Maitland/AMO Morning Monitor – Tuesday 18 August 2020
In the news
- Marks & Spencer to cut 7,000 jobs over the next three months across its stores and management.
- UK Universities preparing for places scramble after the government U-turns on A-level grades.
- The US Commerce Department issues new rules curbing Huawei's access to foreign-made chips.
- Michelle Obama deems Donald Trump unfit for the US Presidency at the first night of the Democratic National Convention.
- Parliament remains in recess.
Stock market moves
- In Europe, the FTSE 100 and Eurostoxx 600 have both opened down this morning.
- Global stocks have been mixed this morning, following US shares nearly hitting record highs yesterday as well as new sanctions on Huawei hitting Asia’s markets. The Topix fell 0.5%, while the Hang Seng gained 0.2%.
- US futures were largely unchanged on Monday evening.
- Sterling has marginally risen to both the euro and dollar.
Corporate announcements* Maitland Client
Persimmon PLC Half Year Results
- Home completions fell to 4,900 (2019: 7,584).
- Total group revenue fell to £1,190m (2019: £1,754m).
- Short term outlook robust with strong start to the second half and healthy level of forward orders, well supported by a strong work in progress position.
- Dave Jenkinson, CEO, said: “Our reaction to the Covid disruption showed very clearly the exceptional quality of our colleagues throughout the business and I’m very proud of their response to the recent challenges. Our team, together with our strong balance sheet, high quality land holdings, significant investment in work in progress, a transformed customer care programme and a 5-star HBF rating now within reach, gives Persimmon a strong platform from which to deliver the homes the country needs, support the UK’s economic recovery and drive long-term sustainable value for all our stakeholders.”
- Attributable profit of $8.0bn and underlying attributable profit of $9.1bn broadly in line with the prior year.
- Net operating cash flow of $15.7bn, above $15bn for the fourth consecutive year, and free cash flow of $8.1bn.
- Basic EPS fell 2% to 157.3c (2019: 160.3p).
- Mike Henry, CEO, said: “We expect most major economies will contract heavily in 2020, China being the exception. Recovery will vary considerably by country. Our diversified portfolio and high-quality assets position us to continue to generate returns in the face of near-term uncertainty, even as we secure and create the options in future-facing commodities that will allow us to sustainably grow value in the long-term.”
- Overall the group year to date has performed ahead of the scenario it announced at the year-end in revenue and cash.
- M&S Food sales have built steadily from the shifts in demand and closure of travel locations at the outset of the crisis. In the last 13 weeks total Food sales have increased 2.5%.
- Clothing & Home total revenue was down 38.5% in the last 13 weeks.
- The group is also announcing today proposals to further streamline the business both at stores and management level, announcing a multi-level consultation programme which the group anticipates will result in a reduction of c. 7,000 roles over the next 3 months.
- Steve Rowe, CEO, said: “In May we outlined our plans to learn from the crisis, accelerate our transformation and deliver a stronger, more agile business in a world in which some customer habits were changed forever. Three months on and our Never the Same Again programme is progressing; albeit the outlook is uncertain and we remain cautious. As part of our Never The Same Again programme to embed the positive changes in ways of working through the crisis, we are today announcing proposals to further streamline store operations and management structures. These proposals are an important step in becoming a leaner, faster business set up to serve changing customer needs and we are committed to supporting colleagues through this time.”
- Adjusted revenue decreased by 9% to £1,652.2m (H1 2019 £1,815.5m), mainly due to 2019 contract losses and COVID-19 impact.
- Adjusted profit before tax of £30.1m (H1 2019 £117.8m).
- Reported loss before tax of £28.5m (H1 2019 profit £31.2m).
- Jon Lewis, CEO, said: “We expect to make further disposals which, alongside other measures, will strengthen the balance sheet and help build towards a more focused, sustainable Capita for the long term. These are unprecedented times and we need to adapt but our strategy remains the right one.”
- Revenue of €1,183.1m outperformed global light vehicle production by 2.5%.
- Positive Adjusted EBIT margin of 2.3% despite sharply lower volumes.
- Significant Adjusted Free Cash Flow generation of €34.9m and net cash generated from operating activities of €92.5m.
- William L. Kozyra, CEO, said: “The Group continued to demonstrate its ability to outperform global light vehicle production in H1 2020, during the biggest declines the global automotive market has faced in modern history. We remain confident in our strategy, business model resilience, operating flexibility and strength in our ability to generate positive profit and positive free cash flow in H1 2020.”
- Total revenue was -11.9% y/y, as expected and previously announced. Performance through the period was significantly impacted by Covid-19 related lockdowns, and the associated reductions in domestic and tourism related consumer spending throughout the group’s regions.
- Underlying EBITDA was (31.0)% y/y and underlying EBITDA margin (excl. share of an associate) was 36.2%.
- Simon Haslam, CEO, said: “At the same time, our strategic approach remains consistent and we have ensured we remain focused on pursuing the numerous opportunities presented by our markets. We are very excited by the proposed acquisition of DPO, the leading high-growth online commerce platform in Africa; which will widen our capabilities across online and mobile money payments, bring an extensive range of direct merchant relationships to our business, and accelerate our growth. We also have numerous opportunities remaining to pursue, whether that be our market entry to Saudi Arabia, our strategic partnership with Mastercard or discussions with banks around substantial outsourcing contracts. We are making excellent progress and remain confident in the industry fundamentals.”
- Revenue fell 14.7% to $4,085m (2019: $4,788m).
- Adjusted EBITDA fell 20.6% to $305m (2019: $384m).
- Net debt excluding leases reduced significantly to $1.22bn at 30 June 2020 (30 June 2019: $1.77bn and 31 December 2019: $1.42bn), benefitting from disposal proceeds and steps taken to protect cashflow.
- Robin Watson, CEO, said: “In the first half of 2020, we took early and decisive actions in response to the unprecedented impact of Covid-19 on the global economy and oil price volatility. Focusing first on the safety of our people, we took action to reduce cost, protect margins & cashflow and ensure balance sheet strength, while delivering for customers. We are benefitting from our broader market exposure and have seen relative resilience in two thirds of our revenue which is derived from chemicals & downstream, renewables and built environment markets. We have successfully protected margins, and delivered trading performance at the upper end of guidance while reducing net debt as a result of portfolio optimisation and steps taken to protect cashflow. Our objectives are to maintain full year margins in line with 2019 and deliver strong cashflow to further reduce debt in the second half.”
- Revenues of $991m (H1 2019: $1,052m) as 11% lower average LME copper price was partially offset by 2% increase in copper sales volumes and 16% higher gold revenues.
- EBITDA of $559m, representing a 56% margin (H1 2019: $620m, 59% margin).
- Copper sales of 146.9 kt (H1 2019: 144.4 kt) and gold sales of 98.6 koz (H1 2019: 108.0 koz), lower than production due to timing of shipments.
- Andrew Southam, CEO, said: “Despite challenging conditions for all miners in the first half of 2020 as a result of Covid-19, KAZ Minerals recorded EBITDA of $559m and grew net cash flow from operations by 31% to $310m. Thanks to the dedication and hard work of our employees we have increased copper and gold production and maintained our low cost position, recording a net cash cost of 68 USc/lb. Covid-19 risks remain, but the Group is on track to achieve its full year production guidance after an excellent performance in the first half.”
- The Group collected 85.4% of the value of its attributable contracted rental revenue, which includes prepaid rent collected in the period.
- Short term concessions, and hence loss of revenue, have been agreed on 7.9% of Grit attributable contracted rental revenue over this period, primarily in the retail segment.
- Short term payment deferrals for the period of March to July 2020 have been agreed on 14.7% of Grit’s attributable contracted rental revenue.
- Bronwyn Corbett, CEO, said: “The Group continues to focus on delivering the investment strategy and further strengthening and defending its current position. The JSE de-listing and primary listing and focus on the London Stock Exchange listing will provide the Company deeper and wider access to capital markets to execute on its attractive growth pipeline to deliver further value to our shareholders. Grit’s earnings and dividends are underpinned by the Company’s secure, diversified and growing index-linked income streams as well as attractive capital appreciation from across our high-quality portfolio. Covid-19 caseload has been significantly lower in Africa than the rest of the world but the full impacts, including economic, remain uncertain. The Company is continuing to successfully focus on strong rent collections and tenant initiatives.”