COVID-19: Marks and Spencer expects trading hit
Marks and Spencer Group plc (LON:MKS) issued a warning on Friday concerning the business impacts related to the evolving COVID-19 outbreak.
Shares in the British retailer were down during trading on Friday.
Marks and Spencer warned that trading over the next 9-12 months in its clothing and home and international business will be “severely impacted” by the illness.
“As a result, it is not possible to provide meaningful guidance on future earnings, although we are taking every step to secure future value for shareholders, colleagues, and suppliers,” the retailer continued.
The company’s food business has remained strong so far, and it is expected to trade profitably throughout. However, Marks and Spencer added that it is not benefitting from stockpiling as much as other major grocers are.
Marks and Spencer said that the final result of profit before tax could be at or below the bottom end of the £440 million to £460 million range, as trading in clothing and home is likely to be “very depressed”.
“We are preparing for the contingency that some stores may have to close temporarily,” warned the retailer.
Marks and Spencer said: “M&S has served customers without cease through two world wars, terrorist bombings and numerous local disasters and we are determined to support our customers now as we always do.”
“We have one of the most loyal and committed workforces in retailing and are very grateful for the extraordinary cheerfulness and dedication they are showing in difficult times. We are seeing substantial sales declines in Clothing and Home and we have to manage our costs accordingly but expect to be able to redeploy significant numbers of colleagues to support the Food business,” it continued.
Shares in Marks and Spencer Group plc (LON:MKS) were down on Friday, trading at -0.60% as of 11:51 GMT.
Government closes schools to contain COVID-19
Boris Johnson revealed yesterday that all schools in the UK are to close from Friday in order to help contain the spread of COVID-19.
“The objective is to slow the spread of the virus and as I say we judge that this is the right moment to do that,” the Prime Minister said in a press conference.
However, in order to help support key workers who are also parents, such as health workers, police officers and supermarket workers, schools are required to make provisions for their children.
School closures across the UK means that exams will not take place in May and June.
“We will make sure the pupils get the qualifications they need and deserve for their academic career,” Boris Johnson continued.
Many students were relying on these exams to secure their place at university in September.
https://platform.twitter.com/widgets.jsThe government has announced that schools will close from Monday https://t.co/PY1RobCHyb pic.twitter.com/TZALqMUZgf
— UK Prime Minister (@10DowningStreet) March 18, 2020
https://platform.twitter.com/widgets.js The UK government has been accelerating measures this week to contain the spread of the illness. On Tuesday, plans to help businesses were revealed, including at least £330 billion in loans – equivalent to 15% of GDP. Many businesses are struggling as the COVID-19 outbreak continues to evolve. Indeed, during a time when people are being told to stay indoors and avoid all non-essential travel, footfall and demand is decreasing.If you have questions about coronavirus in an education setting, you can contact our helpline.
Our helpline will offer guidance for anyone with education related questions – from early years up to universities, plus parents. #Coronavirus pic.twitter.com/qv2QgFOEx4 — Department for Education (@educationgovuk) March 18, 2020
Next warns “greatest challenge” will be demand
Next plc (LON:NXT) warned on Thursday that the “greatest challenge” it faces concerning the evolving COVID-19 outbreak is the risk it poses to demand.
The company said that it must prepare for a “significant downturn” in sales as the situation continues to develop.
Shares in Next rose by over 10% on Thursday. The company did see total group sales for the year ending January 2020 rise by 3.3% to £4.36 billion, with group profit ahead of its guidance at £728.5 million.
However, Next is unable to predict the extent that COVID-19 will hit its retail and online sales looking ahead.
Though the virus is likely to impact its operations, Next does not expect this to be as damaging as the “very significant drop” in both retail and online sales.
“Online sales are likely to fare better than Retail but will also suffer significant losses. People do not buy a new outfit to stay at home,” read the Chief Executive’s review.
Indeed, as the government accelerates its measures to contain the spread of the illness, people are being advised to stay at home and avoid all non-essential travel.
“We have included a detailed stress test that gives the likely cash and profit impact for different levels of sales decline,” the Chief Executive’s review continued.
“The conclusion of our stress test is that the business could comfortably sustain the loss of more than £1bn (25%) of annual full price sales, without exceeding our current bond and bank facilities. This accounts for the business rates holiday announced by Government but excludes any use of Government lending or any measures that may be introduced to help with wages during closure.”
Elsewhere in retail, Laura Ashley (LON:ALY) collapsed earlier this week as the COVID-19 outbreak immediately hit trading.
Shares in Next plc (LON:NXT) were up on Thursday, trading at +10.05% as of 11:11 GMT.
Burberry sales fall as COVID-19 spreads
Burberry Group plc (LON:BRBY) saw its shares fall on Thursday after the luxury fashion brand updated the market on COVID-19 related business impacts.
Shares in the company were down by over 3% during Thursday morning trade.
Burberry said that trading has “deteriorated significantly” since 24 January.
Over the last six weeks, the company has seen comparable retail store sales decline between 40% to 50%.
In February, sales losses were predominantly recorded in Burberry’s Asian markets.
Currently, over 60% of Burberry stores in Europe, the Middle East and Africa and roughly 85% of stores in the Americas are closed.
Those which remain open are operating with reduced hours and experiencing very weak footfall, the luxury fashion brand said.
During a time when people are being encouraged to stay indoors and self-isolate, it is not wonder footfall has reduced.
Burberry said that, in total, roughly 40% of its directly operated stores across the world are closed, with further closures expected.
Burberry continued to add that comparable retail store sales in the final weeks of its financial year are expected to decline by 70% to 80%.
Many companies have been hit by the evolving COVID-19 outbreak as governments are restricting non-essential travel in order to contain the illness.
“Since our February update, the material negative effect of COVID-19 on luxury demand has intensified and is now impacting the industry in all regions,” Marco Gobbetti, Chief Executive Officer, commented.
“Our primary concern is the global health emergency and we continue to take every precaution to help prevent the spread of the virus and ensure the safety and wellbeing of our employees, partners and customers,” said the Chief Executive Officer.
“We are implementing mitigating actions to contain our costs and protect our financial position, underpinned by our strong balance sheet. We remain confident in our strategy and the strength of our brand and I am exceptionally proud of our teams’ resilience and commitment.”
Shares in Burberry Group plc (LON:BRBY) were down on Thursday, trading at -3.26% as of 09:58 GMT.
Waste-to-Energy growth in the Circular Economy with EQTEC PLC
David Palumbo, CEO of EQTEC PLC (LON:EQT), outlines the market opportunity for EQTEC and their Waste-to-Energy technology in an interview with UK Investor Magazine.
EQTEC PLC are a waste technology company listed on London’s AIM and have recently unveiled a number of strategic partnerships to utilise their waste-to-energy technology.
The most recent of these was with German EPC company ewerGy to develop a portfolio of gasification projects in Greece and the Balkans.
EQTEC’s technology uses feedstock such as refuse and farmers waste in their gasification processes to create an energy sources.
The company has a diverse revenue generation channels including technology sales, engineering contracts and maintenance fees. EQTEC also take stakes in operations by providing the equipment which they can then charge services fees on.
By early 2020 more revenue had been generated than for the whole of 2019, demonstrating the growth in EQTEC’s business model.
Summarising the business model, Jon Levinson of SI Capital wrote in a note:
“Projects tend to be bespoke, but the core characteristic start with a long-term local supply of waste in need of elimination and conversion. EQT joins with partners such as the waste operators, EPC (Engineer Procure and Construct) contractors and capital providers, as they collaborate to build sustainable waste elimination and clean energy infrastructure.
“EQTEC supplies the waste elimination and energy recovery technology and provides engineering and design services to the projects. Post commissioning also providing O&M (Operation & Maintenance) Services so generating recurring revenues over the project’s life. Profit margins will vary from contract, but we anticipate an average of around 15%.”
Lloyds share price: is it now time to buy?
Lloyds shares (LON:LLOY) are not alone in experiencing sharp declines due to the coronavirus COVID-19 pandemic and investors will be accessing a number of shares now ‘on sale’.
The Lloyds share price has dropped a significantly since the beginning of 2020 with shares down over 40% from the start of 2020 to the middle of March.
The drop is inextricably linked to the spread of coronavirus, and the market scrambling to price in the decline in economic activity.
However, historical analysis of shares and markets during periods of panic highlights that in almost all circumstances going back to the Great Depression, shares overreact to the downside during the onset of negative news, before recovering towards prior valuation averages.
Lloyds share price
Lloyds share price as shares are currently trading at just 9.6X historical earnings. This compares to a long term FTSE 100 average of around 17x. Value investors would argue the low PE Ratio signals a buying opportunity, but this doesn’t reflect the drop in earnings in 2020, which cause earnings ratios to increase for 2020 FY. This won’t be a surprise to the markets, however, and investors will eventually look past COVID-19, just as they looked past PPI payments and the restructuring costs caused by the financial crisis.Economic fears
Lloyds’ profitability is directly linked to the strength of economy and borrowing demand by business and companies, which is collapsing as coronavirus fears cause panic among consumers and the government restricts everyday activities. Notwithstanding the economic pain driving downside in Lloyds, this pain is deemed necessary by governments to help combat the spread of coronavirus. Further volatility in shares should be expected as we move towards a peak in new COVID-19 cases and restriction on populations are increased. “We know you have to hurt the economy to stop the virus. But the damage is probably going to be temporary, and we’re going to see a recovery probably in the back half of this year,” said Art Hogan, Chief Market Strategist at National Securities in an interview with CNBC. As well as relying in strong economic activity for sustained profitability, Lloyds is also a facilitator of economic activity. The UK government have said they stand ready to support the economy and have introduced the most significant package of financial support measures made by a peacetime government. Through the new Coronavirus Business Interruption Scheme, the UK government will underwrite risky loans to business made by banks such as Lloyds. This will provide support for Lloyds’ underlying lending business as they offering payment holidays for personal loans and mortgages. These measures will avert the worst case scenario for banks and investors should note we are facing a medical crisis as opposed to a financial crisis similar to 2008. Banks such as Lloyds are structurally sound but profitability is set to be dented for a quarter or two. This will be temporary, and just as the economic slowdown was quickly priced into the Lloyd share price, markets will react with buying on any positivity in the battle against COVID-19.Shefa Gems move towards commercial mining with award of Certificate of Discovery
Shefa Gems (LON:SEFA) have been awarded a Certificate for Discovery by the Ministry of National Infrastructures of the State of Israel, a significant milestone in Shefa Gem’s development of Kishon Mid Reach mine.
Shefa have been analysing exploration viability of the mine and today’s announcement paves the way the to commercial mining in the future.
The positive news was reflected by an initial 20% jump in Shefa’s share price on Wednesday to 3.00p.
Instrumental to the decision to award the certificate was Shefa’s prior discovery of their Carmel SapphireTM, a gem unique to Shefa known as a conundrum mineral rich in titanium. The discovery of such a mineral has not been made anywhere else in the world and provides Shefa with a strong footing for further development and eventual production.
The Carmel SapphireTM won Gem of the Year 2018 from International Mineralogical Association.
The next step for Shefa Gems is the application for mining rights with the Israel Lands Authority, following the preparation of a mining plan.
Vered Toledo, CEO of Shefa Gems, said:
“This is a pivotal moment for Shefa Gems. I would like to thank all our shareholders who have expressed confidence in the Company’s activities over the years. After a great deal of hard work by the team, including our network of international expert consultants, Shefa Gems, a pioneer in precious stones exploration, has demonstrated both the commercial potential and the scientific significance of the unique gem stones hidden in the rocks and soils across the regions of Mount Carmel, and the northern valleys of Israel.”
“The Company is now poised to move into an exciting new mine development phase. While there remains exploration work to discover the primary sources, the principal focus now changes to planning and developing the mine and to establishing integrated sales and marketing channels. I look forward to reporting to our shareholders as we progress towards mine development.”
COVID-19: Superdry struggles with store closures
Superdry plc (LON:SDRY) shares crashed on Wednesday after the company issued a warning concerning the evolving COVID-19 outbreak.
Shares in the fashion retailer were down by over 21% during trading on Wednesday.
Superdry said that it is experiencing “unprecedented challenges” as the virus continues to spread.
In order to mitigate the impact of the illness, the company has temporarily closed stores in many countries.
Superdry added that, because this will significantly impact trading, it will not be able to meet its guidance.
As uncertainty surrounding the outbreak of the virus continues, the company will not be providing formal guidance for the 2020 financial year.
Currently, 78 stores across Europe are affected by government closures, Superdry said, which makes up the majority of its European store estate.
Most stores in the UK and the US remain open, but footfall has reduced significantly during a time when people are being told to stay at home and self-isolate.
“Given the performance to date, we do not expect the decline in sales from our retail stores to be fully mitigated by sales through our Ecommerce channel, which remains fully open for business. Whilst we are also pursuing cost saving measures across the business, we do not expect these to be sufficient to offset the sales decline,” Superdry said in a statement.
“Along with everyone else, Superdry is experiencing major disruption to our business operations and recovery as we seek to protect our staff and customers from COVID-19,” Julian Dunkerton, Chief Executive Officer, said.
“We are taking mitigating action wherever we can but the situation is very fluid and uncertain, and we are working to put in place additional financing to secure our recovery,” the Chief Executive Officer continued.
Julian Dunkerton added: “We also welcome the measures announced by the Chancellor yesterday to support UK businesses. The safety of our staff and customers remains our number one priority and we continue to take all appropriate action in line with local government advice. Together, we’re going to make our way through this unprecedented challenge, and I’m confident we can reset the brand and deliver on our transformation plans.”
Shares in Superdry plc (LON:SDRY) were down on Wednesday, trading at -21.66% as of 13:21 GMT.
COVID-19: tips and advice on social distancing
As the COVID-19 outbreak continues to evolve in the UK, I have decided to do my bit to help contain the spread of the virus by staying indoors and reducing social interaction.
This hasn’t been easy for me; as someone who goes to the gym several times a week, enjoys dining out and spending time in bars and pubs, it’s been difficult to adopt this new lifestyle.
However, for my family in Italy, this is nothing new. The nation was put on lockdown as the COVID-19 outbreak accelerated and it became Europe’s worst-affected country.
I have now spent almost a week indoors; here are a few tips which I have found to be particularly helpful.