Trading,Banking,Strategy update and results timing
Trading Update and Banking Facilities and Update on 2019 Results
Half Year trading update
Further to the announcement on 30 June 2020, the Company expects to report a small underlying profit before tax (PBT), before exceptional costs, for the 6 months ended 30 June 2020.
Performance was particularly resilient in Q2, driven by continued growth in the World Services division and robust new business performance across sectors and geographies. New assignments include those from TikTok, BP, Bayer, and Tele2. Major government initiatives include the new launch of the better health campaign for Public Health England (UK), the Victoria State Government (Australia) in its fight against COVID-19, and the much talked about Iceland Tourism campaign.
Given the uncertain global economic environment over the last few months, these initial results are encouraging and more favourable than management's expectations. Although revenue declined in H1 2020 compared to H1 2019, the better than expected second quarter performance and the swift and decisive action taken in reducing costs has resulted in a relatively stable first half year performance, stronger than was anticipated at the start of the pandemic.
Our half year results will be announced in September as usual.
Cash position and banking facilities
The Group's balance sheet remains strong, and has improved further since the announcement on 30 June 2020, with total cash at £59m as of 23 July 2020, compared to £52m as of 23 June 2020. The Group has a committed £36m revolving credit facility (RCF) and a £5m overdraft facility with NatWest. The RCF is fully drawn and the overdraft remains undrawn, leaving net cash of £23m, compared to £16m on 23 June 2020.
In addition to its existing facilities, the Company has received approval for £7m in funding through the UK Government's Coronavirus Large Business Interruption Loan Scheme ("CLBILS"). Given the current cash balance and existing headroom, securing the additional funding is an entirely precautionary measure aimed at ensuring the Company has sufficient cash balances to continue to operate under any plausible trading scenario. The additional headroom from the CLBILS facility is not expected to be drawn in the current trading environment.
Finally, we have also agreed a relaxation of the Company's banking covenants with NatWest for the period from 31 December 2020 to the end of the term of the agreement on 30 June 2021. The table below illustrates the agreed covenant requirements
|
Covenant Test |
Current test ratio requirement |
Test ratio requirement from 31st December 2020 onwards |
|
Interest Cover (Ratio of PBIT to Borrowing Costs) |
5x or more |
4x or more |
|
Ratio of Debt to Earnings |
2.5x or less |
3.5x or less |
We are confident the company can comfortably satisfy its existing covenants for the next quarterly testing period, which falls on 30 September 2020, without needing any alteration. The Company has taken the prudent and precautionary measure of relaxing the covenants for further testing periods after that date, mitigating potential risks that could arise even under an extremely severe scenario.
Update on announcement of audited financial results for the year end 31 December 2019
As previously announced, we were granted a 3 month extension to the filing deadline for the audited financial results for the year ended 31 December 2019 from AIM Regulation such that we need to publish our results by the end of September 2020.
We had targeted the end of July to publish our results, but as a result of disruptions to working practices caused by the COVID-19 pandemic, the Group now expects to announce its full year results for the year ended 31 December 2019 before the end of August 2020.
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For further information please call:
M&C Saatchi +44 (0)20-7543-4500
David Kershaw, Mickey Kalifa
Tulchan Communications +44 (0)20-7353-4200
Tom Murray
Numis Securities +44 (0)20-7260-1000
Nick Westlake, Hugo Rubinstein, NOMAD
Charles Farquhar, Corporate Broking
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