Maitland/AMO Morning Monitor – Thursday 24 September 2020
In the news
- Chancellor Rishi Sunak is set to unveil a 'Winter Economy Plan' today which will include a new wage subsidy scheme
- TikTok has asked a US judge to prevent the Trump administration blocking downloads from Sunday
- Madrid is now faring worse than New York for new Covid-19 infections
- Increased coronavirus restrictions are introduced today including a 10pm curfews for pubs and restaurants
- The NHS Covid-19 app will be launched in England and Wales
Stock market moves
- Shares across Asia-Pacific fell after a Federal Reserve warning that the US economy could stall without fresh stimulus led to a sell-off on Wall Street. The Hang Seng, Shanghai Composite and Nikkei all closed down.
- In the US, the S&P 500 reversed early gains to shed 2.4% after US central bank officials noted the need for Congress to agree on a new round of economic support measures.
- In Europe, the FTSE100, CAC 40 and DAX all opened up.
Corporate announcements* Maitland Client
Smiths Group PLC FY2020 Annual Results
- Revenue increased to £2,548m (2019: £2,498m).
- Operating profit decreased to £327m (2019: £427m).
- Total dividend of 35 pence per share reflecting delayed interim dividend of 11 pence per share and proposed final dividend of 24 pence per share.
- Guidance remains withdrawn, given the uncertain depth and duration of the COVID-19 pandemic.
- Andy Reynolds Smith, CEO, said: “The strength of performance during the year and our confidence in the future support the proposed total dividend. We remain prudent as we continue to navigate the ongoing uncertainty.”
- Current trading is in line with the group’s expectations for the six months ending 30 September 2020.
- Operational performance in the first half of the year is on track against its AMP7 plan, notwithstanding the pandemic, and it continues to target net outcome delivery incentive outperformance for the full year 2020/21.
- Group revenue is expected to be lower than the first half of last year, largely reflecting the company’s allowed regulatory revenue changes and lower consumption from businesses as a result of COVID-19, partly offset by higher consumption from households. Overall, the net reduction in revenue in the first half of the year is expected to be around 5%.
- Underlying operating profit for the first half of 2020/21 is expected to be lower than the first half of 2019/20 largely reflecting the lower revenue and an anticipated moderate increase in infrastructure renewals expenditure.
- Group revenue of $712.4m (2019: $2,151.2m) and Group Adjusted EBITDA of $53.0m (2019: $758.6m) for the period were severely impacted by cinema closures.
- $360.8m additional liquidity raised during the period.
- At the date of reporting, negotiations with the banks remain ongoing in order to obtain covenant waivers in respect of December 2020 and June 2021. This has resulted in a disclaimer conclusion being issued by the auditor.
- There can be no certainty as to the future impact of COVID-19 on the Group.
- Mooky Greidinger, CEO, said: “While there continues to be a lot of uncertainty, we have a dedicated and experienced team that is focused on managing business continuity while taking advantage of the strong slate currently planned for the months ahead.”
- The company traded slightly above its previously guided base case as it closely manages customer relationships, contract details and service requirements throughout the pandemic.
- Its previously guided base case assumed revenue to be around 50% of pre-Covid 19 expectations until the end of August;
- Tight cost controls remain in-place driving positive EBITDA and cash flow.
- Underlying liquidity position remains strong, broadly in line with the half year position.
- Further notable contract wins in the period demonstrate the enduring appeal of our service standards and approach
- Chris Davies, Interim Group Chief Executive and Group Finance Director, said: “We continue to be pleased that our strong customer relationships are sustaining high levels of revenue during the pandemic’s on-going uncertainty. We are grateful to our customers and the public authorities who have recognised the essential role our services play in maintaining the ability of people to get to work and to keep the economy functioning, even during such challenging times.”
- The last eight weeks of the Quarter saw sales momentum returning across all areas of the business.
- This momentum continued across both Retail and Veterinary operations during Q2 FY21, delivering double-digit LFL growth in customer sales into and through the eight weeks to 10 September 2020.
- The balance sheet and liquidity remain strong.
- Full-year underlying pre-tax profit is now expected to be ahead of current market expectations.
- The company has now been trading for 11 weeks and at the date of this announcement the number of sites which have reopened has increased to over 95% of the estate.
- During August, the well-publicised government funded Eat Out to Help Out scheme plus a temporary reduction in the rate of VAT on certain supplies combined to help return the business to like-for-like sales growth, of 1.4%.
- Total sales over the year to date have declined by 35.4% due to the closure period.
- Phil Urban, CEO, said: “The future remains both challenging and uncertain, with only this week a curfew and other additional restrictions being imposed on how and when we can operate. However, we believe we are well placed to meet that challenge and to keep Mitchells & Butlers at the forefront of the eating and drinking-out market.”
- PIP announced an unaudited NAV per share as at 31 August 2020 of 2,846.2p, an increase of 121.4p (+4.5%) from the NAV per share as at 31 July 2020.
- In the month to 31 August 2020, valuation gains added +171.9p (+6.3%), investment income added +0.6p (+0.0%), foreign exchange movements were -47.5p (-1.7%), and expenses and taxes were -3.6p (-0.1%).
- At 31 August 2020, PIP’s private equity assets stood at £1,464m, whilst net available cash balances were £126m.
- Although PIP made no new commitments during the month, PIP’s pipeline points to an active period for new commitments in the months ahead.
- NAV total return of 5.1% (H1 2019: 1.9%) as portfolio values impacted by COVID-19.
- Share price total return of 31.3% (H1 2019: 8.3%) as COVID-19 impacted share prices of all diversified property REITs. As at 31 August 2020 the share price stood at a discount of 20.9% to NAV.
- £194m available for investment comprising £94m of uncommitted cash and £100m of the Company’s low cost, flexible, revolving credit facility.
- Ken McCullagh, Chair, said: “While these are uncertain and unprecedented times, I believe the Company’s strong portfolio and financial foundations will allow it to continue successfully navigating the current difficult situation and maintain its position as one of the UK’s largest diversified REITs.”