By Powerscourt on 24/03/2020
Despite the Dow closing 3% down in the US, Asian stock markets have rallied overnight.
Japan’s Nikkei 225 closed up 5.3%, Seoul’s Kospi gained 5.3% and The Hang Seng in Hong Kong was 3.4% higher with traders encouraged by the US Federal Reserve’s promise to support America’s economy, despite Congress failing to approve a support package.
Following Boris Johnson’s historic address to the nation last night, the UK has awoken to the biggest restrictions on movement in living memory with people banned from leaving their homes except for food, medical treatment, one period of exercise per day or “essential” work.
The interpretation of the word “essential” will no doubt be heavily scrutinized in the coming days and the mainstream media, social media commentators and the public at large are bound to focus on the differing stances being adopted by corporate Britain with regards to compliance with the new rules.
Those adjudged in the court of public opinion to have disregarded employee, customer and public safety may find their reputations irrevocably damaged as a result.
In corporate news, FTSE100 sporting goods retailer JD Sports has this morning joined the growing ranks of listed companies that are withdrawing guidance from the market and postponing the publication of financial results.
Other corporate updates include an announcement from FTSE250 housebuilder Redrow who has stated that it will cancel its dividend while home furnishing retailer Dunelm has said that it has fully drawn down against its revolving credit facility and will place this surplus cash on deposit in light of ongoing market uncertainty.
Finally, mining leviathans Rio Tinto and Anglo American have both published updates following measures unveiled in South Africa last night which include a 21-day nationwide lockdown. Rio Tinto’s update also notes the measures announced in Canada which will also see the closure of all non-essential businesses from midnight tonight until 13 April.
WHAT ARE COMPANIES SAYING?
Consumer and Retail
While Fever-Tree intended to announce its Preliminary Results for the year ended 31 December 2019 on 24 March 2020, the Group will follow the FCA’s request and confirms that it will defer the publication of its results. Given the current high level of uncertainty, it is too early to quantify the impact the COVID-19 crisis will have on the outturn for the remainder of the 2020 financial year and therefore the Board is not able to provide financial guidance at this stage. The Group is “extremely secure” financially, being debt free and having strong cash flows.
Lookers plc, a leading car dealership chain, has announced the temporary closure of all its trading facilities in the UK. While acknowledging the efforts of its “brilliant employees”, the Group stated that “maintaining safe social distancing measures whilst continuing to operate car dealerships has become increasingly difficult”. The Group will now explore alternative options to maintain some levels of service to its customers. This statement was made before the Prime Minister’s lockdown announcement yesterday evening.
The FTSE 100 outsourcing and distribution company has changed the arrangements for the 2020 AGM. It will now be moved to the 15 April, from the 23 March, and will take place at their offices. This statement was made prior to the Prime Minister’s statement, although the company “strongly recommended” shareholders vote by proxy.
Frasers Group plc
In a short statement, the FTSE 250 retailing company has suspended its share buyback programme “with immediate effect” due to the impact of COVID-19. The company affirmed it will “continue to look at all options to maintain shareholder value and support”.
The FTSE 100 pharmaceutical giant has announced plans for its 2020 AGM, which will be held on Wednesday 6 May 2020 at London Heathrow Airport. The AGM will be severely restricted; board members will not meet with shareholders individually, there will be no refreshments and no presentations. The Group further “strongly urges shareholders not to attend the AGM in person this year as to do so would be inconsistent with current Government guidelines relative to COVID-19 and, instead, to submit proxy votes”.
ScS Group plc
The UK home furnishings has temporarily closed its stores in response to the government’s announcement on the 23 March. The Group reiterated it “will continue to provide support to our customers and employees through dedicated teams, who we have enabled to work remotely”. The Group affirmed its strong balance sheet and will reduce capital expenditure to protect its liquidity. Going forward, the Group says it is “impossible” to know the full impact although it is “well positioned as it can be”.
Dunelm Group plc
The FTSE 250 furnisher has also closed its stores in response to the government’s announcement on 23 March. The Group had hoped to maintain the ‘click and collect’ facility, but it will now close down all customer-facing services in light of the Prime Minister’s announcement. The Group affirmed it “had already taken significant and decisive actions to support the most vulnerable and lowest paid colleagues in our business, and now we will go further to support the national effort to defeat this pandemic”. It will now bolster its cash resources, including reducing cash expenditure, lowering costs and suspending this year’s dividend.
In light of the Prime Minister’s announcement yesterday evening, JD Sports has closed all of its UK stores temporarily. The Group noted “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”. The Group is looking to preserve capital across the business and limit the amount of “cash burn”. It has withdrawn guidance for 2020 and has postponed its full year results, likely to be the “second half of May”.
The leading polling company announced it will not release its full year results, in accordance with the FCA’s request, but has released a trading update for the period. It showed growth across the company, including a 16% rise in revenues and adjusted operating profit up 35% (compared to the half year). It stated there has 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”.
Games Workshop plc
Trading for the Group in the nine months to the end of February was in line with expectations. However, 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, the company will be temporarily closing globally all of our stores, headquarters, factory and warehouses with immediate effect. Where possible, company staff will continue to work from home. As the situation develops, we will provide an update on the possible impact of these necessary actions on the Group’s performance for the year to 31 May 2020 and going forward.
Cake Box Holdings plc
Cake Box Holdings plc, the specialist retailer of fresh cream cakes, notes the statement issued by the UK Government in relation to COVID-19 yesterday evening. In light of this statement and to protect staff, franchisees and customers and also to help relieve any further pressure on our NHS during this crisis, the Group confirms that it is informing all of its franchisees that the Group’s franchise stores should be shut until government advice changes. The Group has not given guidance for 2020, affirming its strong cash position and low fixed costs. The Group affirmed it will “provide all possible and appropriate support to its franchisees during this challenging period”.
Eve Sleep plc
Eve Sleep plc, the direct to consumer sleep wellness brand, released its full year results. The company noted the following regarding COVID-19: “Wider market uncertainty increased further in the first two weeks of March with the advent of COVID-19 but at that time there had been no noticeable impact on demand, our operations or our supply chain. Over the last week, since mid-March, we have seen some impact on traffic and consumer demand attributable to the fast changing COVID-19 situation, and believe it is reasonable to expect somewhat subdued demand for a period of time whilst the COVID-19 situation prevails”.
The airline updated the latest figures for March, noting a reduction capacity (year on year) of 30% by the end of March, alongside 80% of its fleet currently being grounded. The company reiterated its cooperation with local authorities, and affirmed it will “resume all flights as soon as reduced travel restrictions and governmental policies allow commercial operations”. The airliner is confident its strong balance sheet, liquidity and “ultra-low” cost business model will allow it to withstand the impact from COVID-19.
Velocys plc, the sustainable fuel technology company, released a brief statement affirming it is “regularly reviewing working practices” and “has the necessary technology platforms to support efficient working among teams over a wide geographical spread, which are well adapted to the present circumstances”. All workers will now be able to work from home and a “dedicated COVID-19 response team” is in place.
The multimodal logistics company released another short statement, affirming it will protect its workforce and noting “exceptional volumes that we would typically see around Christmas”. The Group “notes that, at this stage, no conclusion can be drawn as to the potential impact of the exceptional volumes highlighted above on the profits or losses attributable to the Company for the year ended 30 November 2020”.
Applegreen plc, the Irish-based roadside convenience retailer, will release its preliminary 2019 results as scheduled on Friday, 27 March 2020 and will “provide a detailed briefing on its 2019 results and current trading at this time”. The first 10 weeks of 2020 saw performance in line with management’s expectations, however the various government announcements over the past two weeks has “impacted” footfall and volumes. Currently, stores remain open and supply chains are operating as normal, while the Group has “implemented an extensive range of measures to safeguard our people and communities across our three regions”. It will enact short term measures to preserve cash, including a recruitment freeze, reducing capital expenditure and lowering its cost base. The Group expects a “material reduction in profitability” for the year, although they cannot quantify this yet.
The FTSE 100 miner will “slow down some of its operations” in response to the COVID-19 crisis. This concerns operations in Quebec and South Africa following responses by the President of South Africa and Premier of Quebec. 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 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 will work with the Canadian government to comply with its directive in relation to our Quebec operations, noting the mining industry was designated an “essential business” by the government although they must reduce activity to a minimum. CEO J-S Jacques affirmed to protect the company’s employees and stated the Group “will continue to work with our employees, customers, communities and suppliers to minimise any impact of action being taken to reduce the spread of COVID-19”.
Like Rio Tinto, Anglo American also responded to the statement made by the President of the Republic of South Africa on the evening of Monday 23 March in relation to a 21-day nationwide lockdown, to take effect at midnight on Thursday 26 March, in order to help curb the spread of COVID-19 in South Africa. Anglo American will review the detailed regulations relating to this action that are being published, including in relation to exemptions for certain business activities, and will issue a further statement in due course. The mining giant further affirmed its “priorities are the safety, health and wellbeing of our people and all those who interact with our business around the world”.
Financials & Real Estate
Santander has suspended its dividend for this year “under review” while cutting board and senior management remuneration. In a press release, the bank “will consolidate any dividend payment from 2020 earnings into a single payment in May 2021”. The final amount will be determined once the “full impact of the pandemic is known”. The money saved from cutting remuneration will also be placed into a fund, which is estimated to be “at least €25 million”. Group executive chairman, Ana Botín, and chief executive officer, José Antonio Alvarez, have agreed to reduce their total compensation for 2020 by 50%.
Countrywide plc, the UK’s largest property services group, announces that the publication of the Company’s full year results for the year ended 31 December 2019 will be delayed beyond March 2020, the date the Group had previously stated it had expected to announce. This comes following the request by the FCA.
Redrow plc, the FTSE 250 housebuilder, provided an update on the COVID-19 impact. The company’s sites currently remain open with strict precautions in place including enhanced levels of cleaning, additional hygiene facilities and social distancing. Workers will be encouraged to work from home, with the My Redrow online portal enabling customers to interact remotely online. Following the government’s announcement yesterday evening, “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”. The group noted its strong balance sheet and the anticipated lowering of net debt over the coming month. The dividend has also been cancelled.
Amigo Holdings plc
Amigo Holdings plc, the London-listed guarantor loans lender, has “taken the decision to temporarily pause all new lending activity, except for lending to key workers in exceptional circumstances”. The Group will request employees to “teams that talk to our existing customers, particularly where customers have a need for forbearance, given changes in their financial circumstance”. The Group affirmed it will protect its employees, including asking them to work from home in accordance with government advice.
Pelatro Plc, the AIM-listed Multichannel Marketing Hub software specialist, announces that following discussions with its auditors, recent regulatory guidance and in accordance with the announcement by the Financial Reporting Council (“FRC”) of 23 March in which it encouraged listed companies to delay corporate reports (including final audited statements), the announcement of the Group’s results for the year to 31 December 2019 will be postponed. The company noted travel restrictions are having a “limited” impact on the business, due to the lack of supply chain and ease of working remotely. It stated that, although it’s too early to predict the spread of the virus, “the message we are getting from our telco customers is very much “business as usual”.”
IN THE NEWS
Coronavirus: Pandemic is ‘accelerating’, WHO warns as cases pass 300,000 – BBC News
Coronavirus: Johnson introduces toughest measures seen in peacetime – The Times
UK’s Covid-19 powers to be reviewed six monthly – Financial Times