Maitland/AMO Morning Monitor – Wednesday 6 May 2020
In the news
- Tesla’s strong share price performance passed the level needed to trigger the first tranche of Elon Musk’s ‘moonshot’ pay award, worth $706m at yesterday’s closing price
- Meanwhile Ocado CEO Tim Steiner faces a shareholder revolt over his pay at today’s AGM. He is in line for a bonus of over £100m over five years if the company’s shares continue their strong run
- The value of Bitcoin has risen around 50% in the last month to reach $9,000, ahead of a ‘halvening’ later this month which will see supply of new coins choked as the rewards for mining them are cut
- A survey from the British Chamber of Commerce found that more than half the UK’s large companies could get back to work within days of restrictions being lifted
- Football’s back. South Korea’s K League will restart behind closed doors from this Friday
- Boris Johnson returns to Prime Minister's Questions today in his first across the dispatch box from Keir Starmer
Stock market moves
- In Europe, both the Eurostoxx 6oo and FTSE 100 have opened flat this morning.
- The Nikkei was down 2.84%, while the Shanghai Composite was up just 0.63%.
- Brent crude is up 0.42% this morning, while WTI Crude Oil is down 0.24%.
- Sterling has marginally risen to the euro, however has fallen to the dollar.
Corporate announcements* Maitland Client
ITV PLC Q1 Trading Statement
- Total external revenue was down 7% at £694m (2019: £743m).
- Total ITV Studios revenue was down 11% at £342m (2019: £385m), impacted by the phasing of deliveries and restrictions on working practices due to COVID-19. Broadcast revenue was up 2% at £500m (2019: £489m) with ITV total advertising up 2% as originally guided, and online revenues up 26%.
- £630m undrawn Revolving Credit Facility expiring in December 2023.
- The outlook remains uncertain and is changing rapidly and therefore the group is not giving guidance for Q2 or for the remainder of the year.
- Carolyn McCall, CEO, said: “ITV has taken swift and decisive action to manage and mitigate the impact of COVID-19, by focusing on our people and their safety, and by continuing to reduce costs and tightly manage our cashflow and liquidity. We are also ensuring that we continue to inform and entertain our viewers and stay close to our advertisers. Everyone at ITV has responded extremely well to the challenges we are facing. We are now very focused on emerging from this crisis in a strong position, continuing to offer advertisers effective marketing opportunities and making preparations to restart productions safely.”
- Throughout the ongoing COVID-19 crisis, Ocado Retail has shown resilience in its efforts to meet the needs of as many customers in the UK as possible.
- Overall, Ocado Group maintains a robust financial and liquidity position with £1.2bn of cash on the balance sheet.
- Although the company expects the long term shift towards on-line grocery to accelerate post-crisis, there remain many uncertainties about the length of the crisis, customer reaction immediately post and its long term impact on customers’ disposable incomes and so it has suspended its guidance for Retail Revenue for FY20 until it can accurately forecast likely outcomes.
- Tim Steiner, CEO, said: “Ocado remains in a strong position and while we should be grateful that our current challenges are around growth, expansion and increased demand, we have great empathy for all who are facing different challenges at this time. In retail, we are working with our small suppliers to make sure we pay them earlier than normal and we will work closely with any who are struggling”.
- Q1 revenue $1,134m (2019: $1,202m), down -7.6% on an underlying basis, consistent with 30 March trading update.
- Reported growth down -5.7% including a 3.4% benefit from acquisitions and -1.5% foreign exchange headwind.
- Performance of all three global franchises held back by impact of COVID-19 to varying degrees dependent on geography and exposure to elective procedures.
- Strong balance sheet and good liquidity, with net debt of $1.8bn at quarter end compared to $3.4bn of committed facilities.
- Roland Diggelmann, CEO, said: “Looking to the medium-term, we have a proven strategy that will continue to guide our choices. We remain committed to our ambition to consistently outgrow our markets at the same time as delivering ongoing improvements to trading profit margin.”
- JD Sports Fashion has provided an update following the Competition and Markets Authority’s decision to prohibit the Group’s acquisition of Footasylum Limited and require the sale of the Footasylum business.
- The Group fundamentally disagrees with the conclusion reached by the CMA in its Final Report, which materially fails to take proper account of the dynamic and rapidly evolving competitive landscape in which the company operates, as well as the long lasting – and likely permanent – impact that COVID-19 has had on its industry, which may never return to its pre-merger state, to the particular detriment of smaller retailers like Footasylum.
- The group firmly believes that the CMA has failed to meet its objective of protecting consumer interests and today’s decision will be detrimental for Footasylum, its customers, its 2,500 staff and the UK sports retail market as a whole. The company is carefully considering whether to make an application to the Competition Appeal Tribunal to review this decision.
- Gross written premium in Q1 2020 increased by 4.7% compared with Q1 2019, with own brands growth of 5.6%.
- The group estimates the impact of Covid-19 disruption to its Travel business will be approximately £44m.
- In Motor, Covid-19 restrictions have led to a reduction in claims notifications of approximately 70% during April, with average severity expected to increase as average repair durations lengthen and credit hire costs increase.
- States that its business remains strong and remains focused on its transformation and cost reduction plans as key drivers for its future commercial success.
- Penny James, CEO, said: “We are a strong business with a clear strategy and operational momentum. We’ve traded well during Q1 and continue to make progress on our strategic transformation. Our solvency position is strong, partly as a result of the difficult decision to cancel our final dividend for 2019 and also because of our resilient business model. Acknowledging the importance of dividends to shareholders we will review our dividend position alongside our half year results and on an ongoing basis once it is possible to have a better understanding of the impact of Covid-19.”
- Organic originations of £1.5bn in the first three months of 2020 (Q1 2019 statutory: £799m for OSB and £710m for Charter Court Financial Services Group).
- Underlying net loans and advances increased by 5% in the first quarter, excluding the impact of structured asset sales. On an underlying basis, after structured asset sales, net loans and advances as at 31 March 2020 remained unchanged at £18.2bn (31 December 2019: pro forma underlying £18.2bn).
- Underlying and statutory retail deposits of £16.3bn as at 31 March 2020 (31 December 2019: pro forma underlying £16.2bn, statutory £16.3bn).
- Andy Golding, CEO, said: “The UK and global economies continue to experience unprecedented uncertainty stemming from COVID-19. It is too soon to say what the longer term impact will be on our business, but we entered this period with a strong and secured balance sheet, sensible LTVs and strong risk management capabilities equipping us well to navigate the current situation. I would like to finish by taking the opportunity to thank all of my colleagues for their resilience, dedication, support and hard work which have allowed us to continue to provide our customers with the quality service they expect through these difficult times.”
- The Group has been successful in its objective of maintaining continuity of the essential services it provides throughout the lockdown period whilst adhering to strict health and safety standards.
- The Industrial & Commercial division has continued to serve customers, however it is the most severely impacted part of Biffa’s business, with almost all revenues from customers affected by the lockdown ceasing for the time being, across sectors including hospitality, leisure, transport and non-food retail. Overall, revenues are down around 50% from their position prior to COVID-19.
- The Group has now seen stabilisation of the above trends across all business areas whilst the economy remains in lockdown.
- Balance sheet mix optimisation continued with loan growth of 0.3% to £73.2bn and deposit growth of 1.4% to £64.7bn.
- Pre-provision operating profit of £352m is 3% lower year-on-year due to the expected NIM compression.
- Total impairment charge of £232m (63bps cost of risk); pre-COVID-19 credit quality robust at 23bps cost of risk.
- The company remains well positioned for an uncertain outlook.
- David Duffy, CEO, said: “Amid the uncertainty, it is clear that the pandemic will have long-lasting and wide-ranging effects on how companies do business and on what customers will expect from the organisations they choose to interact with. Although the full impacts from the COVID-19 outbreak will take time to emerge, I’m confident that our agility, digital capabilities and focus on disrupting the status quo will make us stronger and well-equipped to support changing customer needs and play our part in the UK’s economic recovery.”
- National Express is today announcing a proposed placing of up to 19.99% of the Company’s existing issued share capital. The Placing will lower the Group’s gearing, providing enhanced resilience, as well as further financial flexibility to invest in growth opportunities as it exits the COVID-19 crisis.
- The group today has also provided a market update, stating that the contracted nature of the majority of revenue alongside robust cost management action underway means the Group has continued to generate positive EBITDA and cashflow.
- The Group has made significant progress to secure additional liquidity with approximately £1.3bn in cash or undrawn committed facilities.
- Dean Finch, CEO, said: “National Express went in to this pandemic as the leader in all the markets we serve. Whilst the next few months will remain uncertain, we are already seeing a number of growth opportunities as existing and potential new customers seek a financially secure and reliable operating partner. I look forward to maintaining our leadership position and resuming full services as soon as possible, delivering safe, high-quality services to our customers as well as strong and sustainable returns for our shareholders.”
- The Group expects a total reduction in income for the current academic year 2019/20 of up to 12% (£8m), which is below the worst-case reduction in revenue of up to c.£21m as previously announced by the Company.
- The Group is continuing to receive bookings for the forthcoming academic year 2020/21, with 47% of rooms now reserved, compared with 54% at the same point last year.
- Demand from international students is continuing albeit at lower levels, but the Group is starting to see an increase in bookings from the UK domestic market.
- The Group continues to focus on further embedding the operational transformation of the business, which is largely complete.