COVID-19: EasyJet grounds entire fleet
EasyJet shares (LON: EZJ) fell on Monday after the low-cost airline announced that it has grounded its entire fleet of aircraft.
Shares in the airline were down by over 7% during trading on Monday.
“As a result of the unprecedented travel restrictions imposed by governments in response to the coronavirus pandemic and the implementation of national lockdowns across many European countries, easyJet has, today, fully grounded its entire fleet of aircraft,” the airline said in a statement.
The aviation industry has been hit particularly hard by the outbreak of COVID-19 as many nations have been placed under lockdown in an attempt to contain the spread of the illness.
Earlier this month, Europe’s worst-affected nation, Italy, was placed under lockdown.
This caused EasyJet rival Ryanair (LON:RYA) to announce that it will be lowering its passenger target for 2020.
On Monday, EasyJet said in a statement: “Over recent days easyJet has been helping to repatriate customers, having operated more than 650 rescue flights to date, returning home more than 45,000 customers. The last of these rescue flights were operated on Sunday 29 March. We will continue to work with government bodies to operate additional rescue flights as requested.”
The airline continued to add that it is uncertain when it will restart commercial flights.
EasyJet will continue to evaluate the situation based on regulations and demand. It will update the market when it has a clearer picture of the future.
“I am extremely proud of the way in which people across easyJet have given their absolute best at such a challenging time, including so many crew who have volunteered to operate rescue flights to bring our customers home,” Johan Lundgren, easyJet CEO, said.
“We are working tirelessly to ensure that easyJet continues to be well positioned to overcome the challenges of coronavirus,” the CEO continued.
Shares in EasyJet plc (LON:EZJ) were down on Monday, trading at -7.63% as of 11:55 BST.
Oil sinks dragging the FTSE 100 with it
Oil prices sunk again on Monday hitting 17-year lows and driving risk-off sentiment in equities as the FTSE 100 started the week in the red.
Brent oil for delivery in May fell as low as $19.89 in early Monday trade as concerns about the Saudi/Russia price war continued to put downside pressure on the price.
“Crude prices plunged further over the weekend, with WTI slipping below $20 and Brent around the $23 level, as Saudi Arabia said it was not in talks with Russia despite Washington pressuring both sides to help stabilise markets,” said Jack Allardyce, Oil & Gas analyst at Cantor Fitzgerald.
“The potential for a renewed supply pact had been one of the few factors helping to prop up benchmarks, as coronavirus-driven demand destruction has continued to outweigh global stimulus efforts.”
The United States’ attempts to resolve the spat between Russia and Saudi Arabia has so far yielded little results which threatens the future of their shale gas industry.
Vivek Dhar of the Commonwealth Bank of Australia said “US oil production cuts are expected to be the most significant,.”
“The plunge in US oil rigs last week signals the pressure facing the US shale oil sector.”
Some analysts have speculated Russia is attempted to permanently destroy the US shale gas industry and increase its control over large parts of oil supply.
Stocks fall
The drop in oil weighed on European stocks which are still vulnerable to bouts of negative sentiment in the face of a recession cause by coronavirus. The FTSE 100 was particularly heavily hit due to the heavy weighting of commodity shares; BP and Shell represent a significant portion of the index and were down 1.5% and 1% respectively. They were by no means the largest movers in the FTSE 100 on Monday with Meggitt falling 15% and Rolls Royce trading 11% in the red. The drop in Meggitt shares comes a days after the company released financial results and withdrew its dividend.
Clean Energy startup MPower reaches overfunding on Crowdcube
Clean energy start MPower has reached overfunding on Crowdcube after securing more than £300,000 to expand its Africa focused fintech and clean energy business.
The company is focused on solar powered products that are backed by their software, data solutions and a financing model that supports a distribution network.
MPower provides plug & play solar powered products such as refrigerators and water pumps to rural communities in Africa and have already reached over 2000 end-users in Africa with operations in Togo, Cameroon and Zambia.
MPower operates a B2B business model and has established a distribution network which have taken advantage of MPower’s turn-key solutions.
Whilst MPower is making a positive environmental impact, it has combined this with a positive financial impact through a ‘lease-to-financing’ model that empowers bossinesses and individuals.
MPower operates a B2B business model and has established a distribution network which have taken advantage of MPower’s turn-key solutions.
Whilst MPower is making a positive environmental impact, it has combined this with a positive financial impact through a ‘lease-to-financing’ model that empowers bossinesses and individuals.
Financial inclusion
Africa lacks a standardised and broad credit rating system for individuals so MPower has set about developing its own criteria which measures and approves individuals using Big Data. Not only does this provide rural communities with access to finance, it also helps MPower reduce their credit risk. This will be crucial as MPower scales and targets the $70 billion African power market. MPower have forecast their model can capture $349 million of this market providing investors in MPower with significant opportunity to gain exposure to the African power delivery market.Market penetration
The company was established in 2017 and has already earned a cumulative revenue of £550k. This was largely from operation in Togo, Cameroon and Zambia and there are near-term plans for expansion in Namibia, Cameroon & Togo. Over the medium-term, MPower has identified Senegal, DRC, Zimbabwe, Ghana, Ethiopia as potential countries for expansion.Crowdcube
MPower secured £234,540 from an institution as part of the Crowdcube fundraise which will add to prior investment from Innoenergy, Technology Fund and UK-Aid / Energy4Impact. MPower had an initial Crowdcube target of £300,000 which it comfortably meet before going into overfunding, where investors can still invest. With stock markets moving through a period of volatility, MPower provides an opportunity in a high growth emerging market uncorrelated with traditional shares.The Royal Mint to produce medical visors for the NHS
The Royal Mint is set to start producing medical visors for the NHS to help fill the gap in protective equipment for frontline medical staff in the UK.
The Royal Mint will produce the visor in their state of the art manufacturing plant in Llantrisant.
Usually associated with the production of coins, engineers at the Royal Mint were keen to support the NHS and set about production after finding prototype designs on the internet.
The initial batch of orders will be provided to the Cwm Taf Morgannwg University Health Board Wales but say the have capacity to provide thousands of visors. To facilitate the ramp up in production, the Royal Mint have put out requests for rate materials.
Leighton John, Director of Operations for The Royal Mint commented: “My sister works for the NHS and it really focuses your mind on the challenges they are facing, and the opportunity we have to support them.
“On Wednesday at 9am we knew nothing about medical visors, but we set our engineers the task of developing essential medical equipment which could be easily made on site – within seven hours they’d created a medical visor, and within 48 hours it was approved for mass manufacture. We’ll shortly post the specifications on our website to enable other firms to make them too.
“We are now developing the production line, and urgently calling for help to source 1.0mm PET clear plastic which is in low supply across the UK. We believe firms will have this in stock, and we’d urge them to get in touch with us so we can continue to support our NHS.”
The Royal Mint joins a wave of companies shifting their manufacturing abilities to help fight coronavirus; LVMH have started producing hand sanitiser, F1 teams are making ventilators and Amazon is helping with distribution.
The case for investing in FTSE 100 shares now
After the recent selloff in FTSE 100 shares there is an abundance of companies trading at their lowest levels for decades and could present excellent value for the long-term investor.
Indeed, many shares were offering very good value on an earnings basis before the coronavirus selloff, and it would appear that they only offer better value now.
However, the recent selloff is also a stark reminder that shares present risks to investors due to sudden changes in the macro environment that feed through to underlying company earnings. This is a risk that remains despite shares being at record lows and investors should think hard about what makes shares a good price to buy.
Taking the hypothetical example of company XYZ plc’s shares that were trading at £10 in January and are now trading at £3, it doesn’t necessarily mean they are now ‘good value’ or ‘cheap’.
When assessing the value of FTSE 100 companies, investors should reflect on companies’ earning potential in the future, typically over the next 12 months.
Indeed, measures implemented by central banks and government such as the Federal Reserve’s ‘unlimited’ asset purchase and the UK’s promise to pay workers 80% of their wages will provide short term relief rallies.
These should be treated with caution as they can represent ‘Bull Traps’ that suck investors into thinking stocks will continue back up to recent highs, before dumping again.
Technical analysts will always recommend waiting for markets to retest highs or lows before entering a position around market reversals. This means you avoid being sucked into traps and reaffirms the market will respect lows before they move higher.
In the case of the FTSE 100, the key levels to retest will be 5,000. This is both psychological and very close to the closing low of 4,993.
Earnings
The recent selloff in equities due to the spread of COVID-19 was driven in the most part by uncertainty on what earnings will look like over the next 12 months, and the assumption they will be severely reduced. A reduction in earnings will be reported by a large proportion of the FTSE 100; airlines have completely shutdown, banks are being forced into repayment holidays and utility companies are going to see power usage and prices fall. The key question for investors is now whether, over the next 6-12 months, the earnings outlook is going to change to the extent that the recent decline in equity prices makes current share prices good value compared to future earnings. Whilst monetary and fiscal stimulus will prevent company earnings from completely collapsing, a broad rally in share prices will depend almost entirely on an economic recovery driven by businesses resuming operations and creating jobs, once the peak of coronavirus has passed. In short, a sustained rally back to the FTSE 100 highs around 7,700 is only likely once the health crisis shows signs of ending. However, as investors await a medical response to COVID-19 they will be presented with once in a generation opportunities for long term purchases, but must be prepared to accept short term volatility.Bull Trap
Indeed, measures implemented by central banks and government such as the Federal Reserve’s ‘unlimited’ asset purchase and the UK’s promise to pay workers 80% of their wages will provide short term relief rallies.
These should be treated with caution as they can represent ‘Bull Traps’ that suck investors into thinking stocks will continue back up to recent highs, before dumping again.
Technical analysts will always recommend waiting for markets to retest highs or lows before entering a position around market reversals. This means you avoid being sucked into traps and reaffirms the market will respect lows before they move higher.
In the case of the FTSE 100, the key levels to retest will be 5,000. This is both psychological and very close to the closing low of 4,993.
Investors must consider the Enterprise Investment Scheme (EIS) to support the NHS and economic recovery
Enterprise Investment Scheme (EIS) investments are sought by investors around the end of the tax year as they seek mitigate tax with investment in exciting innovative companies.
This year more than ever, investor focus will be on innovative medical opportunities, especially those promising to provide relief in the NHS battle against COVID-19.
There have been a number of high profile products from listed companies helping the coronavirus crisis such as Novacyt’s COVID-19 testing kits, but some of the real innovations may be unlocked in unlisted companies that could benefit from EIS investment.
Andrew Aldridge, Partner at Deepbridge Capital, has highlighted investors can help innovations in the healthcare sector by investing in companies that are directly providing treatments and researching therapies and vaccines for COVID-19, as well as those developing ventilators.
In addition, Andrew Aldridge suggested EIS investors should also consider companies providing relief to the ongoing strains on the NHS such online healthcare delivery platforms, technologies to assist with remote working and devices designed to minimise human contact.
“These companies are quite rightly receiving commercial interest in the acquisition of products but in order for them to be able to scale up research development and manufacturing, they also need venture capital. The EIS is therefore a key Government weapon in this current fight,” said Andrew Aldridge.
“By utilising the EIS, investors can benefit from generous tax reliefs (potentially including income tax relief mitigation, CGT deferral, IHT mitigation and loss relief), whilst also directly assisting the UK’s healthcare and economic battle with Coronavirus. Delaying investments should not be an option. Investors and financial advisers should be speaking with EIS product providers in the life sciences and tech sectors and asking how they can help raise much needed funds.”
“The NHS staff, the supermarket workers, those ensuring the UK continues as best to continue to operate with some vague degree of normality are quite rightly the heroes of the hour. However, investors can have a major impact on this scenario by ensuring that innovators have the resources to expedite their innovations which can make a real distance.”
Investors choosing to invest through the Enterprise Investment Scheme get numerous tax benefits including 30% tax relief and exemption, capital gains tax and relief on any losses.
Economic recovery
The Enterprise Investment Scheme can not only help with the funding of medical companies fighting coronavirus but will be instrumental in helping the UK economic recovery. SMEs employed 16.6 million people in 2019, representing 60% of the working population and the backbone of the UK economy. While the Enterprise Investment Scheme provides investors with generous tax benefits and the potential of huge returns, it also supports employment in innovative and high growth sectors such as technology, healthcare, food and drink, and sustainability. The importance of the EIS was highlighted by Director General of the Enterprise Investment Scheme Association, Mark Brownridge, who has been lobbying government to increase reliefs given to investors in an effort to further support investment during the coronavirus slowdown. He said: “we believe it is perfectly achievable to implement these recommendations in the short term and that they will facilitate faster and increased deployment of capital to entrepreneurial businesses.” “We estimate that between £100m to £200m of addition private investment could be achieved right now to support the businesses that represent the future, but without this additional support they may well not achieve their full potential, or at worst may fail. We strongly urge the Government to review our recommendations”EIS Opportunity: Help Me Stop – Rehab in The Real World
Help Me Stop (www.helpmestop.org.uk) is a breakthrough non-residential alcohol and drug treatment service launched in recent months in London. The Help Me Stop “Dayhab” service is based on the successful US Intensive Outpatient Programme model, which has been proven to produce the same results as the traditional residential treatment model, but at only one tenth of the cost.
With COVID-19 keeping many of us in our homes, and access to addiction treatment becoming much harder, Help Me Stop has now launched a Digital Dayhab solution to operate alongside the Company’s existing first centre in West London.
The UK is currently failing in the way alcohol and drug addicts can access suitable treatment. Every year in the UK 500,000 people are looking for addiction treatment, but less than 3% are accessing rehab due to the very high cost of residential treatment. Price and disruption to lifeare the two most common reasons for clients not finding suitable Rehab.
A typical residential centre will charge £25,000 for 4 weeks – the Help Me Stop Digital Dayhab service provides 75 hours of intense treatment over 4 weeks for £1,750 – less than 10% of the cost. The service consists of a combination of group and one on one sessions, and there is also a supplementary recovery service and family programme available alongside the core programme.
The first Help Me Stop Dayhab centre was successfully launched in the summer of 2019 and has to date performed to plan. Due to the current epidemic, however, the Company has temporarily paused its branch expansion programme, to focus on the launch of its new online service, which is already signing up clients and showing signs of taking off successfully.
It should be noted that the new online service has the potential to attract clients from all over the UK and is not geographically restricted. Help Me Stop therefore has the ability to bring affordable Dayhab to both the home and the high street.
Help Me Stop is not only generating significant demand and demonstrating its viabilityin the UK market, mirroring the US experience, it is also a totally scalable business with potential to expand quickly across the UK in the next 3-5 years with a combination of online and high street units, in the process disruptingthe marketplace by putting recovery within reach for many thousands of people.
The current offer document for Help Me Stop assumes a branch roll out to up to 12 branches by 2023. The Directors believe that the new Digital Service has the potential to easily replicate and possibly exceed that growth pattern. The business is projecting Ebitda of £3.5m by 2023, which based on an exit multiple of 10 (industry average is 9-13) would produce a value of £35m, equivalent to a return of 8 x cash.
The business qualifies for EIS and will be issuing shares both before and after the tax year end, providing the ability for investors to carry income tax relief back to 2018-2019 tax year, if required.