By Powerscourt on 28/03/2020

Powerscourt Coronavirus Briefing – 28 March 2020

ANALYSIS

Although the US successfully passed the $2 trillion package designed to support the American economy on Friday, it wasn’t enough to prevent the Dow falling by over 900 points to close down 4%.

Overnight markets in Asia were more positive however – Korea’s KOSPI was up 1.9%, Japan’s Nikkei 225 rose 3.9% and Hong Kong’s Hang Seng was up 0.5%. 

In the UK, the FTSE100 closed down 5.3% at 5510 points, it’s lowest level since December 2011.

However, away from the markets, the biggest news of the day was undoubtedly Number 10’s disclosure that Prime Minister Boris Johnson has tested positive for COVID19 and is currently self-isolating. Matt Hancock, Health Secretary and Chris Whitty, Chief Medical Officer, have also tested positive. 

This news, combined with Prince Charles’ positive test result earlier in the week, serves to remind us all how the virus has the ability to infect absolutely anyone and may prompt UK businesses to review their business continuity plans in relation to “key man risk”. 

Arguably the most high profile case within the UK’s business community thus far is that of BT’s CEO Philip Jansen. This news was originally broken by Sky’s Mark Kleinman on the evening of 12 March before BT confirmed Mr Jansen’s positive test result via a stock exchange announcement the following day, stating that his symptoms were mild and that he would continue to lead BT, working remotely over the coming weeks. 

The wealth of remote working applications and the fact that the vast majority of business leaders will be working from home anyway means that companies should already be fully prepared for members of the senior leadership team to have to self-isolate or take time out of the business to recover. 

However, given that data published by the Chartered Governance Institute last year showed that the average age of a FTSE100 board director is 59 years with non-executive directors aged 60 years old, the potential for COVID19 to disproportionately impact UK board rooms is high. 

With business leaders playing such a fundamental role as the conduit through which a company communicates with investors, employees, the media and other stakeholders, handling news around positive COVID19 tests within the Boardroom will need to combine honesty and transparency with reassurance and pragmatism. 

WHAT ARE COMPANIES SAYING?

Consumer and Retail

Carluccio’s

The Italian casual dining chain has appointed advisers to investigate insolvency options following the forced closure of its restaurants because of the coronavirus pandemic. Its appointment of FRP Advisory to look at insolvency options comes a day after The Restaurant Group announced it would be putting its Chiquito and Food & Fuel brands into administration, affecting about 1,500 jobs. Carluccio’s, with more than 100 outlets and 2,000 employees, is expected to go into administration within days.

Royal Mail

Royal Mail has warned that it could be forced to reduce services if more staff become sick or have to self-isolate. Shares in the postal group, which are widely held by its employees and the public, tumbled yesterday after it warned about the impact of the COVID-19 crisis. It said that its British letters and parcels business would be “materially loss-making” in the 2020-21 financial year, beginning on April 1.

The Ritz

Aidan Barclay, son of Sir David Barclay, has struck a deal to sell The Ritz hotel, despite uncertainty caused by the coronavirus outbreak and a bitter battle within the billionaire Barclay family. Sir Frederick Barclay warned this month he would take legal action against Aidan and other members of the family if the hotel on Piccadilly in central London was sold for less than £1 billion. The price of Aidan Barclay’s deal has not yet been disclosed however, it is expected to fetch between £700 million and £800 million. Some reports last night suggest that the buyers were Qatari investors.

Tui

Tui, the world’s largest tour operator, has received approval for a €1.8bn loan to help it survive an almost complete shutdown of its operations, including airlines, hotels and cruise ships. The loan is being provided by the German state-owned development bank KfW and will boost Tui’s existing €1.75bn credit facility, giving it more than €3bn in finance. However, this month the travel group announced it was cutting staff hours and wages as well as freezing recruitment and payments to hoteliers to cope with loss of revenues.

Industrials

Ashstead

Amid mounting fears for the future of the American economy, Ashstead’s stock dropped 173p, or 9.3%, to £16.83 yesterday, making them among the heaviest fallers in the FTSE100. Following its acquisition of Sunbelt Rentals in the US three decades ago, Ashstead now generates 85% of its revenues in the American market, meaning Thursday’s US jobless data painted a bleak picture for the group. However, Ashstead’s sharp fall was eclipsed by that of Carnival which lost 20.5%, or 253.5p, to end on 981.5p.

John Menzies

The aviation services company has reduced its workforce by 17,500 worldwide and is trying to obtain emergency government funding in order to deal with the impact of COVID-19. They said that customers had been grounding flights on an “unprecedented scale” and that the company could no longer give financial guidance for this year. John Menzies’ shares, which are at lows not seen since 2009, fell by a further 9.25p, or 10.9%, to 74.75p yesterday.

 OneWeb

British satellite maker One Web is expected to collapse after funding from backers SoftBank fell through, putting 500 jobs at risk. The satellite start-up backed by Sir Richard Branson was at one stage valued at $3.25bn and had raised billions of pounds from investors. However, once the coronavirus panic hit financial markets and sent shares tumbling, the talks to raise $2bn in new funding and launch a constellation of more than 600 satellites collapsed.

Rolls-Royce

Rolls-Royce is suspending production for a week at its UK civil aero-engine factories, following similar measures taken by aerospace companies from Airbus to Safran, as the industry struggles with the constraints imposed by the spreading coronavirus pandemic. The UK engine maker said production would be “modified” when the factories reopen in a week’s time, adding weight to growing market speculation that the sector is steeling itself for significant production cuts, even after the pandemic is brought under control.

Virgin Atlantic

The UK-based airline, Virgin Atlantic, is set to seek a bailout from the British government worth hundreds of millions of pounds in the coming days. As it battles the crisis hitting the aviation industry as a result of the coronavirus pandemic, Virgin Atlantic is looking for a package of commercial loans and guarantees alongside other carriers such as easyJet, Loganair, Eastern Airways and Norwegian Air Shuttle. This comes after Richard Branson, the billionaire founder of the company, offered to inject $250m into his Virgin Group conglomerate, with the majority going to the airline.

Volkswagen

Volkswagen is still spending approximately €2 billion a week but is not selling any cars – except in China – because of the pandemic, chief executive Herbert Diess has said. The world’s biggest carmaker by sales added that it may have to cut jobs across its 124 factories and among its 671,000-strong global workforce, unless the outbreak is soon brought under control. In common with other carmakers, Volkswagen has halted production across 72 factories in Europe but are working on ways to allow them to resume manufacturing.

TMT

Citymapper

Journeys through London have ground to a near halt, dropping 90pc, according to data from UK start-up Citymapper. The public transport and journey-planning app last week launched a Citymapper Mobility Index, a data feed comparing how many journeys are being planned across cities against a normal day, as London’s nine million residents are asked to stay at home. For London, journeys this week were down 10pc of normal capacity. In other parts of the UK, Manchester was moving at around 12pc of normal capacity, while Birmingham was moving at 16pc.

Zoom Technologies

Amid the stock market of recent weeks, Zoom Technologies is one of the rare few companies enjoying a surge in its share price as it is sometimes being confused with the video conferencing app Zoom, that has become the most downloaded video call app in the world. In investors’ eagerness to get on board Zoom Video Communications’ rise to popularity, many have instead been buying shares in Zoom Technologies, a small company selling modems and other wireless communication products. The number of people buying into the “wrong” Zoom has led the US markets regulator to suspend trading in Zoom Technologies.

IN THE NEWS

Sunak adds extra £60bn public spending to fight coronavirus – Financial Times

Boris Johnson asked US for ventilators, Donald Trump claims – Daily Telegraph