Maitland/AMO Morning Monitor – Thursday 27 August 2020
In the news
- TikTok's CEO Kevin Mayer quits just months after his appointment, after Donald Trump calls to block the company.
- A team from the WHO which were tasked with finding the origins of the coronavirus have been criticised after it failed to visit Wuhan.
- Wisconsin's attorney general names police officer who shot Jacob Blake.
- A New Zealand court sentences the man responsible for the mass shootings of two mosques in Christchurch last year to life in prison, the first person in the country's history to receive the sentence.
- Parliament remains in recess.
Stock market moves
- In Europe, the FTSE 100 and Eurostoxx 600 have both opened down this morning.
- Asian stocks have slipped today despite global enthusiasm on Tuesday and China releasing new data that showed industrial profits recorded the fastest month-on-month growth since 2018. The Topix was down 0.5%, with the Hang Seng down 1%.
- US futures were down on Tuesday evening ahead of a speech from the Fed Chairman Jerome Powell.
- Sterling has marginally fallen to the euro and dollar.
Corporate announcements* Maitland Client
Flutter Entertainment PLC Half-year Report
- Encouraging trading H2 to date, benefitting from condensed football fixtures, favourable sports results and ongoing resilience of gaming.
- Pro forma Group revenue growth of 22% in H1 (global online +29%); reported revenue increase of 49%.
- Pro forma Adjusted EBITDA £684m, growth of 35%; reported Adjusted EBITDA £342m.
- Profit before tax fell 70% to £24m.
- Peter Jackson, CEO, said: “The second half has started well, with good sports betting performance following the return of major sport events, whilst gaming performance has remained resilient. Looking ahead, we have identified promising opportunities to increase investment across the Group and, while the outlook with respect to Covid-19 remains highly uncertain, the diversification of our Group means we approach the future with confidence.”
- Significant H1 impact from COVID-19; timing and shape of industry recovery remains uncertain.
- Underlying revenue of £5.6bn, down 24%, and reported revenue of £5.8bn, down 26%.
- Underlying operating loss of £(1.7)bn including one-off charges of £(1.2)bn in Civil Aerospace, largely related to COVID-19.
- Warren East, CEO, said: “While our actions have helped to secure the Group’s immediate future, we recognise the material uncertainties resulting from COVID-19 and the need to rebuild our balance sheet for the longer term. We have identified a number of potential disposals that are expected to generate proceeds of more than £2bn, including ITP Aero and a number of other assets. Furthermore, in light of ongoing uncertainty in the civil aviation sector, we are continuing to assess additional options to strengthen our balance sheet to enable us to emerge from the pandemic well placed to capitalise on the long-term opportunities in all our markets.”
- H1 reported revenue -12.3%, LFL revenue -11.5% (Q2 -18.4%).
- Loss before tax of -£2,581m, impacted by £2.7bn of impairments.
- H1 headline operating margin 8.2%, down 3.7pt on prior year as cost savings offset the majority of revenue decline.
- Mark Read, CEO, said: “After two months in which our strategic progress could be measured by growth outside Greater China, the second quarter saw an inevitable downturn, with like-for-like revenue less pass-through costs declining by 15%, albeit better than our expectations. Assuming there is no second wave nor major lockdowns, the second quarter is expected to be the toughest period of the year, although we remain cautious on the speed of recovery.
- The company announces that Sir Donald Brydon has indicated his intention to retire from his role as Chairman of Sage, and step down from the Board, in September 2021.
- When he steps down Sir Donald will have served as Sage’s Chairman for nine years.
- His retirement aligns with the Board succession plan and good corporate governance practice, including the UK Corporate Governance Code requirement for a chair to step down after nine years on the board.
- Ocado announces that after eight years as Chief Financial Officer of the Group, Duncan Tatton-Brown has decided to step down due to family circumstances.
- He will be succeeded by Stephen Daintith who is currently Chief Financial Officer of Rolls-Royce Holdings plc.
- A start-date will be confirmed when known.
- Group fees fell by 11% in FY20. Growth slowed through H1, with fees down 2%.
- Operating profit fell by 45% to £135.0m, all delivered in the 9 months to the end of March, with Q4 trading broadly breakeven.
- While conditions remain tough, May-July fees were stable, and the group is seeing modest signs of improvement in Perm.
- Alistair Cox, CEO, said: “Although many uncertainties remain, Group fees have been stable since May and we see modest signs of improvement in Perm. With our strongest ever balance sheet, leading market positions and highly experienced management teams around the world, we are focused on leveraging these advantages to continue growing market share and investing in organic opportunities to accelerate our return to growth, while keeping a tight control on costs. I would like to sincerely thank our colleagues, shareholders and other stakeholders, whose deep commitment and support means we face our future with confidence.”
- Revenue down 19% and adjusted operating profit in continuing operations down 61% due to Covid-19 pandemic.
- Operating profit down 63% to £39.4m (2019: £104.5m).
- Gavin Slark, CEO, said: “We are very pleased with the performance of our business which was made possible by the outstanding efforts and commitment of colleagues in a half year outturn that demonstrates the resilience and the cash generative qualities of our Group and the agility of our management teams in responding to the Covid-19 pandemic. Grafton’s resilience, market positioning and geographic diversity together with its low debt and strong liquidity leaves the Group well positioned for continuing progress. We are very encouraged by the performance of the Group in recent months as it emerged in a strong position from the Covid-19 lockdown and based on current trends the Group should deliver a similar level of adjusted operating profit in the second half to the comparable period last year.”
- Underlying profit before tax decreased 14% to £156.3m (H1 2019: pro forma underlying £182.8m) and statutory profit before tax increased 10% to £99.3m (H1 2019: restated £90.5m).
- Underlying net loan book grew by 2% to £18.5bn in the period, or 7% excluding structured asset sales, and statutory net loan book grew by 2% to £18.8bn. Organic originations were £2.1bn (H1 2019: pro forma underlying £3.1bn).
- Underlying basic EPS of 26.1p (H1 2019: pro forma underlying 30.3p) and statutory basic EPS of 15.5p (H1 2019: 25.5p).
- Andy Golding, CEO, said: “It remains too early to say what the full impact of COVID-19 will be on the UK economy, nevertheless we will continue to be there for our customers, supporting them in the best way that we can. The foundations of our business remain extremely strong, with a very strong capital position and a prudent business model, all of which position us well to respond to the challenges and opportunities ahead and to continue to support our colleagues, customers and communities and deliver value to our shareholders over the long-term.’’
- The Group has delivered a resilient trading performance and adjusted operating profit for the full year is expected to be in line with market expectations.
- The Group’s third quarter, running from April to June 2020, was impacted by the COVID-19 crisis with revenues down 12% on a reported basis and down 21% on an underlying basis.
- Performance started to recover in June and has continued into the fourth quarter, with revenues steadily improving in July, down 4% on a reported basis and down 10% on an underlying basis.
- Johnny Thomson, CEO, said: “Our businesses have responded exceptionally to the COVID-19 crisis, making a difference to our colleagues, our customers and our communities through these uncertain times. Diploma has also delivered a resilient trading performance, with revenues continuing to improve across all of our Sectors, and strong profit and cash generation throughout the period. Whilst the outlook for the virus remains uncertain, we are trading in line with expectations and are confident about the Group’s growth prospects. The crisis has demonstrated the power of our value-add distribution model, the diversity of our end segments, the benefits of broad-based scalable businesses, and the importance of a strong balance sheet. Our strategy will continue to develop these strengths and we have significant market opportunities for growth.”
- The group generated cash of over $245m in the first half of 2020 and approximately $101m in August 2020 (post-period) from sales of equity in Founded Entities.
- Strong cash position of $310.5m as of 30 June 2020 on a parent company level projected to fund Wholly Owned Pipeline and operations into the first quarter of 2024.
- Operating Loss for the period was $52.8m (30 June 2019: $70.3m).
- Daphne Zohar, founder and CEO, said: “During this period, we have also demonstrated a strong commitment to value realisation through the monetisation of Founded Entity equity. In the first half of 2020 we generated over $245m from the sales of minority shares in certain Founded Entities to help fuel the future growth of the Company, and we are well-capitalised into the first quarter of 2024 with $310.5m as of 30 June 2020. We have also generated an additional approximately $101m in the August post-period from a subsequent sale of Founded Entity equity. We are energised by the progress from the first half of the year, and we aim to continue this momentum across our Wholly Owned Pipeline and our Founded Entities as we collectively work to deliver highly differentiated medicines for patients and value for shareholders.”