The United Kingdom and European markets extended gains today (before the close on 28th May 2020), and the market sentiments were encouraging with the following factors:
- Swift revival in economic activities spreading optimism of quick economic recovery post lockdown.
- Enormous stimulus plan for the EU outweighing rising concerns of US-China tension.
Considering the current sentiments, we will cover three LSE listed stocks - Ted Baker PLC (LON: TED), Kingfisher PLC (LON: KGF) and Lookers PLC (LON: LOOK). As on 28th May 2020 (before the market close at 2.40 PM GMT), TED surged around 8.37 per cent, KGF plunged 0.95 per cent and LOOK jumped over 9.36 per cent, respectively, against the previous day close. It would be interesting to see how these stocks are responding to the lockdown easing plan of the Government. For better understanding, we will also walk through their respective recent regulatory updates, stock price movements, financial and operational position so that we can throw some rational light over the plausible outlook scenario.
Ted Baker PLC (LON: TED) – Plans to Reopen Stores in June
Ted Baker PLC is operating as a retailer, which enhances lifestyle globally through its product line of womenswear, menswear, and accessories. The business operations are divided into three segments, namely Retail, Licensing and Wholesale.
(Source: Company Website)
Recent Developments – Top Level Management and Board Changes
- 18th May 2020: David Wolffe was appointed as Chief Financial Officer of Ted Baker PLC, with the immediate effect.
- 22nd April 2020: The Board of TED appointed non-executive Chairman to John Barton.
- 30th March 2020: Rachel Osborne was appointed as Chief Executive Officer, with immediate effect.
COVID-19 Update – Reflecting Sale and Leaseback of Ted Baker's Headquarters, with Additional Loan Facility
On 23rd March 2020, Ted Baker announced the disposal of Big Lobster Limited for the consideration of around GBP 78.75 million. Additional Highlights are stated below:
- The Group has arranged additional credit facility of GBP 13.5 million through its lending bank.
- End markets are intensely impacted by COVID-19 disruption.
- In such scenario, the Group adopted several cost cutting measures to save on operative expenses while deferring capital expenditures.
- As per the government, there will be exception in business tax rate even though the Group had already paid GBP 6.2 million as business rates in FY20.
Share Price Performance
TED’s shares were trading at GBX 180.10 on 28th May 2020 (before the market close at 12:09 PM GMT+1), along with a market capitalization of GBP 73.57 million. The 52-weeks high and low of the stock are GBX 1,483.00 and GBX 90.05, respectively.
Due to prolonged uncertainties, the Group failed to provide meaningful guidance. However, the underlying pre-tax profit is expected to fall in between GBP 5-10 million. Moreover, Chinese factories and supply chain networks are now operational while the Company has significant volume of inventory. The Group is looking forward to seeing the consumer traffic post lockdown easing.
Kingfisher PLC (LON: KGF) – Recovery in May Sales Post Hammered First-Quarter Results Amid COVID-19 imposed Lockdown
Signalled a Recovery in May Sales with Store Reopening, while Q1 was Hammered by Lockdown.
Kingfisher PLC is a FTSE 250 listed Company, which is engaged in home improvement products and services. It has around 1,300 stores spanned across Turkey, Russia and Europe. It employs a workforce of more than 77,000 people. The Group had announced ‘One Kingfisher Transformation Plan’ 2016 to bring efficiency, digitalisation and geographic expansion.
(Source: Company Website)
Recent Significant Developments of 2020
- 12th May 2020: The Group announced that it had started phased reopening of stores in France and the UK from the second half of April.
- 23rd March 2020: The Group reported a preliminary financial statement and reported liquidity of c.£1.1 billion under cash and cash equivalents (as at 20th March 2020)
Company Update – Operational and Financial Action will Give KGF a Sound Footing During the Current Crisis and Beyond
On 12th May 2020, the Company provided the Q1 20/21 sales (for the three months ended 30 April 2020), along with the impact of COVID-19 on its business. Overall results reflected the decent trends, with strong e-commerce growth, phased reopening of stores in France and the UK in the second half of April 2020, improving relative sales trend, and sufficient liquidity headroom.
Additional highlights are:
- In the first quarter of 2021, the total sales were down by 24 per cent in constant currency to GBP 2.2 billion, while LFL (like-for-like) sales reduced by 24.8 per cent. The downturn was impacted by the COVID-related disruption.
- Trading up to 14 March 2020 continued the positive trends seen in the fourth quarter of 2020, reflecting the implementation of a new trading approach across the Group and operational improvements in France.
- It has taken effective actions taken to preserve cash and reduce costs.
- On 8th May 2020, the Group had cash at bank of approximately GBP 700 million and access to more than GBP 2 billion in total liquidity.
Share Price Performance
KGF’s shares were trading at GBX 193.45 on 28th May 2020 (before the market close at 12:10 PM GMT+1), along with a market capitalization of GBP 4.11 billion. The 52-weeks low and high of the stock stood at GBX 233.30 and GBX 101.00.
Through the click & collect and home delivery services, the Company has started transforming the operations to meet a material surge in online transactions. Further, the Group has donated more than GBP 1 million of PPE (personal protective equipment) to frontline health workers, with more on the way. It has also taken substantial actions throughout the business to protect cash and reduce costs, in part supported by governments. Kingfisher stays a resilient and market-leading business with a robust management team, and the Board is confident that the Company is on-track to recuperate once the situation normalises.
Lookers PLC (LON: LOOK) – Contemplating Trading Scenario Post Lockdown Easing
Lookers PLC is listed on FTSE All-Share index and was admitted to the LSE on 21st June 1973. The Company is engaged in motor retail and relates aftersales service. It differentiates the business into four divisions, namely Aftersales, Used Cars, New Cars, and Leasing & others. It comprises more than 165 franchised dealerships which consist of 31 brands. The operations are spread across the UK and the Republic of Ireland.
(Source: Company Website)
Recent Major Regulatory Updates - Transition in the Management
- 12th March 2020: The Group reported that the Chief Operating Officer (COO), Cameron Wade resigned from his position with immediate effect.
- 5th February 2020: Mark Raban was appointed as Chief Executive Officer with immediate effect. It is mindful to note that Cameron Wade was also appointed as COO on the same date.
Operational and Trading Update (as on 24th April 2020) – Reflecting a Surge in Aftersales, Decline in New Vehicle Unit Sales, and Re-opened 31 Locations
The company’s new vehicle unit sales for the two-month period ended 29 February 2020 decreased by 4.8 per cent (at an LFL basis) against the UK new car market, which abridged by 5.8 per cent.
Some Other Highlights:
- In the two-month period ended 29 February 2020, the unit sales of used vehicles decreased by 2.6 per cent at an LFL basis. Whilst LFL aftersales revenue surged by 0.9 per cent.
- The LFL operating costs for the two-month period ended 29 February 2020 were marginally lower than the previous year's levels.
- The Group has adopted several immediate measures to preserve liquidity (including 30 per cent reduction in board fee).
- Lookers expects to report the net debt of around GBP 62 million at 31st December 2019, with revolving credit facility (RCF) of GBP 250 million.
Share Price Performance
LOOK’s shares were trading at GBX 21.71 on 28th May 2020 (before the market close at 12:11 PM GMT+1), along with a market capitalization of GBP 82.71 million. The 52-weeks low and high of the stock stood at GBX 88.22 and GBX 10.54.
For the two-month period ended 29 February 2020, the Company has reported a downturn. In light of COVID-19, the Group is continuing to take an effective approach to manage cash. The company was facing a challenging market condition due to weak customer confidence and retail cost inflation. Given the continuing uncertainties resulting from the COVID-19 situation, the management continues to believe that it is too early to make any reasonable estimation of the financial impact on the Group during 2020 and beyond. Due by Coronavirus outbreak, the company has expected its revenue and profitability to be impacted in FY20 and partly reopened 31 locations and 10 parts distribution centres. The Group shall emerge strongly in the long run once the uncertainty fades away.
One Year Comparative Stock Performance Chart of TED, KGF, and LOOK
TED, KGF, and LOOK share prices in the last one-year have decreased by 87.60 per cent, 11.45 per cent, and 75.27 per cent, respectively as shown below.
(Source: Refinitiv, Thomson Reuters)
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