City snapshot: Domino’s reports sales surge during coronavirus crisis

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Domino’s Pizza Group has reported a jump in UK sales in recent weeks as consumers order more takeaway deliveries during the coronavirus-driven social lockdown.

The group said that in its core UK & Ireland business, trading in January, February and the first two weeks of March was in line with expectations, with UK like for like sales growth at just over 3%, driven by order count.

However, over the past week, UK trading has accelerated, with the growth in delivery more than offsetting the lack of collection sales.

Domino’s said this like for like sales growth has been driven by growth in items per order and therefore higher overall ticket, arising from both the shift from collection to delivery as well as a change in consumer purchasing behaviour.

CEO David Wild said: “We’ve been working closely with the wider industry and Government, and are keen to do all we can to support our customers and communities by safely delivering hot food to help people stay at home during this difficult time. T

“he safety of our colleagues and customers is always our top priority, so we’ve strengthened our already high hygiene standards, rolled out contact free delivery and switched to delivery only to ensure we can confidently serve the public. We are also looking to recruit additional store colleagues and delivery drivers.

“Domino’s is at its heart a delivered food business, and we’re working around the clock to keep our supply chain operational, our back-office colleagues working from home, and our stores making great tasting pizzas for our customers.”

The group has moved to entirely contact free delivery and at the start of the week stopped in-store collection orders. Collection typically accounts for around 20% of sales.

It said it has seen minimal supply chain disruption to date and is recruiting additional delivery drivers.

However, in its discontinued Norway, Switzerland and Iceland businesses, it has seen significant disruption, with sales down double-digit year on year and around 16 temporary store closures across the three markets due to labour shortages and low demand. Its Swedish business is less affected at present.

As a result of the virus and the uncertain outlook, the company has decided to suspend its final dividend payment that was announced on 5 March and will delay its AGM.

Morning update

The addition of Welcome Break’s network of motorway services has boosted Applegreen’s (APGN) annual sales to over €3bn, with profits more than doubling.

Group revenue for the year to 31 December 2019 leapt 53% to €3.1bn.

Like for like growth in non-fuel (food and store) revenues were 4.9%, while LFL growth in fuel revenue was 10.8%.

Its store estate expanded rapidly during the period, adding up to 556 sites at the end of December 2019.

During the year 14 sites were added to the estate in the UK and Republic of Ireland, while 70 sites were added in the US, comprising of 46 sites in the US Mid-West in September 2019; the acquisition of a 40% minority stake in 23 Service Areas in Connecticut in October and a further three new openings in the North-East.

After some Brexit related softness in Q1 2019 in Welcome Break, we have seen good progress through the year driven by its catering power brands. This momentum continued into the first two months of 2020.

However, Applegreen said that given the ongoing uncertainty in light of COVID-19, it expects a material reduction to our expectations of profitability for the current financial year.

Group adjusted EBITDA jumped 141% year-on-year to €140.4m.

Adjusted EBITDA excluding the Welcome Break acquired assets was €57.7m, representing 21% growth.

Applegreen updated the market on the wider effects of the coronavirus outbreak this week, noting that it expects a “material reduction” in profitability for the current financial year.

“The scale of this will be dependent on how the situation develops and over what timeframe, together with the impact of any further measures taken by national governments to mitigate the disruption,” it stated.

CEO Bob Etchingham commented: “Our absolute focus at present is navigating the various issues associated with COVID-19 and to ensure we are looking after our people whilst continuing to deliver the essential service we provide to our customers.

“We are very pleased with our trading performance and the strategic development of the Group in 2019 where we successfully integrated a number of important acquisitions, expanded our footprint in the US and significantly reduced our reliance on fuel by continuing a shift in focus to convenience retail and food on the go.

“We are highly conscious of the considerable uncertainty created by the current COVID-19 crisis but are confident in the defensiveness of our business model and the strength of our balance sheet and liquidity. Therefore, we are positive about navigating the company through this crisis and building our business for the long term.”

European Coke bottler Coca-Cola HBC (CCH) has said its trading in March has been “severely affected” in territories with heavy restrictions on population movements, such as Italy and central and Southern Europe.

Out of Home sales typically represents 35-40% of sales in these markets.

Given this situation CCH is looking at cost-saving measures and reassessing marketing and capex investments, while it has withdrawn financial guidance for the current financial year.

However, the group said it still intends to pay its ordinary dividend to shareholders at its June AGM given its strong balance sheet, adequate liquidity and lack of problematic financial covenants of its debt facilities.

It said: “Our strong balance sheet and liquidity position, our leading market shares and largely variable cost base, together with our unique portfolio of brands and resilient and talented people will allow us to weather this unprecedented crisis.

“When we emerge, we will be able to focus on capturing the many opportunities that we have in front of us. In the meantime, we continue to monitor the COVID-19 pandemic and its impact on our business and will provide further updates as necessary.”

Speciality bakery group Finsbury Food Group (FIF) has announced a “significant reduction in demand” due to the closure of the UK’s food service industry.

It said that, following the strong results announced in February, trading in the first two months of the second half of its financial year was tracking in line with market expectations.

Since then, as the effects of COVID-19 on the UK and Europe have become more pronounced, and with the UK government taking the decision to close food outlets, schools and other public places where food is provided, our UK foodservice business, which accounted for approximately 20% of total group revenue, has seen a significant reduction in demand.

While the performance of the largest part of the group, retail, is proving resilient with overtrade in bread and pockets of weakness in CAKE, trading in its foodservice business is likely to continue to be significantly impacted in the immediate term as a consequence of the closures.

“We are in the very early stages of understanding the impact of the virus on our business and, with the situation being as fluid as it is, it is not currently possible to provide guidance on future earnings,” the company stated.

Considering the actual and anticipated change in demand across the business, the board is taking actions to manage short-term costs, including temporarily suspending production at its Kara site in Manchester, the freezing of all discretionary expenditure and capital investment and careful management of cash resources.

It has also decided to withdraw its proposed interim dividend announced in February given the “heightened uncertainty”.

“While the virus will continue to have an impact on normal trading patterns in the near term, the fundamentals of the business remain sound, and the board is confident in the group’s ability to withstand the current situation and deliver on its long-term growth ambitions,” it stated.

Total Produce (TOT) said it is continuing to “trade satisfactorily, considering the challenging economic environment”.

It said, despite the disruption and need to protect staff, the group’s supply chains are functioning adequately and have remained open across all of its key markets.

Although it has experienced a reduced level of demand from the foodservice sector, demand from retailers has remained robust as consumer buying patterns shift.

“The group continues to monitor the situation and is taking appropriate measures to adapt to the changing market and to ensure that supply chains remain open,” it said.

“Given the unprecedented nature of this outbreak, it is not yet possible to determine its full impact on the group’s results for the current financial year, however, the group expects satisfactory results in 2020, although earnings are now likely to be lower than in 2019.

“Given the diverse structure of the Group’s business in terms of customers, products and locations, the board believes that Total Produce is well positioned to respond to the current global challenges.”

Beer and cider supplier C&C Group (CCR) has tapped the market for an additional €140m of funding.

It has issued of the equivalent of approximately €140m in Euro and Sterling of new US private placement notes.

The unsecured notes have maturities of 10 and 12 years. The issue has achieved C&C’s aims of diversifying the sources of debt financing and extending their maturity out to 2032 on attractive terms. Covenants are aligned to those of the Group’s existing debt facility.

Group CFO Jonathan Solesbury commented: “We are very pleased to have successfully completed our first US Private Placement, particularly against the backdrop of the current market uncertainty. The issue extends the maturity of our debt as well as diversifying our capital structure. It gives the Company access to a broader range of funding options in the future.”

Lloyds Securities and NatWest Markets acted as joint placement agents on the placement, Rothschild & Co acted as financial advisor to C&C.

Supermarket Asda has announced that it is extending its support for colleagues who are impacted by Covid-19 and needing to self-isolate.

In addition to providing full pay to colleagues who have been identified by Government as needing to self-isolate for 12 weeks, the supermarket has also confirmed that it will be taking further steps to protect colleagues impacted by Covid-19 by offering fully paid leave to colleagues who are vulnerable – such as those over 70 or pregnant - as well as the carers of extremely vulnerable people.

Asda has confirmed that it will provide them with 12 weeks’ pay to allow them to self-isolate and protect their health and that of their family during Coronavirus.

Over the past week, Asda has announced a number of measures to help keep customers and colleagues safe through social distancing which includes clear signage, directional barriers and floor markings to help customers move around our store easily and maintain a 2-metre distance.

Hayley Tatum, Asda’s Chief People Officer commented: “Protecting our customers and colleagues has always been our main priority throughout these uncertain times and we want to do everything we can to help keep them and their families safe.

“We don’t want any of our colleagues worrying about being paid if they need to self-isolate as a result of Coronavirus which is why we’ve take the decision to pay them for the next 12-weeks.”

On the markets this morning, the FTSE 100 has given up yesterday’s gains to fall 4% back to 5,582.5pts.

Major fallers so far include Greencore (GNC), down 8% to 172.9p, Devro (DVO), down 6.9% to 141.2p, WH Smith (SMWH), down 6.8% to 1,092p and Marks & Spencer (MKS), down 5.9% to 102.1p.

The few risers include C&C Group, up 4.2% to 185.6p, Finsbury Food Group, up 1.6% to 64.5p and Nake Wines (WINE), up 1.4% to 253.5p.

Yesterday in the City

The FTSE 100 continued its green shoots of recovery yesterday, rising a further 2.2% to end trading back at 5,815.7pts.

Multiple food and drink suppliers benefited from the market recovery yesterday, led by Bakkavor, which jumped 43% back to 107.4p while fresh food supplier contemporary Greencore (GNC) rose 15.9% to 187.8p.

Other suppliers up yesterday included Hilton Food Group (HFG), up 10% to 1,034p, Cranswick (CWK), up 9.2% to 4,000p, Nichols (NICL), up 8.9% to 1,230p, Finsbury Food Group (FIF), up 8.6% to 63.5p and Premier Foods (PFD), up 7.6% to 25.4p.

FTSE 100 companies that strongly recovered yesterday included Compass Group (CPG), up 11% to 1,242p, Diageo (DGE), up 6.8% to 2,684p, British American Tobacco (BATS), up 6.1% to 2,733.5p and Tesco (TSCO), up 5.7% to 234.2p.

Yesterday’s fallers included Carr’s Group (CARR), down 9.7% to 103p, Applegreen (APGN), down 8.4% to 197p, FeverTree (FEVR), down 6.3% to 1,155p, McColl’s (MCLS), down 5.6% to 25.5p, Naked Wines (WINE), down 3.9% to 250p and B&M European Value Retail (BME), down 2.9% to 287.1p.