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After a historic rally, the Global markets are set to retreat today (before the market close on 9th June 2020). The market sentiments were stimulated by the following major triggers:
- The retail sales in the UK fell sharply again in May, albeit the decline was lesser than in April.
- The GDP of 19 countries in Eurozone territory contracted by 3.6 per cent (compared to Q1 FY19) during the first quarter of FY20. It was primarily driven by a decline in investment and household spending.
- After topping three-month high at USD 41 a barrel, the Brent benchmark slipped by around 1 per cent.
- UK businesses have enrolled for an aggregate loan amount of GBP 35 billion across the three emergency credit programmes, as reported by the treasury.
- The exports in Germany fell by 24 per cent in April.
In the light of above market sentiments, we will discuss two general retailing stocks - Joules Group PLC (LON:JOUL) and Marshall Motor Holdings PLC (LON:MMH). As on 9th June 2020 (before the market close at 3.10 PM GMT+1), both (JOUL and MMH) the stocks were trading lower than the previous day close by around 1.80 per cent and 2.40 per cent, respectively. Let’s skim through their financial and operational position to understand the stock price movements better.
Joules Group PLC (LON:JOUL) – Experiencing an Encouraging Online Engagement while it has Boosted Liquidity
Joules Group PLC is a FTSE All-Share listed Apparel Retailing Company, which designs and markets lifestyle clothing, accessories, and a range of homeware products. The Group has a multichannel business structure, which operates through retail stores as well as an e-commerce marketplace. The Company operates through three segments, namely Retail, E-Commerce and Other. The Other segment comprises income from licensing. In the United Kingdom, the Group has around 125 stores, 3 franchise stores and over 34 concessions stores. Moreover, the Company has a growing presence in the United States, Germany, Europe and Rest of World.
(Source: Annual Report, Company Website)
Recent Significant Developments of 2020
21st April 2020: The Group reported a liquidity headroom of £43.1 million, on 19th April 2020. The substantial headroom was available after the completion of equity placing and additional revolving credit facility in April.
3rd April 2020: The Group raised GBP 15 million in gross proceeds by issuing 18,750,000 new ordinary shares, wherein Liberum and Peel Hunt acted as bookrunners.
Business Update - Demonstrate the Strength of the Joules Brand and Loyalty of the Customer Base
On 21st April 2020, the Company announced the completion of GBP 15 million revolving credit facility (RCF) with Barclays Bank. Further, the Group’s net debt position was GBP 6.9 million as at 19th April 2020, with available headroom of GBP 43.1 million. Some Additional Highlights are stated below:
- The management believes that these proactive actions have significantly strengthened Joules' balance sheet, the resources to emerge relatively stronger from this unprecedented situation and providing Joules with sufficient liquidity headroom to manage a COVID-19-related downside scenario.
- The E-commerce channel, which represents almost half of the Company’s sales remained open for business and expecting an increase in the website traffic and demand during the lockdown period.
- The Group announced that it had raised nearly GBP 35,000 to support the charity. Further, JOUL has been able to exploit its supply chain to assist key partners and local Leicestershire health services, with a donation of around 50,000 masks.
Share Price Performance Analysis
(Source: EODHD/Others, Thomson Reuters) -1-Year Chart as of 9th June 2020, before the market close
JOUL’s shares were hovering at GBX 123.10 on 9th June 2020 (before the market close at 3:02 PM GMT+1). Stock's 52 weeks High is GBX 291.13 and Low is GBX 32.80. Total outstanding M-Cap. (market capitalization) stood at around GBP 131.31 million.
Business Outlook
The Company earns half of its total revenue from e-commerce channel, and e-commerce sales stay open for business during lockdown days. Customer traffic and demand to the group website has been running ahead of the Group’s expectations. However, due to the COVID-19 mayhem, the Group is expecting a substantial impact over near-term profitability, albeit the Group is focussing on managing the short-term pressure and protecting long-term value for its stakeholders. Joules believe that increasing traffic on its website along with the enhanced liquid position is likely to drive growth in the near to medium term.
Marshall Motor Holdings PLC (LON:MMH) – Trading was Ahead of Market Prior to Lockdown Closure Period
Marshall Motor Holdings PLC is a FTSE AIM All-Share listed Automotive Retailing Company, which is engaged in sale and servicing of the commercial vehicles, passenger cars and caters to associated activities. It operates through a single operating segment, i.e. Retailing, which also provides ancillary aftersales services besides selling of used and new vehicles.
(Source: Presentation, Company Website)
Synopsis of Recent Major Regulatory Updates
1st June 2020: The Group reported that all its 117-car showroom reopened its operations. However, the Group continues to focus on cash preservation and cost management as the new vehicle sales plunged 97.3 per cent in April 2020.
26th May 2020: The Company affirmed that its aftersales facilities are now operational for all services and customers. Further, the Group also planned to ramp-up its aftersales services soon as the demand revives.
Trading and COVID-19 Update – Re-Opening the Dealership Sites, with Decent Organic Growth and Consistent Market Outperformer
On 1st June 2020, the Company provided the following financial and operational update in advance of the re-opening of its retail showrooms from June 1, 2020. Trading significantly ahead of UK market in Q1 FY20. During the lockdown period, the Group had furloughed 90 per cent of employees as many stores closed. Additional Highlights are:
- During the lockdown closure period, the Company has kept 62 after sales operations opened, which will support emergency services, key workers, and commercial vehicle operators.
- The Group has taken an effective step to protect its cash position and mitigate and manage costs during this unprecedented period.
- On 31st May 2020, the adjusted net debt stood at GBP 3.2 million, a decrease from the previous period (31 December 2019: GBP 30.6 million).
- The Group's witnessed GBP 120 million RCF (revolving credit facility) with HSBC and Barclays.
- A gradual return to normalised trading levels and the impact of lockdown closure period is expected to result in a loss in the first half of 2020.
- All the 117 car showrooms and all other operating units were re-opened, which will effective from 1st June 2020.
Share Price Performance
(Source: EODHD/Others, Thomson Reuters) -1-Year Chart as of 9th June 2020, before the market close
MMH’s shares were hovering at GBX 125.00 on 9th June 2020 (before the market close at 3:07 PM GMT+1). Stock's 52 weeks High is GBX 170.00 and Low is GBX 80.00. Total outstanding M-Cap. (market capitalization) stood at around GBP 95.78 million.
Business Outlook
The Group’s long-standing strategy of associating with the right brands and at the right locations has helped them to remain well-positioned to get the maximum benefit from future growth. With the outbreak of COVID-19, the company is in preparation of contingency plans to prevent its dealerships. However, the substantial impact of both a gradual return to a more normalised trading environment and the temporary closure of the Company's physical retail showrooms in the unprecedented crisis, is anticipated to result in a loss before tax H1 FY20. The Group will release its interim results of 2020 in August 2020.
