Navigating for Recovery & Reset Regional Director, Commercial - - PowerPoint PPT Presentation

Your Business – Navigating for Recovery & Reset

Ask the experts

Victoria Kerton

Regional Director, Commercial Banking, NatWest

Growth outlook in the red for 2020. Recent surge in new cases might further dampen economic mood. Market bakes in negative interest rates.

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Source: Bloomberg, ONS, DMP

• 15%
• 10%
• 5%

0%

2020 UK GDP Forecast (% Y/Y Change)

• 0.20%
• 0.10%

0.00% 0.10% 0.20% 0.30% Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23 Aug-23 Nov-23 Feb-24 May-24 Aug-24 Nov-24 Feb-25 May-25 Aug-25 Nov-25

UK O/N Rate

18-Sep 11-Sep 28-Aug 14-Aug

0% 20% 40% 60% 80% 100% Information And Communication Administrative And Support Service… Arts Entertainment And Recreation Professional Scientific And Technical… Education Accommodation And Food Service… Transportation And Storage Construction Manufacturing Wholesale And Retail Trade Real Estate Activities Water Supply Sewerage Waste… Human Health And Social Work Activities All Industries

Trading status (24th Aug – 6th Sep)

Currently trading Temporarily closed or paused trading Permanently ceased trading

• 60
• 40
• 20

Manufacturing Construction Wholesale & Retail Transport & Storage Accom & Food Info & Comms Finance & Insurance Real Estate Prof & Scientific Admin & Support Health

Expected percentage impact of Covid

(2020Q4)

Investment Employment Sales

Growth outlook in the red for 2020. Recent surge in new cases might further dampen economic mood. Market bakes in negative interest rates.

Update

Recovery Gauge

Momentum waning

• GDP growth in July was strong. Further progress in August. But only c. ½ of output has been recovered
• The hard yards of the recovery are approaching with momentum expected to fade in Q4
• Sectoral disparities striking. Finance & Insurance almost fully recovered, mini housing boom. But there is

pronounced weakness in consumer-facing sectors.

Update

Recovery Gauge

Behaviour normalisation delayed Car use plateau, pub trans

• v. low

Cuts to gather pace Retail recovered. services not Long road ahead Robust rebound Mini boom, for now Weaker than H1 US, EZ momentum waning Growth

• July GDP up 6.6%m/m. High-freq

data shows further progress in Aug.

• Momentum expected to wane in Q4.

Epidemiology/ Policy

• Cases rising sharply, 2nd wave now

c.1/2 of 1st wave.

• Surveys indicate significant

behavioural change

• Govt back-up plan to vaccine

Mobility

• Car use close to typical
• Pub. transport at 30-40% of pre-CV
• UK lagging France and Germany

Labour Market

• Surveys indicate cuts to come
• Google search “redundancy”

elevated

• Negligible recovery in job postings

Consumer Spending

• Retail back to pre-CV level
• Masks shift away from services
• Footfall recovery has plateaued

(c.70% of normal in both shopping centres and High Street)

Hospitality, Hotels, Aviation

• Rest. reservations cooling since

Aug, but above pre-EOHO

• UK flights -65% below avg - lagging

Eur & US. Hotel occupancy and room rate saw marked Aug rise

Lending

• Unsecured recovering – some

consumer appetite coming back

• Corporate borrowing has eased

significantly since March

Housing Market

• RICS points to strong near-term

approvals and house price growth (even with little pass on of % cuts)

• House sale supply limited
• 1/5 mort holidays on to another

Rates, Inflation

• 5Y swaps avg 0.3% to ‘25

(0.4% in H1),

• Little sign of near-term

inflationary pressure

Global

• Sharp US Q4 slowdown if no new

stimulus (income replacement)

• EZ rebound to summer now slowing
• China – recovery progressing. Only

major economy to see growth in ‘20

Economic outlook summary

Approved UK facilities

Government backed lending schemes have supported the UK economy through 2020 – but this will need to transition to “commercial terms” in 2021

Source: British Business Bank 20th September 2020

Key themes & features

• With the exception of the Future Fund, the government backed loan schemes utilise debt capacity. Their intention is to support liquidity and

working capital during extraordinary interruption: schemes are now aligned in the closing dates of 30th November, 2020

• The utilisation of these schemes is in many cases alongside utilisation of wider programs of support – JRS, TTP arrangements, Business

rate relief, reduced VAT for hospitality, VAT deferrals, grant schemes and Innovate grants and loans which will also have cashflow impact as businesses transition to commercial terms through 2021

• We are now seeing businesses plan for their road to recovery, and in almost all cases there needs to be more strategic thinking across:
• Position in market, end markets and supply chains
• Structural shifts to the marketplace and the economy
• Available debt capacity, liquidity, cashflow and access to capital
• The importance of sustainable business planning – and data
• The relevance of relationships, ecosystems, megatrends and connectivity

Cumulative number of approved facilities Cumulative value of approved facilities Cumulative number of applications Bounce Back Loan Scheme 1,260,940 £38 billion 1,552,727 Coronavirus Business Interruption Loans Scheme 66,585 £15.5 billion 142,076 Coronavirus Large Business Interruption Loans Scheme 566 £3.8 billion 992 Future Fund 711 £720m 1,073

NatWest Commercial Banking – supporting the UK economy beyond lending

The investment ready business

Jonathan Grant, Partner & Head of Corporate

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The Investment Landscape

• 2019 - Last half - deal activity slowed
• Brexit and election
• Post election momentum
• Increase in deals developed by clients
• 2020 – big push for active deals to close before the March budget
• Entrepreneurs relief reduction
• LOCKDOWN end March
• May 2020 to September re-emergence

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Key Issues for Investment & Acquisition

Stable business Growth: Revenue & Profits Sustainable customer base Strong/ viable management Ownership

• f all key

rights Synergy

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What has happened post COVID-19?

• Growth Continued or business plan re-cast?
• Type of deals that have survived
• Professional services
• Logistics
• IT, SAS, Comms
• Stable businesses with credible long term plans
• Both the sector and investor are important
• Overseas interest has continued (well funded companies looking for new

markets/ideas)

• PE and investor interest remains strong
• Synergy increases value
• Existing relationships help to hold interest and trust

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Delivering Successful Deals

• Preparation, commitment and adaptability
• Being clear about what you really need
• Trusted advisory team
• Early preparation & due diligence
• Post Covid-19 successful deals:
• Diligence is key
• Stable business/sector
• Established management teams with good succession planning

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Victoria Kerton Regional Director, Commercial Banking, NatWest Jonathan Compton Partner, Dispute Resolution, DMH Stallard 01483 467433 Jonathan.Compton@dmhstallard.com Robert Ganpatsingh Partner, Partner, Dispute Resolution TMT, DMH Stallard 01293 605000 Robert.Ganpatsingh@dmhstallard.com Simon Bellm Partner, Employment, DMH Stallard 01293 558511 Simon.Bellm@dmhstallard.com Jonathan Grant Partner, Corporate, DMH Stallard 01293 558506 Jonathan.Grant@dmhstallard.com

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