Maitland/AMO Morning Monitor – Tuesday 12 May 2020
In the news
- British companies struggling to survive the coronavirus lockdown could be saddled with unsustainable debts of more than £105 billion, according to an influential group of top City executives. TheCityUK trade organisation, led by Aviva chairman Sir Adrian Montague has written to Bank of England governor Andrew Bailey calling for help.
- Sir Richard Branson is selling a stake in his space exploration business Virgin Galactic to raise $500m to prop up his other enterprises, including Virgin Atlantic. The billionaire has been criticised for seeking financial help from the taxpayer for the airline, which last week announced plans to cut 3,000 jobs.
- Private equity group KKR has agreed to inject $750m into cosmetics company Coty, which owns brands such as Clairol and CoverGirl. It is the first step in moves which could see KKR buy a majority share in Coty’s professional beauty and haircare division and become its second-largest investor after majority shareholder JAB.
- P&O Ferries has provoked anger by announcing plans to make 1,100 staff redundant. Natalie Elphicke, MP for Dover and Deal, said the company’s owners, the Sovereign State of Dubai, had “more than enough money” to keep P&O afloat and should either “stump up or sell to better owners”.
- Arlington Automotive Group, which supplies motor manufacturers including Bentley, Ford and Jaguar Land Rover, has called in administrators, threatening 600 jobs, after the collapse in car sales.
- The Body Shop is accelerating plans to re-start direct selling to consumers in the US for the first time in more than a decade. It follows a big leap in sales via this channel in the UK since the lockdown. The Body Shop is owned by Brazilian health and beauty group Natura. The group also owns Avon, which is well known for its make-up ‘parties’.
- More than six million people whose jobs are currently furloughed will learn later today whether the scheme will be extended. The Chancellor Rishi Sunak is expected to extend the scheme which currently pays 80% of people’s wages up to £2,500 a month, possibly until September. The furlough scheme, which is costing an estimated £14 billion a month, may also be made more flexible. Mr Sunak has already said that there would be no “cliff-edge” end to the scheme.
- Alok Sharma will give a Commons statement on the back-to-work COVID-19 safety plans this afternoon.
Stock market moves
- Asian markets are lower today as Chinese and Hong Kong shares fall 0.24% and 1.60% respectively.
- US Futures as of 8:15 BST point towards a slight dip at the open this afternoon.
- Gold has seen a boost off the back of fears over a second wave of infections after some countries reported a jump in new cases, though a stronger dollar capped these gains.
- In Europe, the FTSE 100 and Euro Stoxx 600 are trading marginally up in the early hours.
Corporate announcements* Maitland Client
Morrison(Wm.)Supermarkets PLC COVID-19 and Q1 sales update
- For Q1, Group LFL excluding fuel was up 5.7%, comprising contributions from retail of 5.1% and wholesale of 0.6%.
- Trading during the individual weeks of Q1 was highly volatile, with stocking up, then the initial impact of lockdown and weak Easter trading, followed by a significant improvement in recent weeks.
- At this stage, the company’s best estimate is that the 2020/21 costs relating directly to COVID-19 are likely to be broadly offset by the in-year business rates cost saving, but the actual net effect is highly dependent on the length of the crisis and how customers respond as lockdown eases.
- David Potts, CEO, said: “We are facing into the unprecedented current challenges and are playing our full part to help feed the nation: working with determination, creativity and pace to serve customers as well as we possibly can.”
- Group revenue grew by 3.0% to €45.0bn, supported by improving commercial momentum in Europe.
- Adjusted EBITDA grew by 2.6% to €14.9bn, reflecting revenue progression and cost programme success.
- Free cash flow grew by 12.2% to €4.9bn, supported by disciplined capital management.
- Resilient business model with expected free cash flow (pre-spectrum) of at least €5bn in FY21.
- Dividends per share of 9.00 eurocents.
- Nick Read, Group Chief Executive, commented: “Vodafone has delivered a good financial performance – growing revenue, adjusted EBITDA and free cash flow – whilst building strong commercial momentum through the year and executing at pace on our strategic priorities. We have also continued to invest in our fixed and mobile Gigabit network infrastructure and digital services, to provide faster speeds for our customers, as well as successfully managing the recent surges in demand. The services Vodafone provides are more important than ever and we are committed to playing a key role in society’s recovery to the ‘new normal’ […]”
- Revenue profit decreased 6.3% to £414m.
- Loss before tax for the year of £837m (2019: loss of £123m).
- Cash and available facilities of £1.2bn.
- Mark Allan, CEO, said: “Landsec’s strong balance sheet and resilient operational performance have enabled us to respond to immediate challenges posed by Covid-19 with speed and decisiveness. I am confident Landsec is approaching the future from a position of strength.”
- Ryanair has announced plans to return to 40% of normal flight schedules from Wed 1 July 2020,
- The airline will operate a daily flight schedule of almost 1,000 flights, restoring 90% of its pre-Covid-19 route network.
- On board its aircraft, Ryanair cabin crew will wear face masks/coverings and a limited inflight service will be offered of pre-packaged snacks and drinks, but no cash sales.
- Eddie Wilson, CEO, said: “It is important for our customers and our people that we return to some normal schedules from 1 July onwards. Governments around Europe have implemented a 4 month lockdown to limit the spread of the Covid-19 virus. After 4 months, it is time to get Europe flying again so we can reunite friends and families, allow people to return to work, and restart Europe’s tourism industry, which provides so many millions of jobs.
- Rowan Baker, CFO, has informed the Board of her intention to step down as CFO and as a Director of the Company to become CFO of Laing O’Rourke.
- The Board is pleased to confirm that Martin Abell will join the business as CFO Designate on 26 May 2020, becoming CFO on 1 August 2020, following Rowan’s departure.
- Martin most recently held the position of CFO at Clinigen Group plc, the pharmaceutical and services company.
- John Tonkiss, CEO, said: “On behalf of the Board, I would like to thank Rowan for her huge contribution over the past eight years. I am also pleased to welcome Martin to the Company. His commercial and public company experience will be of huge benefit and I look forward to working with him.”
- Total revenue decreased 9.6% to £389.9m (2019: £431.1m).
- Adjusted profit before tax secreased 60.1% to to £31.8m (2019: £79.6m).
- During this period of high uncertainty, the Board has focused on cash preservation with capital expenditure being significantly lower in the third quarter and with stock levels lower than at the half year.
- Based on recent order trends and customer feedback, the company now expects full year revenue to be in the range of approximately £490m to £505m.
- Q1 20/21 sales of £2.2bn, down 24.0% in constant currency; LFL down 24.8%.
- Sufficient liquidity headroom against assumption of prolonged period of reduced sales, based on current cash balance of c.£700m.
- All reopened Kingfisher stores are operating with strict social distancing and safety measures.
- Thierry Garnier, CEO, said: “These challenging times have underscored both the agility of our teams and the importance to customers of our offering, which gives me a lot of confidence for the future.”