John Menzies lays off 17,500 staff
Aviation services giant John Menzies says it has cut more than half its staff, due to the coronavirus crisis.
Older readers (or indeed bloggers!) may associate the Menzies name with newspaper distribution. But these days, the firm is actually focused on airports — handling cargo on the ground, managing luggage at several UK airports, and even operating plane fuelling services.
It had employed over 30,000 people, but revealed today that it has reduced global headcount by over 17,500 worldwide in response to the “dramatic fall” in business.
Menzies warns:
In the period since 10 March 2020, we have seen our international and domestic airline customers ground passenger flights on an unprecedented scale.
That includes a 60% drop in passenger flights, and a 20% deduction in cargo flights.
It explains:
As part of our cost reduction initiatives, we have reduced global headcount by over 17,500 in response to the dramatic fall in volume. Reductions are being supported in some countries by governmental schemes and we hope that in the fullness of time a high number of these employees can return to the business.
Menzies board are also taking a 20% pay cut.
Curiously, Menzies doesn’t seem to qualify for some of the rescue measures launched by the UK government. It says:
We are engaged with the UK Government as we attempt to secure some of the emergency funding announced by the Chancellor of the Exchequer and await the refinement of the eligibility criteria for the COVID Corporate Financing Facility (CCFF) which we currently do not currently qualify for.
CCFF is designed to help UK companies, by buying their short-term debt, as long as it is investment-grade. Unfortunately for Menzies, they’re too small to have a credit rating — but also too big to qualify for measures aimed at small firms….
Outsourcing group Capita has just withdrawn its financial guidance for the year, due to the “unpredictable level of disruption caused by COVID-19”.
While Capita’s essential workers in the public sector are busy, the rest of its business has been hit by self-isolation rules. That includes work training programmes, back office functions, contact centres for retail and leisure clients, consulting and its corporate travel agency.
The firm is now engaged in some “prudent” cost savings, including pay cuts for top bosses:
- Central overhead costs will be reduced to the bare minimum whilst ensuring operational oversight and regulatory compliance are maintained.
- Discretionary expenditure has been materially reduced, specifically in areas such as travel, marketing, non-essential training and recruitment.
- We have temporarily closed a number of our offices around the UK which are not required for the provision of essential services and are planning to move rent payments to a monthly in advance basis (from quarterly).
- We have reduced the number of contractors we use by reallocating and prioritising internal resources.
- Significant temporary reductions of salary by senior management and the Board
Capita says it’s also working with the government to develop coronavirus testing sites.
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The slump in housing activity has forced online estate agent Rightmove to cancel its 2019 dividend, and to suspend all financial guidance for 2020. More here
European stock markets are all in the red today, after their best three day rally ever.
The Stoxx 600 index has dropped around 2.4%, having surged by 15% between Tuesday morning and Thursday evening.
In London, the FTSE 100 has fallen further, down 223 points or almost 4% (but it’s still up over 7% this week).
With coronavirus cases and deaths still rising — with the US overtaking China for infections – investors may be fretting about what the next few days will bring.
They may also have noticed that four of the last Mondays have seen heavy selling – so it may make sense to hunker down today.
Craig Erlam, Senior Market Analyst, OANDA Europe says:
Rallies don’t last forever and clearly investors are happy to call time on this one as we head into another uncertain weekend.
The last three Monday’s have all been relatively heavy down days, producing an average decline of 5.16% in the FTSE 100. We may have had a good run this week but the weekend can feel like a long time at moments like this and the numbers were getting from the US, which now has more cases than China or Italy, are getting uglier by the day.
It therefore strikes me as quite sensible to take some profit off the table and see how the weekend goes. I fear a few more shocks lie ahead as we get closer to peak coronavirus in countries like the US, UK and more.
Domino’s Pizza has also suspended its dividend today, despite seeing a pick-up in demand from people ordering home deliveries.
In the last week, UK trading has accelerated, with the growth in delivery more than offsetting the lack of collection sales, it told the City.
CEO David Wild says Domino’s is being cautious, having closed its stores to help with coronavirus isolation measures.
The 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.
Here’s our news story on Mike Ashley’s apology for mishandling the Covid-19 crisis, and his efforts to make amends….
Speaking of dividends… betting firm Flutter has suspended its 2020 payment to shareholders this morning.
The company, which owns Paddy Power and Betfair, blamed the cancellation of sports events around the globe.
Royal Mail has warned that it could be forced to reduce postal services, due to the impact of the coronavirus.
It told shareholders this morning:
In recent weeks, we have seen rising levels of sick absence as colleagues self-isolate or care for family members. W e cannot rule out reductions to services as COVID-19 develops.
Royal Mail also warned that its UK parcels, international and letters (UKPIL) business will be materially loss making in the 2020-21 financial year, while profits at its European parcels division GLS will be “significantly reduced”.
So, it’s joining the army of companies cancelling this year’s dividend payment.
Mike Ashley apologises over coronavirus mistakes
Apology of the morning goes to Mike Ashley, for admitting that his Sports Direct chain (now called Frasers) made some serious blunders this week.
In a large helping of humble pie, Ashley has written an open letter, admitting that he should never have tried to keep Sports Direct shops open – or pestered ministers to be treated as an essential service.
He writes;
In hindsight, our emails to the Government were ill-judged and poorly timed, when they clearly had much greater pressures than ours to deal with. On top of this, our communications to our employees and the public on this was poor.
Sports Direct’s (initial) refusal to comply with the government’s call for non-essential shops to shut caused an outcry on social media.
Ashley is now trying to make amends, saying he is putting Sports Direct’s transport operations at the National Health Service’s disposal:
Outside of Frasers Group, I have offered our support to the NHS and we are poised and ready for when that offer is accepted, with our entire fleet of lorries at their disposal – to help deliver medical equipment and supplies. This offer is not limited to the NHS but all key workforces across the Government. We will help wherever possible.
Finally, to reiterate, I am deeply apologetic about the misunderstandings of the last few days. We will learn from this and will try not to make the same mistakes in the future.
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UK retailer Next is also among the top fallers in London, down 7.9%, after it halted online shopping last night.
Next told the City that it had responded to employees, who told it they weren’t happy about being dragged to work rather than isolating.
NEXT has listened very carefully to its colleagues working in Warehousing and Distribution Operations to fulfil Online orders. It is clear that many increasingly feel they should be at home in the current climate.
We flagged up earlier this week that Next had been offering a 20% bonus to staff who would come into stores and fulfil online orders, despite Very Clear Instructions from the government to Stay At Home unless your job is Essential.
Some retailers took longer to grasp this than others.
Retail analyst Nick Bubb says:
Well, the shock news that Next has had to temporarily close down its Online business because of warehouse staffing problems is a big blow to the company and may cause a domino effect on other Online fashion operators, including ASOS and Boohoo…
Shares in UK housebuilders are among the top fallers, with Berkeley Group down 8% and Barratt Development losing 8.5%.
Last night, the government effectively put the UK housing market into deep freeze, telling buyers to delay their home moves if possible, and instructing sellers not to allow new viewings.
The new guidance is “adapt and be flexible” while the Covid-19 pandemic plays out. Ministers don’t actually want people to cancel moves, but clearly the market is going to be slow for a while….
….especially as some lenders are pulling mortgage offers:
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European markets fall
The slump in Chinese factory profits may have reminded investors that the world economy isn’t in great shape.
For whatever reason, stocks have fallen sharply at the start of trading in Europe.
Every stock on the FTSE is down, pulling the index lower by 181 points or 3% to 5633.
It’s still been a very good few days for stocks, given the FTSE 100 closed below 5,000 points on Monday.
UK car production to hit lowest level since financial crisis
Britain’s car industry is also being hit hard by the coronavirus, with output likely to tumble this year.
My colleague Jasper Jolly explains:
British car production will slump to its lowest level since the financial crisis this year, the industry has warned, after the coronavirus pandemic forced the closure of every large factory in the UK.
Passenger car output will fall by 18% to only 1.1m in 2020, down from 1.3m last year, according to forecasts for the Society of Motor Manufacturers and Traders (SMMT) carried out by AutoAnalysis. It would be the lowest number since the depths of the financial crisis in 2009, when 999,460 cars were made in the UK.
Introduction: Record slump in Chinese factory profits
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The economic costs of Covid-19 are rising, fast, as the outbreak drives the global economy into recession.
Overnight, China has reported a huge tumble in factory profits for the first two months of this year — down 38.3% year-on-year to 410.7 billion yuan (roughly £47bn).
That’s the steepest slump since the National Bureau of Statistics started publishing the data in 2020
January and February are usually interrupted by the week-long Lunar New Year. But the coronavirus crisis has created much more disruption, with factories unable to reopen on schedule due to mass quarantine rules and transport disruption.
Car makers, electrical equipment and electronics manufacturers, and chemical companies all reported particularly hefty drops in earnings – a sign of which parts of the economy have suffered.
Such a huge slump in profits shows that China’s economy has take a serious hit, with growth certain to slow very sharply this year.
As Reuters puts it:
The decline in profits points to lingering trouble for the manufacturing sector, which is wrestling with fallout from the health crisis that has severely hurt output. Most analysts now expect a contraction in gross domestic product in the first quarter.
Industrial production and sales fell sharply amid epidemic control efforts, while the costs of labor and depreciation continued to put pressure on companies, a statistics bureau official said in a statement published alongside the data.
The data comes a day after America posted its biggest jump in weekly jobless claims ever — with over three million US citizens filing for unemployment benefit.
Later today we discover how badly US confidence has been hit by the crisis – despite Donald Trump’s efforts to play it down, and insists America will be back to work soon.
After several very strong days, European stock markets are expected to dip today as investors ponder the damage being caused to the world economy.
The agenda
- 2pm GMT: University of Michigan’s survey of US consumer sentiment: expected to fall to 90, from 95.9
- 5pm GMT: Baker Hughes count of US oil rigs
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