TRADE CREDIT Food & Beverage Update Q4 2020
1093-0321 FOOD & BEVERAGE UPDATE | Q4 2020
CONTENTS
PAGE 2 | Introduction AUTHOR
PAGE 2 | Winners & Losers Victoria Bond PAGE 3 | Conclusion Risk Underwriter +44 (0)203 011 5611 PAGE 3 | Trade Credit Reinsurance Scheme Email
INTRODUCTION Overview of 2020
The UK food and drink sector had a very difficult yet divided year in 2020; whilst the supermarkets experienced sales growth they could only dream of, the hospitality and foodservice sectors have faced tough and challenging times.
I have spoken with several food and drink companies as the country has moved in and out of various localised and national restrictions, and whilst no two companies are the same, we’re beginning to understand the true financial impact the pandemic has had in the sector, with the majority of businesses experiencing reduced sales, impacting profitability and cash generation, often resulting in losses and operating cash outflows.
Promisingly, however, the sector appears to have bounced back quickly after the national lockdown was lifted in July, though many companies will find themselves facing higher debts, and their ability to service this debt, meet or reset banking covenants and most importantly a company’s liquidity headroom will prove critical to their survival.
Coronavirus and Brexit dominated the news in 2020, whilst business rates became a hot topic of Q4 with the multiples in particular coming under increased pressure to repay these rates. Tesco were the first to voluntarily repay business rates relief they received during the pandemic, with their peers quick to follow suit, cumulatively repaying the governemnt over £2bn.
As Brexit negotiations continued into December, few could forget the images of thousands of lorries queuing throughout Kent as France closed their border with the UK. This, combined with delays at container ports resulted in soaring transport costs, delays and shortages, and whilst a deal was finally reached just in time for Christmas, importers and exporters must now navigate the additional customs requirements.
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FOOD & BEVERAGE UPDATE | Q4 2020
WINNERS & LOSERS A divided performance
The biggest winner from 2020 was the UK grocery market, which grew a massive 8%, whilst pubs and restaurants are understood to have lost £200m a day in 2020 due to coronavirus restrictions across the hospitatlity sector and various localised and nationalalised lockdowns.
UK listed food and drink companies that benefited the most during 2020 were those providing basic goods/services, whether through the supermarkets or via a direct online offering. The companies with the greatest share price gains included; Naked Wines; Premier Foods; Ocado Group; Pets at Home Group; and Stock Spirits Group.
At the other end of the spectrum were companies typically operating in or supplying into the hospitality and foodservice sectors. The UK listed food and drink companies which experienced the greatest share price loss included; Greencore; SSP Group; Marston’s; C&C Group; and Bakkavor Group.
CONCLUSION Moving into 2021
As we move further into 2021 there are multiple challenges facing the food and drink sector. Brexit has caused additional costs and regulations for many businesses, and as the various Government support measures unwind companies could find themselves facing a reduced migrant workforce, higher raw material prices and/or reduced demand/consumption, all of which will place further strain businesses. As a result, company insolvencies are expected to increase significantly next year.
As an underwriter we must also continue to work closely with our clients, taking into account our clients experience with their customer, as much as the sector and region they operate in, and there will be a greater reliance on obtaining later financial information going forwards. An uncertain and challenging year lies ahead for all in the UK food and drink sector.
TRADE CREDIT REINSURANCE SCHEME Extension to 30 June 2021 Throughout 2020 the UK Government put in place various economic policies to try to protect jobs, businesses, and the economy, including the Trade Credit Reinsurance Scheme, which was due to initially end at the end of 2020, but has been currently extended until the end of June 2021. This has provided a platform to enable us to continue to support our clients and their customers impacted by Covid.
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FOOD & BEVERAGE UPDATE | Q4 2020
For more information, please contact the Trade Credit team: 52-56 Leadenhall Street, London EC3A 2EB +44 (0)203 011 5700 [email protected] www.nexusunderwriting.com
Nexus Trade Credit is a trading name of Nexus CIFS Limited and Equinox Global Limited. Nexus CIFS Limited is an Appointed Representative of Nexus Underwriting Limited. Equinox Global Limited and Nexus Underwriting Limited are both authorised and regulated by the Financial Conduct Authority (FCA). Nexus CIFS Limited is registered in England and Wales number 08125609, Equinox Global Limited is registered in England and Wales number 07067241. Registered Office: 52-54 Leadenhall Street, London EC3A 2EB. Both are part of the Nexus Group.
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