Maitland/AMO Morning Monitor – Thursday 11 June 2020
In the news
- The challenges facing the retail sector were laid bare yesterday with the Restaurant Group (which owns Frankie & Benny’s), Monsoon Accessorize and Quiz all announcing major restructures. In total 3,600 workers will be affected, with the large majority of job losses coming at the Restaurant Group which plans to cut up to 3,000 roles as it shuts 125 of its outlets.
- Michel Barnier has said that the EU is ready to increase the frequency of trade talks to find “compromises” on the key issue of the level playing field. But in a downbeat assessment of how the talks have progressed, Mr Barnier said that he would not allow the UK to “cherry pick” elements of a trade deal. Responding to these comments, a UK government spokesperson said: “We are not asking for a special, bespoke, or unique deal. We are looking for a deal like those the EU has previously struck with other friendly countries like Canada.”
- The CBI has appointed former Treasury adviser Tony Danker to be its next Director General. Mr Danker will take over from Carolyn Fairbairn in November, at the end of her five year term.
- 10.30am: Urgent Commons Question to Robert Jenrick on ‘public confidence in the probity of the planning process’ amid a row over his approval of a property development
- 11.15am: Commons statement from the Ministry of Justice on reform to probation services in England and Wales
- 2pm: The Department of Health and Social Care publishes statistics covering the first seven days of operation of the NHS Test and Trace service
- 5pm: Government press conference with Matt Hancock and Dido Harding on Test and Trace
Stock market moves
- The FTSE is trading down 2.3% in early hours, and Eurostoxx 600 down 2.7%.
- Stocks in Asia Pacific traded lower Thursday afternoon. Shares in Australia led losses among the region’s major markets, with S&P/ASX 200 dropping 3.12%. The Nikkei 225 in Japan slipped 2.67% while the Topix index shed 2.06%. Over in South Korea, the Kospi fell 1.81%. Singapore’s Straits Times Index also dropped 2.92%.
- Oil prices dropped in the afternoon of Asian trading hours, with international benchmark Brent crude futures 3.35% lower at $40.33 per barrel. U.S. crude futures also fell 3.91% to $38.05 per barrel.
- Futures markets tipped the S&P 500 to shed 1.4% when Wall Street opens later in the day.
Corporate announcements* Maitland Client
Just Eat Takeaway.com N.V. JET to combine with Grubhub
- The Company is to acquire 100% of the shares of Grubhub Inc. in an all-stock transaction to create the world’s largest online food delivery company outside of China, measured by Gross Merchandise Value and revenues.
- Grubhub shareholders will be entitled to receive American depositary receipts representing 0.6710 Just Eat Takeaway.com ordinary shares in exchange for each Grubhub share, representing an implied value of $75.15 for each Grubhub share and implying a total equity consideration (on a fully diluted basis) of $7.3bn.
- On completion, Matt Maloney, CEO and founder of Grubhub, will join the Just Eat Takeaway.com Management Board and will lead the Combined Group’s businesses across North America and two current Grubhub Directors will join the Just Eat Takeaway.com Supervisory Board.
- The Combined Group will be headquartered and domiciled in Amsterdam, the Netherlands, with its North American headquarters in Chicago and a significant presence in the U.K..
- Unilever today announced plans to unify its Group legal structure under a single parent company, Unilever PLC. The Board believes that moving from the current dual-headed legal structure to a single parent company will bring significant benefits by:
- Increasing Unilever’s strategic flexibility for portfolio evolution, including through equity-based acquisitions or demergers. Such flexibility is even more important due to the increasingly dynamic business environment that the Covid-19 pandemic will create.
- Removing complexity and further strengthening Unilever’s corporate governance, creating for the first time an equal voting basis per share for all shareholders. Upon completion, there would be one market capitalisation, one class of shares and one global pool of liquidity, whilst maintaining the Group’s listings on the Amsterdam, London and New York stock exchanges.
- The Group today announces the successful completion of the placing announced yesterday as well as the concurrent offer made by the Company for retail investors to subscribe for ordinary shares of 2 pence each via the PrimaryBid platform to raise gross proceeds of up to approximately £657m through the Placing and Retail Offer.
- Concurrently with the Placing and Retail Offer, Ocado announces the pricing and final terms of the offering of 350m of guaranteed senior unsecured convertible bonds due 2027.
- The Placing, Retail Offer and Convertible Bond Offering together constitute a total raise of total gross proceeds of approximately £1,007m.
- Revenue up 36% to £14,577m (2019: £10,745m), driven by higher average precious metal prices.
- Operating profit down 27% to £388m (2019: £531m), driven by a restructuring and impairment charge of £140 million and a c.£60 million impact related to COVID-19.
- EPS down 39% to 132.3p (2019: 215.2p).
- The Group’s newly announced efficiency initiatives will deliver additional annualised savings of at least £80m by 2022/23 for a cash cost of c.£80m, with initial savings of at least £30m supporting operating performance in 2020/21.
- Group revenues increased by 16.5% to £3,813.4m (FY19: £3,272.6m).
- UK B&M store fascia revenue growth of 12.6%, including Like-for-Like revenue growth of 3.3% for the year, including 6.6% in the fourth quarter.
- Group profit before tax increased by 3.2% to £252.0m (FY19: £244.3m).
- Recommended final dividend increased to 5.4p per share (FY19: 4.9p).
- Since the year end, the UK business delivered £1m in cash donations to Foodbanks and gave £2.9m of discounts to NHS workers. Store and distribution colleagues received 110% of normal pay to reflect their increased responsibilities and workload.
- Simon Arora, CEO, said: “Looking ahead, there are of course many uncertainties for the economy, consumers and not least for the retail industry. We will all be living with the consequences of the virus and the public health responses to it for a long time to come. I am however confident though that B&M with its modern network of mostly out-of-town stores, well-invested infrastructure and value-led variety offer is well positioned to support the communities in which we trade for whatever lies ahead. The health and safety of our colleagues and customers will remain a priority.”
- Underlying revenue of £4.9bn (2019: £5.2bn) in line with FY20 guidance, statutory revenue of £4.4bn.
- Underlying operating profit of £524m (2019: £588.4m) after a small impact of COVID-19.
- Underlying basic EPS of 69.1p (2019: 84.0p).
- Archie Bethel, CEO, said: “We end a busy year in a strong position to deal with the current Coronavirus (COVID-19) uncertainty. We saw strong performances across our Marine, Nuclear and Land sectors and have taken action to address weaknesses in Aviation, including writing down goodwill to reflect our updated expectations of the oil and gas market. The early impact of the global COVID-19 pandemic had a limited impact on the Group in the last financial year but is creating uncertainty as we head into this new financial year.”
- MoneySavingExpert has provided support to many people with over 16m visits to its pages dealing with Coronavirus-related problems.
- The Group has continued to trade effectively through the period, benefitting from diversified revenue streams and strong cash conversion. As at the end of May 2020, the had net debt of £0.8m having paid the £46m 2019 final dividend.
- It is still too early to have full visibility on when and how the consumer and provider sides of our marketplace will be back to normal, so the Group continues to suspend forward financial guidance for 2020.
- Statutory revenue contracted by 3.9% mainly due to declining Carrier revenue and lower non-Headline MVNO revenue the business winds down.
- Headline EBITDA (pre-IFRS 16) grew 9.7% to £260m (FY19: £237m) driven by lower cost to serve due to a reduction in faults and contact centres calls as a result of an increase in more reliable Fibre connections.
- Final dividend of 1.50p (FY19: 1.50p); total 2020 dividend of 2.50p (2019: 2.50p).
- COVID-19 pandemic has seen good quality, reliable connectivity become an absolute necessity, further validating the Group’s position as the only scale, value provider in the market.
- Whilst the telecommunications sector has not felt the most severe effects of the COVID-19 pandemic, the Group will not be completely immune from the longer lasting macroeconomic impacts of the virus.
- Net assets of £1,246.5m (2019: £1,455.1m); 185.6p per share (2019: 216.8p), a NAV total return of -13.3%.
- Life science portfolio, valued at £479.5m, a -25.0% return.
- Capital pool of £767.0m at 31 March 2020 (2019: £399.7m); significantly strengthened in the year with an aggregate of £592.6m of proceeds from divestments.
- Martin Murphy, CEO, said: “Whilst we have seen delays to clinical trials across the portfolio, we are confident our companies are well placed to be resilient through the current crisis. The UK life science industry has been playing an important role in developing solutions to COVID-19 and it is clear that fundamental innovation and collaboration has never been more important for societies and patients. The Syncona team has leveraged its core expertise to provide advice to both the Wellcome Trust and Government when requested during these exceptional times.”
- Group revenue in continuing operations was down 26% to £810.9m in the five months to 31 May 2020 from £1.09bn in the same period last year due to the impact of the Covid-19 pandemic.
- The Group had a solid start to the year before experiencing a decline in activity in the second half of March resulting in an overall decline in Group revenue of 2% in the first quarter compared to the same period last year.
- The national shutdown measures remained in place throughout April in the UK and Ireland and had a material impact on trading leading to a decline in Group revenue of 80% in the month compared to April 2019.
- Revenues up 15% to £48.2m (FY19: £42.1m) despite COVID-19 impact in last two months of FY20.
- Digitally enabled revenue, including live workouts delivered virtually, increased by 21% to £14.5m (2019: £12.0m) and represented 30% of total revenues (2019: 28%).
- Adjusted PBT margin reduced to 13.7% (FY19: 19.5%) mainly due to COVID-19 impact in Q4.
- Octavius Black, CEO, said: “We are pleased with the Group’s overall performance despite the difficulties of the last quarter. At the end of January 2020 we were on track to exceed revenue and deliver on profit expectations. The COVID crisis had a significant impact in February and March 2020 and the effect can be seen in the year’s final numbers. The strength of our digitally enabled offer has protected the business from more severe consequences of COVID-19. Further investment in digital was already underway before the onset of the pandemic and with expectations of lasting change to how people work we will look to grow this revenue stream in the year ahead. The pandemic and its impact has created a challenging business environment. We are confident that we have the right strategy and are making the right investments to deliver a return to growth once the worst effects of COVID-19 pass.”