in a prolonged economic impact, the Group is conducting a comprehensive review of its cost-base. We will share the progress of this at our interim results.
In this period, we have made good progress on inventory management following collaborative discussions with our OEM partners. The strong relationships enabled us to reduce previously committed orders and extend financing terms. We expect inventory levels to rise over the coming months, albeit to a lesser extent than we had originally anticipated. We are confident that the route to market that we offer for our partners will be as robust as ever.
Inchcape has a strong balance sheet, having ended 2019 in a net cash position, aided by strategic retail disposals. The Group has been confirmed as an eligible issuer under the UK Government's Covid Corporate Financing Facility (CCFF) and as of 21st May we have drawn down £100m. In addition to the flexibility provided by the CCFF, as of today, the Group has available cash of £245m and £420m of headroom in our RCF. Our net debt currently stands at £210m.
As we said on 7th April, we have stress-tested the impact of various conservative scenarios – including a prolonged period of global shutdowns followed by materially reduced activity throughout the second half of 2020 – and remain comfortable that we have sufficient financial resources to navigate an extended period of disruption.
OUTLOOK – The Board announced on 20 March 2020 that it put on hold any forward guidance until such time that the overall impact of Covid-19 on the Company became clearer. While some markets have started to reopen, it is still too early to provide a forward-looking view of the Company's performance in 2020.”
• Pendragon – “On 23 March, in light of the situation with Covid-19 and in line with the requirements of HM’s Government, Pendragon temporarily closed all of its retail locations.
Pendragon initially reopened, with new safety procedures, around 20 service centres during April (out of a total of 145), to either service or repair vehicles for key workers or for customers who depend upon having access to a vehicle. As demand has started to return, the Group has reopened more of its service centres, with a total of 125 open as of today, operating at a reduced capacity with around 20% of total technicians currently now returned to work. Weekly labour sales, whilst building momentum, currently remain significantly down on the same time last year, with last week representing c17% of the level achieved in the same week in 2019. As customer demand builds, further technicians will be brought back to work to increase capacity and meet this higher demand.
Pendragon recognises the key strategic importance of a strong omni-channel offer, and during the period of closure has continued to develop its digital capabilities, with enhanced online home delivery functionality being deployed on the Car Store website, ahead of a wider group roll-out. Additionally, telephone sales operations have continued, with a focus on providing support for customers and facilitating home delivery where required. This additional capability has helped to take a total of 3,610 customer orders and complete 1,187 home deliveries since the beginning of April. Whilst this volume is still significantly below normal levels, there has been an increasing daily trend in order numbers in used car sales in particular.
The safety of colleagues and customers remains the Group’s absolute priority. The business has worked hard to be in a position to implement measures and plans to reopen locations safely as permitted or appropriate. These strict new measures will allow dealerships to operate through the introduction of ways of working that enable social distancing and will include changes to both operational methods and physical layout within dealerships. The Board is confident colleagues will be provided with a safe environment in which to work and that customers are provided with a safe environment in which to shop.
The Group will also continue to develop its digital propositions for customers who choose to shop for their next car online.
It is currently expected that dealerships will be able to open, with compliant social distancing measures, from 1 June, and the Group will work with trade bodies and OEM partners as the situation develops to enable this to happen safely and effectively.”
• Pets At Home – “As anticipated in our full-year trading update on 2 April, nearly all of the exceptional demand witnessed in the closing weeks of Q4 has unwound during Q1 of the current year which, combined with our adherence to guidelines on social distancing across our operations and restrictions on the sale of pet products and health care services deemed non-essential, has temporarily depressed normal levels of Group turnover.
While online sales have remained at materially elevated levels, matched by improved capacity and good product availability, they are, in isolation, unable to mitigate the reduced level of in-store sales, and their weighting towards food, together with an additional £5m of costs relating to our initial response to Covid-19, has had an adverse effect on profits, margins and cashflow in the financial year to date.
Accordingly, we anticipate H1 FY21 Group pre-tax profit, including both the one-off benefit from the business rates holiday, which will be utilised to mitigate partially the estimated financial impact of Covid-19 this year, as well as additional operating costs related to social distancing, to be materially below the prior year. It remains difficult to make a clear assessment of how consumers will react as we emerge from lockdown and we, therefore, do not feel it is prudent to provide full-year guidance at this stage. We will, however, reassess this at our Q1 update at the end of July.
Looking ahead – Over and above managing the business through the pandemic, we must endeavour to continue creating value for our shareholders by being well-placed for a recovery in demand.
Early indications are that some of the behaviours that consumers have displayed during lockdown, notably social distancing and the preference to purchase goods and services safely and conveniently, may persist post exit. Preparing for this has meant adapting our working practices, introducing further precautionary measures around customer interaction, and implementing new ways of safely delivering products and services across all channels, all the while retaining discipline over cash utilisation, thereby maintaining a resilient balance sheet and low financial gearing.
The current environment lacks precedence in the UK and it is difficult, therefore, to assess the medium to long-term effect it will have on consumer behaviour or when we might see normalisation in shopping habits. This crisis has, however, encouraged us to critique our business model and how we operate. While some things have changed, and will continue to do so in a post-pandemic world, we remain confident in the long-term sustainability of our business for a number of reasons, not least our sustainable retail and owner-managed veterinary models, our growing multichannel platform, our large and expanding loyal customer base and our unique solutions-based pet ecosystem.
We operate in a large, growing market with favourable demographics and clear, long-term demand drivers. While the current crisis is affecting consumer behaviour across the UK, our pet population is unchanged, pets remain an important part of our lives – possibly even more so as a result of our present circumstances – and still need to be fed, loved and cared for.
These are clearly unprecedented times and Pets at Home will not be immune to the challenges that we collectively face. We have had to respond quickly and make significant changes to the way we operate our business, and will undoubtedly need to remain focused yet agile as we respond to pandemic-driven issues and opportunities alike. I am proud to be surrounded by an experienced and adaptable management team who, with the support of our fantastic colleagues who have continued to work tirelessly in adverse circumstances, providing essential products and healthcare services for the nation's pets, are determined to create a stronger pet care business in a post-pandemic future.”
Support Services
• Intertek – “We have delivered a resilient trading performance in the first four months of 2020. This demonstrates the strengths of our business model, our geographic and business line diversity and our disciplined approach to performance management.
Group revenue in the first four months was £882m, down 4.6% at both constant currency and at actual rates with a resilient LfL revenue performance of 4.9% below prior year at constant rates.
Our disciplined approach to cost and margin management remains firmly in place.
We continue to be very focused on cash conversion and disciplined capital allocation.
Our Product related businesses delivered a resilient revenue performance of £520m, down 6.1% at constant currency with a LfL revenue performance of 6.6% below prior year. Clearly some businesses performed better than others, for example, Electrical, Transportation Technologies, Building & Construction and Business Assurance while understandably some were affected more significantly, for instance Softlines and Hardlines.
In our Trade business, we delivered a revenue of £201m, with a resilient LfL revenue performance of 5.9% below prior year at constant currency. I would like to highlight the strong resilience of our Agri business in the first four months of the year.
Our resources-related businesses delivered a good trading performance with a LfL revenue growth of 2.4% at constant currency. We were extremely pleased with the good LfL growth in Capex Inspections and robust LfL revenue growth we saw in Minerals.
OUTLOOK – The speed at which the global pandemic has unfolded and the broad-based nature of the lockdown initiatives in every country makes it difficult to attempt any precise guidance and it is too early to quantify the impact of the Coronavirus for 2020.”
• Knights – “As announced on 26 March, the Group moved quickly to put in place a number of prudent cost saving and efficiency measures in relation to the uncertainty created by Covid-19, demonstrating the benefit of a corporate structure in which the senior leadership were able to act with agility whilst supporting its lawyers to remain focused on delivering value to clients. Knights' people, and its clients, have responded well to home working and this is planned to continue until September at the earliest.
The Board believes that the swift actions taken position the Group well to trade through the current environment, which has resulted in a circa 20% decline in instructions in the last few weeks. However, the Board is encouraged by early signs that market conditions have stabilised following the particular disruption experienced since early April.
The recent acquisitions, which have integrated and are performing well, have built upon the Group's already resilient business model being a well-balanced, full service offering and highly diversified revenues by client, sector and geography. The Group is seeing the benefit of this model, with higher levels of disputes and employment work mitigating a reduction in corporate transactions and marginally lower levels of activity in certain areas of the Group's real estate work. The increase in the number of fee earners in the year to over 900, despite the previously announced headcount reductions, further adds to the resilience and diversity of the Group.”
• Restore# – “In the trading update issued on 21 April 2020, the Board confirmed that it would not be appropriate to provide specific guidance for the current financial year due to the uncertainty presented by the outbreak of Covid-19. However, the Company is in a position to provide an update on the key performance and demand trends experienced during April and May to date, which have been positive: • Following a reduction through the second part of March, activity in April stabilised at levels which were better than expected at the start of the month
• All businesses are continuing to trade with most operational sites open
• Storage revenue streams in our largest business, Records Management, remain solid and reliable
• Swift actions to reduce variable and discretionary costs were implemented effectively
• After furloughing approximately 45% of the workforce we have started to bring back some employees in response to growing customer demand and we expect this to continue in the coming weeks and months
• The business remains strongly cash generative and in line with the Board's expectations. The Group is operating well within its banking covenants and has significant headroom in its credit facilities
We have modelled different operating scenarios as per the trading update on 21 April 2020 and under both 'short and severe' and 'long and severe' scenarios, the Group will remain profitable with a robust financial position and strong liquidity for the year to 31 December 2020. The recent improved performance trends support the Board's confidence in the strength of the Group's liquidity position as well as its ability to remain profitable in 2020 albeit lower than reported for 2019.”
• TP Group – “The advent of Coronavirus in recent months has placed a number of challenges before the business.
The Group is approaching this situation on a number of fronts to:
• protect the health and wellbeing of staff and their families;
• sustain the level of business activity on customer projects;
• continue dialogue with customers regarding renewals, extensions and new business opportunities; and
• manage investment in operating expenses and capital equipment where necessary.
The business is robust as it participates in several long-term strategic government and institutional programmes in the UK and overseas. More than 80% of the year-end order book can be ultimately traced to programmes from government and international institutions and major prime contractors. Many of these organisations have publicly stated their intentions to continue the pursuit of current programmes and ensure continuity of payments and integrity of the supply chains through this period, which is proving to be the case. As such, a large percentage of our order book and pipeline of opportunities are regarded as secure.
The Group's profile further protects us through the spread of our business activities across multiple sectors, and the global nature of the major industrial businesses we work with that we expect to continue operating through such events.
The Group maintains a business continuity plan that includes several relevant features:
• flexible working practices and systems that support the ability to work from home in many cases;
• employee outreach initiatives to support as far as possible the health, wellbeing and safety of our staff;
• flexible shift patterns within the manufacturing facilities to accommodate staggered activities and appropriate distancing within the facilities; and
• communications processes to facilitate and co-ordinate the running of the business and the interaction with key stakeholders.
The business is further insulated through:
• a liquid cash balance that is retained predominantly within the UK operating businesses;
• a banking facility of £7.0 m available to supplement our existing cash balance; and
• our ability to flex our plans on operating expenses and capital investment.
As of 20 May 2020 the banking facility has been fully drawn to insulate the business against any potential Covid-19 impact. However, it must be noted that the Group's current cash flow forecast indicates that none of these funds will be required to support the Group's ongoing operational activities.”
Technology
• Cohort – “In responding to the disruption caused by Covid-19, the wellbeing of all our employees remains paramount. The transition to having most employees work from home, and the adoption of social distancing measures for those unable to do so, was achieved quickly and efficiently. Fewer than 30% of the Group's employees are now working on site and many of these are working from home for part or most of the time. Nevertheless, our manufacturing sites have remained operational with enhanced health and safety measures in place.
A small minority of Group employees are on furlough leave, most of whom either are vulnerable individuals or have vulnerable dependents. Cost containment and cash preservation measures have been implemented across the Group including Board and senior management pay freezes for the coming financial year.
FY20 year-end update
Cohort's performance was tracking broadly in line with expectations prior to the imposition of Covid-19 restrictions in the last two months of our financial year, typically our busiest period. We were assisted by the UK MOD's quick action to support its suppliers, including faster payments and simplification of some procedures.
Nevertheless, the restrictions have affected our ability to carry out work on customer premises and customers' ability to witness acceptance tests and to place new orders. This had some impact on our FY20 revenue and trading profit, although these still showed positive growth compared to FY19. With the benefit of a lower tax charge we anticipate FY20 earnings per share to be in line with market expectations.
Despite delays to orders caused by Covid-19 restrictions in the final quarter, order intake for the year was c£125m, a satisfactory outcome compared to the record order intake of £189.9m in FY19, which included a number of large, long-term awards. The expected year-end order book of c£186m is similar to the prior year (2019: £190.9m).
As at 30 April 2020, net debt stood at c£5m (31 October 2019: net debt £6.8m; 30 April 2019: net debt £6.4m); this was better than both our forecast and the position at the last year-end and represents a net debt / EBITDA ratio of less than 0.3.”
Transport
• easyJet – “easyJet has today announced that it will resume flights on 15 June.
A small number of flights will restart on routes where we believe there is sufficient customer demand to support profitable flying. The initial schedule will comprise mainly domestic flying in the UK and France. Further routes will be announced over the coming weeks as customer demand increases and lockdown measures across Europe are relaxed.
We will continue to refine our schedule planning and our capacity expectations for the remainder of 2020, which will be confirmed in due course, whilst also continuing our focus on minimising cash burn.
Alongside the resumption of services, easyJet has announced a range of new measures to help ensure the health and wellbeing of both customers and crew onboard. These include:
• Customers, cabin and ground crew will be required to wear masks
• Enhanced cleaning and disinfection of easyJet aircraft
• Availability of disinfectant wipes and hand sanitiser onboard
• Initially, no onboard food service
The measures have been implemented in consultation with aviation authorities ICAO and EASA, and in line with government and medical advice.
We will also continue to promote our easyJet mobile app, which avoids paper boarding passes, and work closely with our partner airports to ensure all measures recommended by local and European authorities are implemented.”
Lifting restrictions
• Greece has announced that its tourism season will start in June, adding that international flights will resume in July. To encourage tourism, Greece is also making travel cheaper by temporarily reducing value added tax (VAT) on all transport – flights, bus journeys and rail travel – to 13% from 24%. The popular Mediterranean destination will also offer sample coronavirus tests to incoming tourists.
• The Scottish government will move to the first phase of the easing next Thursday, which will allow people to:
• Do more outdoor activity
• Sit or sunbathe in parks or open areas
• Meet one other person from another household, while outside
• However, visiting people inside their houses will not be permitted
• Schools in Scotland will reopen from 11 August in a “blended model of part time in-school and part time at-home learning”
Teachers and other staff will be expected to return to schools during June to prepare classrooms for the new term.
• India is set to resume domestic flights two months after the government imposed a lockdown. Passengers will need to have downloaded a government contact-tracing app, will be subject to thermal screening and also need to wear masks and gloves while inside airports.
• Cyprus has announced an end to many of its lockdown measures. Outdoor areas for restaurants and pubs reopen on Thursday – as do hairdressers, parks and playgrounds – and people can host up to ten visitors in their homes.
• Japan says it will lift its state of emergency in Osaka, Kyoto and Hyogo today as the number of virus cases continue to drop.
• Californian authorities have said they will roll out guidelines for the resumption of production of Hollywood movies and TV shows on Monday, but Governor Gavin Newsom warned that Los Angeles County was likely to be excluded from the first phase. Due to the challenges of social distancing on sets, Hollywood is expected to be among the last industries to come back.
• Bars and pubs in New Zealand reopen today, but capacity will be more than halved to meet social distancing guidelines.
Other
• France’s health authorities are warning the public that “the virus is still circulating” as people break for the holiday on Thursday. The north-west region of Brittany reclosed a number of beaches after seeing “unacceptable behaviour” last weekend.
• UK contact tracing system to be piloted starting with ten lead councils before being extended to others – including Tameside, Leicestershire, Surrey, Warwickshire, Leeds, Camden, Devon, Newcastle. Middlesbrough and Norfolk.
• The UK has begun a trial to see whether two anti-malarial drugs Chloroquine & Hydroxychloroquine could prevent Covid-19 in Brighton and Oxford. Chloroquine, hydroxychloroquine or a placebo will be given to more than 40,000 healthcare workers from Europe, Africa, Asia and South America. All the participants are staff who are in contact with Covid-19 patients. The trial will be conducted by Bangkok-based Mahidol Oxford Tropical Medicine Research Unit, which is supported by the University of Oxford and the charity Wellcome.
• The World Health Organization has recorded its largest daily rise in global cases, with 106,000 reported over the last 24 hours.
• Wuhan authorities have expanded a ban on the trade of illegal wildlife to include hunting and eating as well.