By Powerscourt on 23/03/2020
Powerscourt Coronavirus Briefing – 23 March 2020
Overnight trading on Asia Pacific indices has been weak as the number of countries imposing national lockdowns continues to increase and the US stimulus deal was blocked.
Despite ongoing efforts by other governments around the world to implement packages in order to support the global economy, Australia’s S&P/ASX fell as much as 8.6% at one stage before clawing back losses to close 5.6% down. South Korea’s KOSPI fell 5.3% and Hong Kong’s Hang Seng fell 4.5%. Japan’s Nikkei 225 was the one bright spot, rising 2.2%.
In the UK, the impact of COVID19 on the country’s public transport network has been laid bare this morning by announcements from Stagecoach, Go Ahead Group and Firstgroup, the three largest listed providers of rail and bus services.
All have announced a slew of measures to preserve liquidity and support their balance sheets including cutting dividends, voluntary paycuts for senior staff and reductions in service.
The FCA’s weekend request that all listed companies delay the publication of their preliminary financial statements for at least two weeks has today prompted home improvement company Kingfisher to postpone the announcement of its FY results, which were due to be issued tomorrow. Others will clearly follow suit in the days and weeks ahead as the FCA seeks to limit the practical challenges on both companies and auditors during the current crisis.
Separately, fellow FTSE100 constituent and media stalwart Pearson has provided a rare bright spot this morning, pointing towards an uplift in the use of its digital products and services as students go online in light of global education system shutdowns.
While the ongoing crisis means that bad news will, sadly, continue to outstrip positive updates emanating from corporates for the foreseeable future, areas of strength such as these are likely to be seized upon by the media – expect to see similar notes of resilience from tech-enabled companies engaged in the provision of online healthcare, video conference facilities and mobile gaming in the days ahead.
WHAT ARE COMPANIES SAYING?
Consumer and Retail
John Lewis announced it will close all 50 of its department stores at close of business on Monday 23rd March 2020 due to the coronavirus impact. JohnLewis.com and Waitrose.com will operate as normal, however the company admitted it will be “the first time in the 155-year history of the business that it will not open its shop doors for customers”. Customers can use ‘click and collect’ for Waitrose products and can have them delivered to their door. The food halls within John Lewis Oxford Street and Waitrose shops which share premises with John Lewis space at Kingston, Ipswich, Stratford, Horsham, Basingstoke and Canary Wharf will remain open. Chairwoman Sharon White said it was with a “heavy heart” the company has shut its stores, although they are seeing “extremely strong demand” online.
The boss of Kurt Geiger, Neil Clifford, announced he is suspending his salary for a year, giving NHS staff a 50% discount when the stores reopen and continuing to pay all store staff so that they can offer volunteer time for charities.
The FTSE 100 publisher has announced it is pausing its share buyback programme and will implement a number of measures to stem the impact from COVID-19. This includes accelerating the shift to online learning, particularly for university students, alongside virtual school offerings and formal online university courses. The company commented it has “strong financial position, with significant headroom on liquidity and scope for further cost savings”.
ITV released a trading update on the COVID-19 impact, admitting it is having a “significant impact” on the company’s ability to film productions. As well as pausing these productions, the company has implemented contingency plans to produce as many programmes as possible, particularly the news output and live productions. ITV also noted demand “remains strong” and “It is too early to quantify the impact of this on ITV Studios’ revenue and profit”. As the focus is on reducing costs and bolstering cash flow, ITV has withdrawn its 2020 guidance and suspended the planned dividend.
The transportation company released a statement, affirming its commitment to protecting employees while recognising the need for crucial services to transport key workers. The Group has seen significant volume reductions, particularly in North America, and is proactively briefing customers as to the future levels of service. The Group withdrew its guidance for the full year ending 31 March 2020, and affirmed its diverse portfolio, significant liquidity, and cash conservation initiatives as capable of withstanding the virus’ impact.
The FTSE 250 transportation group laid out three priorities for the company: “to safeguard the health and wellbeing of our colleagues and customers; to play our role in society in challenging times; and to protect our business”. Following an announcement by the Department of Transport, the company is looking to support rail operators through management contracts over the next six months, and is holding “discussions” with government authorities in the face of service reductions. The Group has also suspended its dividend and affirmed its “strong balance sheet with good liquidity under its existing facilities and maintains a positive dialogue with its lenders”.
Stage Coach plc
Stage Coach plc, a leading travel and tourism company, published a trading update and an update on the coronavirus’ impact on the company. The company affirmed its commitment to protect its employees, and stated it holds “over £290m of available cash and undrawn, committed bank facilities to underpin the continuity of the business”. Other initiatives include a cross-functional working group, a planned reduction in capital expenditure, future reduction of the company’s cost base, and the “re-financing of our core, bi-lateral bank facilities, entering into £325m of new, bi-lateral bank facilities committed through to March 2025”.
The FTSE 250 soft drinks provider praised the “dedication” of its employees while committing to protecting their welfare, whether by working from home or, when not possible (e.g. in the supply chain), taking precautions to ensure they are protected. The company flagged a “material impact” on the 2020 outlook amid the closure of trade outlets and restrictions in people movements. It further stated it is “too soon” to know the full impact, although they have developed scenario planning for the current conditions and expect a monthly EBITA decline “of between £12m and £18m per calendar month”.
Hyve Group plc
The FTSE 250 global exhibition organiser affirmed its commitment to protecting staff and guiding the business through the COVID-19 crisis. The company predicted a “large-scale postponement plan” across its business, which was “larger” than the March 5 update predicted. The company committed to reducing costs and bolstering cash flow alongside being in “constructive dialogue” with lenders regarding covenant headroom and facility flexibility. The company has withdrawn guidance for 2020.
Royal Phillips, a global leader in health technology, announced that it is increasing the production of certain critical care products and solutions to help diagnose and treat patients with COVID-19. In particular, this includes “patient vital signs monitors and portable ventilators and medical consumables for non-invasive and invasive ventilation to treat a broad range of respiratory conditions”. This is alongside a ‘telehealth’ platform to connect carers and patients in their home. Royal Phillips further called on governments “to facilitate enhanced access to critical materials and components by not imposing restrictions such as export controls and tariffs, and to provide help to accelerate logistics, as well as exemptions for critical suppliers from lockdown measures”.
Integrated Diagnostics Holdings plc
Integrated Diagnostics Holdings (“IDH,” “the Group,” or “the Company”), IDHC on the London Stock Exchange, a consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, will delay the publication of its results for the year ended 31 December 2019. The results were previously scheduled to be released on Thursday, 26 March 2020 at 7am GMT. Against the backdrop of the unprecedented covid-19 pandemic, the Board of Directors, on the recommendation of the UK Financial Conduct Authority (FCA), has decided to delay the publication of the Company’s FY2019 results. The Company will provide a Notice of Results once the FCA has made clear its guidance on a release date.
Altitude Group plc
Altitude Group plc, operator of the leading marketplace for personalised products, published its full year results as coming in above guidance. However, the company cautioned that “the uncertainty created by the coronavirus crisis and its impact on demand for promotional products in the US is currently unknown, which therefore renders accurate or responsible forecasting impossible. Therefore we are withdrawing guidance until there is more clarity”.
Kingfisher announced it will be complying with the Financial Conduct Authority’s (FCA) strong request to all listed companies to delay the publication of preliminary financial statements for at least two weeks. Kingfisher was one of a number of companies due to announce final results to have received a letter from the FCA on Sunday 22 March. The letter requested a delay to the forthcoming announcement of the preliminary financial statements for the year ended 31 January 2020, scheduled to be announced on Tuesday 24 March. Further updates will be given as to the timing of the publication of the FY 19/20 results, as soon as further advice is provided by the FCA.
Airbus announced a new raft of measures aiming to bolster its liquidity and balance sheet in response to the COVID-19 pandemic. This includes a new € 15 billion credit facility, the withdrawal of 2019 dividend proposal, the suspension, and the withdrawal of the 2020 guidance. In a statement, CEO Guillaume Faury affirmed: “Our first priority is protecting people while supporting efforts globally to curb the spread of the coronavirus. We are also safeguarding our business to protect the future of Airbus and to ensure we can return to efficient operations once the situation recovers.”
Royal Dutch Shell
In a regulatory statement, the oil & gas giant affirmed its commitment to staff protection alongside building financial resilience capable of withstanding the COVID-19 impact. This includes reduction of underlying operating costs by $3-4 billion per annum over the next 12 months compared to 2019 levels, the reduction of cash capital expenditure to $20 billion or below for 2020 from a planned level of around $25 billion, and
material reductions in working capital. CEO Ben Van Beurden commented: “The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past”.
The building materials giant has put in further measures to mitigate the COVID-19 impact, with policies differing depending on the region. The Group is “quickly adapting to the evolution in demand, aiming for operational continuity, depending on the health situation and on government decisions in each country, whilst reducing costs (reduction of teams, partial unemployment or stoppages) and prioritizing the health of its stakeholders”. In particular, the group has adjusted its customer service model, including shifting ordering and collecting to an online platform, while decreasing capital expenditure and implementing a cost-cutting programme across the Group. Saint Gobain also affirmed its strong financial position which has been bolstered by a new syndicated credit line of €2.5 billion alongside access to the new Pandemic Emergency Purchase Program (PEPP) launched by the European Central Bank. The Group has withdrawn guidance for 2020.
Europa Metals Ltd
Europa Metals, the European focused lead and zinc developer, announced an update on the COVID-19 impact. The company is prioritising the health and safety of its global workforce, further to the advice and guidance of national and international health authorities. In Spain, the Company’s subsidiary, Europa Iberia SL (“Europa Iberia”), is reporting regularly to the Board on guidance and enforcement by the Spanish health authorities. The Board “is mindful of the fluid and changing situation and the need to comply fully with all such requirements”. All advice issued as of 16 March 2020 by the Spanish Government has now been enacted across the Group where applicable. The company has implemented work from home procedures and has banned all non-essential international travel.
Lamprell has received a letter from the Financial Conduct Authority requesting all companies that are due to report in the next few weeks to defer the release of their 2019 financial results, as a result of the unprecedented practical challenges that listed companies and the audit profession are facing during the ongoing Coronavirus crisis. As a result, the Board of Lamprell plc has agreed to accommodate the FCA’s request and will defer the release of Lamprell’s 2019 financial results, which will not now be issued this week as planned. The company will issue an announcement regarding the new date for release in due course following publication of further guidance from the FCA.
Financials & Real Estate
Trust and corporate management company Intertrust released a defying statement, affirming “no material adverse impact on revenues has been observed from COVID-19, nor on cash”. The firm also stated its offices around the world has seen “minimal disruption to date” and are continuing to provide the usual service to clients. CEO Stephanie Miller stated: Our technology has proven to be a real differentiator and has allowed us to switch to effectively working remotely in all our offices since last week. We are focussed on the continuity of our business, maintaining our financial and operational resilience and continuing to deliver uninterrupted services to our clients”.
NewRiver REIT plc
Following government guidance, New River’s community pub business, Hawthorn Leisure, has closed all its sites with immediate effect. The Company had “anticipated pub closures at some stage soon and was therefore well prepared for this outcome”. The company has also provided £120m of available liquidity from undrawn credit facilities and unrestricted cash balances. The company also put forward “scenario testing” which took into account the loss of income and showed “significant covenant headroom and a capital structure that is well placed to absorb a prolonged period of uncertainty”.
Orchard Funding Group plc
Orchard Funding Group, the company specialising in insurance premium finance and the professions funding market, released its full year results and updated on the COVID-19 impact. The Group sees little material impact, due to “sound underwriting procedures, multiple layers of protection and guarantees by the government to aid businesses in surviving this”. The Group added 0.1% impairment provision across all of trade receivables as an added buffer.
STM Group plc
As previously announced, STM Group Plc intended to announce its preliminary results for the year ended 31 December 2019 on Tuesday 24 March 2020. As announced by the UK Financial Conduct Authority ( ” FCA”) this morning, on 22 March 2020 the FCA wrote to all listed companies which were planning to announce preliminary financial statements shortly, requesting that all such listed companies that were looking to announce should delay their preliminary financial statements, in order to ease the practical challenges faced by the audit profession during the Coronavirus crisis. Whilst the Board were in a position to announce the Company ‘ s preliminary financial statements on 24 March 2020, it has agreed to follow the FCA ‘ s request and will no longer announce its preliminary results on 24 March 2020.
AIM-listed 1Spatial, a company specialising in Location and Geospatial Software Solutions and Location Master Data Management (LMDM), updated on the impact of COVID-19 and is continually evolving its business to withstand the impact. The company has seen “little disruption” in key markets although they are “cognisant” this could change, having shifted to remote working across the business alongside signing and delivering on contracts as normal. The company vowed to take “appropriate action” should this change and will update in the May 2020 full year results.
IN THE NEWS
Coronavirus: FCA asks UK companies to delay results – Financial Times
Company reporting ban triggers fear of stock market closure – The Times
Coronavirus: Government prepared to ‘do what it takes’ – BBC News