18th Mar 2020 08:09
(Alliance News) - First the travel firms were hit; now it is the turn of the travel services firms.
After UK catering firm Compass warned on Tuesday about the impact of the Covid-19 health crisis on events and travel, French food services and facilities management giant Sodexo said Wednesday it expects the coronavirus pandemic to hit its annual revenue by EUR2 billion.
Sodexo said the Covid-19 pandemic started to be a concern in the second half of January for its business in China, leading to a "rapid deterioration" worldwide in February.
In London on Wednesday, Restaurant Group said it has seen a sharp slowdown in sales, with its Concessions business "getting worse by the day" due to international travel bans.
For the first eight weeks of the financial year, like-for-like sales were up 4.5%. In the last two weeks, however, sales have tumbled 13%.
In the Concessions business, which operates outlets in places such as airports, sales have been down 22% and the situation is "getting worse by the day".
The company, which operates casual dining chains such as Frankie & Benny's and Wagamama, is now assuming an overall decline in like-for-like sales of 25% in the current financial year, with a "significant" fall in its Concessions business. It expects adjusted earnings before interest, tax, depreciation and amortisation between GBP95 million and GBP105 million for the financial year ended December 27.
"Clearly the situation is evolving rapidly and there is no certainty around the severity and duration of the impact on the business. The company is continuing to consider its funding options, both equity and debt, on an ongoing basis," said Restaurant Group.
The stock rose 3.1% on the announcement early Wednesday, though remains down more than 80% so far in 2020.
Here is what you need to know at the London market open:
----------
MARKETS
----------
FTSE 100: down 3.3% at 5,118.76
----------
Hang Seng: down 4.3% at 22,261.27
Nikkei 225: closed down 1.7% at 16,726.55
DJIA: closed up 1,048.86 points, 5.2%, at 21,237.38
S&P 500: closed up 6.0% at 2,529.19
----------
GBP: flat at USD1.2063 (USD1.2057)
EUR: firm at USD1.0997 (USD1.0974)
Gold: down at USD1,502.19 per ounce (USD1,527.67)
Oil (Brent): down at USD28.26 a barrel (USD29.72)
(changes since previous London equities close)
----------
ECONOMICS AND GENERAL
----------
Wednesday's Key Economic Events still to come
1100 CET EU harmonised consumer price index
1100 CET EU foreign trade
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US housing starts and building permits
----------
The US and Britain led a multi-billion-dollar global fightback against economic havoc wreaked by the coronavirus as the EU shut its borders to travellers from outside for 30 days to stem the pandemic's ferocious spread. The sweeping measures, never before seen in peacetime, have upended society worldwide and roiled financial markets on fears of a global recession. The coronavirus outbreak, which first emerged in China late last year, has quickly marched across the globe, infecting nearly 200,000 people and killing 7,900 as governments scramble to contain it. Following criticism that they were mismanaging their crisis response, London and Washington on Tuesday announced massive economic stimulus packages. President Donald Trump said the White House was discussing a "substantial" spending bill with Congress that would include immediate cash payments to Americans. Officials did not give hard numbers but The Washington Post reported the amount could reach USD850 billion, with a chunk destined for airlines fearing ruin. "We're going big," Trump told reporters. UK Chancellor Rishi Sunak on Tueday unveiled an "unprecedented package" of government-backed loans worth GBP330 billionfor businesses struggling in the sudden economic paralysis caused by mass self-quarantine. France has pledged a EUR45 billion aid package. German Chancellor Angela Merkel meanwhile confirmed the 30-day "entry ban" into the EU.
----------
Restaurants are reopening, traffic and factories are stirring, and in one of the clearest signs yet that China is awakening from its coronavirus coma, the country's "dancing aunties" are once again gathering in parks and squares. As the rest of the world runs for cover, China – where the virus first emerged – is moving, guardedly, in the opposite direction as domestic infections fall to nil following unprecedented lockdowns and travel restrictions. But ordinary life is far from normal. Masks and temperature checks are essential to enter most places and many eateries are banning diners from facing each other in a mass "social distancing" campaign – no easy task in the world's most populous nation.
----------
BROKER RATING CHANGES
----------
GOLDMAN SACHS RAISES COMPASS GROUP TO 'BUY' ('NEUTRAL') - TARGET 1600 (1800) PENCE
----------
LIBERUM CUTS COMPASS GROUP PRICE TARGET TO 1400 (2000) PENCE - 'HOLD'
----------
RBC RAISES ANTOFAGASTA TO 'SECTOR PERFORM' (UNDERPERFORM) - TARGET 760 (740) PENCE
----------
JEFFERIES RAISES RECKITT BENCKISER TO 'HOLD' (UNDERPERFORM) - PRICE TARGET 5275 (5000) PENCE
----------
COMPANIES - FTSE 100
----------
Wm Morrison Supermarkets reported a rise in profit for its recently-ended financial year. Total revenue for the year to February 2 was down 1.1% to GBP17.5 billion, though pretax profit jumped 44% to GBP435 million. Profit was boosted as Morrisons booked a GBP27 million exceptional gain, versus a loss of GBP93 million the year before. Profit before tax and exceptional items was up 3.0% to GBP408 million. Like-for-like sales were down 0.8%, having risen 4.8% the year before. Sales have been on an "improving trend" since the start of 2020, the supermarket said. "During the last two weeks, there has been considerable stocking up and sales pull-forward as customers plan for the impact of Covid-19. Overall, for the first six weeks of 2020-21, retail contribution to LFL was 5.0%," said Morrisons.
----------
Tesco and J Sainsbury noted the UK government's plan to give all retail businesses a full business rates holiday for the next twelve months. Both said they are awaiting further details on the policy, though Sainsbury's highlighted that it paid GBP567 million in business rates for the financial year ended March 2019, of which GBP500 million related to stores.
----------
Sainsbury's is the latest supermarket to announce measures to help the elderly and vulnerable during the ongoing coronavirus crisis. All its stores will only open to these two groups for the first hour of trading on Thursday, Chief Executive Mike Coupe said, but will open for an hour longer so other shoppers do not miss out. Supermarkets have seen a huge surge in demand for delivery services, with no slots available until next month for both Tesco and Waitrose in some parts of the south east. Iceland outlets across the country have also introduced reserved time slots to give the vulnerable and the elderly a chance to shop in store.
----------
HSBC Holdings late Tuesday said it has appointed Interim Chief Executive Noel Quinn as the bank's new permanent boss. "Noel has proven to be the outstanding candidate to take on a role permanently that he has performed impressively on an interim basis since August 2019," said Chair Mark Tucker. Quinn said there is "much that remains to be done" at HSBC.
----------
COMPANIES - FTSE 250
----------
Mitchells & Butlers said recent trading has been "severely impacted" by Covid-19. "Given the rapidly evolving nature of the situation it is impossible to quantify the impact Covid-19 could have on our financial performance. However, we expect a significant reduction in our expected outturn for 2020 and, given this uncertainty, can no longer provide detailed guidance on the expected forward financial performance for the year," the pub operator said. The company stressed it has a "strong" balance sheet and has sufficient headroom.
----------
Peer Marston's said it expects UK government advice for people to avoid pubs and bars will dent sales in the coming weeks. Like-for-like sales in its pubs for the 24 weeks to March 14 were 1% below last year. Marston's said it is unable to quantify the hit from Covid-19 at this stage, though it anticipates a reduction in its expectations for the current financial year. "Recent statements from the UK government suggest that the current state of much reduced social activity is likely to continue for several months at least. If that is the case, it is unlikely that an interim dividend will be recommended in May, retaining c.GBP20 million in the business," the company commented.
----------
COMPANIES - OTHER MAIN MARKET AND AIM
----------
Clothing retailer Superdry said it is seeing "major disruption". As trading has been "significantly impacted" by Covid-19, with the firm temporarily closing stores in a number of countries, it has become "clear" that the company will not meet guidance. As such, Superdry has withdrawn its guidance for the 2020 financial year. "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 e-commerce 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," said Superdry. The retailer said it has GBP47 million of net cash, and its working capital performance to date has been "better" than forecast.
----------
COMPANIES - INTERNATIONAL
----------
All McDonald's restaurants in the UK and Ireland will become takeaways, drive-thrus and delivery operations as the company attempts to cope with the coronavirus outbreak. In a statement, chief executive Paul Pomroy wrote: "Our restaurants will remain open for as long as it is safe to do so. "In the last 24 hours it has become clear that we need to temporarily change our operations to ensure the wellbeing of our employees and customers consistent with the Government's guidance on social distancing. Therefore from 5am tomorrow (Wednesday) morning all restaurants will close seating areas and temporarily move to being takeaway, drive-thru and McDelivery only." All restaurants will scrap dine-in operations, shut seating and close children's play areas, but toilets will remain open.
----------
L'Oreal said it expects the new coronavirus epidemic to hurt the beauty market in several geographic zones. The French personal care company noted that the experience it has had with similar situations in the past - including SARS and MERS - shows that after a period of disturbance, consumption resumes strongly. Therefore, looking ahead, L'Oreal said it is confident in its capacity this year again to outperform the beauty market and achieve another year of growth in both sales and profits.
----------
Wednesday's Shareholder Meetings
Berkeley Group (re remuneration policy)
Sureserve Group
Safestore Holdings
----------
By Tom Waite; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
RB..LAntofagastaCompass GroupRTN.L