By Powerscourt on 07/04/2020

Powerscourt Coronavirus Briefing – 07 April 2020


The global market rally continues, driven by optimism that we are at the end of the beginning of the COVID-19 pandemic (i.e. close to the peak). Overnight, stock markets in Asia built on yesterday’s momentum in European and US markets – main US indices rose 7%. The optimism seems based on hope that restrictions would soon be eased in some European countries, starting with Austria. The Topix was up 2.5%, the CSI 300 1.8%, the Hang Seng 1.1% and the Kospi 1%. The S&P 500 had its best day in a fortnight while European markets made more modest gains.

The UK, however, had sobering news. Prime Minister Boris Johnson, hospitalised with COVID-19 on Sunday, was transferred to intensive care on Monday evening. This ominous news prompted a rare wave of unity from the British polity. World leaders also sent messages of sympathy.

Johnson asked foreign secretary Dominic Raab to deputise ‘where necessary’ as the country approaches the likely peak in cases. Hours earlier, Raab updated on expanding NHS capacity, the government’s testing programme and the role the Foreign and Commonwealth Office had played in repatriating British citizens abroad, stressing that ‘every arm of government’ – prominently including the one that he leads – is doing everything it possibly can to defeat coronavirus. The daily reported death toll fell for the second day in a row, possibly affected by lower reporting at weekends.

Raab’s role will include chairing meetings of COBRA, the UK national crisis committee, and of cabinet. Lord Kerslake, a former senior civil servant, has explained that while there is nothing under the UK’s unwritten constitution to prevent Raab taking the reins, over time his authority as an unelected leader might diminish. If Johnson is unavailable for a long period, a new leader might need to be chosen by the party.

On the markets, with AGM season fast approaching, companies including Reach and Aggreko have clarified details of their AGMs. They have banned shareholders from attendance in person on the basis of government stay at home measures. Both companies have withdrawn dividends, but only Aggreko provides details of a mechanism for shareholders to ask questions.





Consumer and Retail

WH Smith

In an update on trading, the stationer announced total group revenue for the week of trading to 4 April was down approximately 85% year on year. For March revenue was down 25%. The company is working on the basis of a “pessimistic scenario” which assumes 95% of stores remain closed with gradual re-openings. On this basis, revenue from April until the end of August could be down between 80 and 85%. The company estimates it will be able to reduce group cash operating costs by around 60% in the second half of the financial year. In addition to reducing costs, the group has secured a package of new bank financing arrangements, which includes a waiver on existing bank covenants.


The automotive distributor and retailer said that its markets have been “impacted” by closures and reduced activity. It described the situations as “clearly very dynamic”, noting that Singapore was moving to lockdown today. The company has taken “swift action to reduce discretionary costs and capex” including the Board and senior management taking a 20% reduction in fees/salary, and cancelling the final dividend. It said it is “exploring other debt options” including the government’s CCFF scheme.


The home emergency repairs and improvements business has decided not to furlough or make redundant any staff “in order to do the right thing for Homeserve’s teams and maintain maximum flexibility in the way the business is run”. The company’s c.6000 office-based staff are working from home, in what it described as a “monumental effort by operations staff”. The company continues to respond to emergency repair requests, with social distancing procedures in place.


Brewer and retailer Adnams said it has reduced costs “to a minimum”. The company has cancelled its final 2019 dividend and is discussing new facilities with its banker. The “large majority” of employees have been placed on furlough –  “Our culture has meant that our staff have responded positively to these decisions and they look forward to returning to work with us once the crisis has passed”.


Travel & Leisure


Airbnb announced in a statement yesterday that it has raised $1bn in debt and equity from private equity firms Sliver Lake and Sixth Street Partners. While not providing financial details beyond the commitment of new capital, CEO Brian Chesky said “We’ll see a new flexibility in how people live and work, which means they won’t have to be tethered to one location.”

Cineworld Group

The world’s largest cinema chain updated on a situation “impossible to imagine a few months ago”, highlighting that the entire estate of 787 cinemas in 10 countries has been closed. The update said “every effort is being made to mitigate the effect of the closures”, including landlord discussions and expenditure curtailment. The company has suspended payment of its dividend and its executive directors are deferring payment of their full salaries and bonuses.




The airline has become one of the first large companies to take a loan through the Covid Corporate Financing Facility. In a statement yesterday, the company announced the successful issuance of £600m of commercial paper as well as the issuance of a utilisation request to fully draw down its $500m RCF. This leaves the airline with expected cash of c.£2.3bn. CEO Johan Lundgren said the moves reflect the current priority to “safeguard short term liquidity”.


Financials & Real Estate 


In his annual letter to shareholders yesterday, CEO Jamie Dimon said that after delivering a series of record results, “it should be expected that our earnings will be down meaningfully in 2020”. The letter also considered an “extremely adverse scenario” in which the bank could suspend its dividend for the first time ever. Dimon promised to provide a “more complete and current view” on the impact of the crisis on the bank’s strategies “when the time is right and the future is clearer”.


Online trading firm Plus500 announced first quarter revenue up 487% on last year, with more than 80,000 new customers. The company said its revenue increase was “a result of significantly increased volatility across global financial markets”. It highlighted that there had been no operation impact from the pandemic, given operations are entirely online.

Grant Thornton

Having delayed results a week to properly assess the impact of the virus, the accounting firm noted an expected drop in fees. In anticipation of this, about 150 employees had agreed to take a 40% reduction in pay and hours for two months and partners had agreed to cut monthly profit share when needed.


The healthcare REIT yesterday announced a proposed equity placing to fund its development and acquisition pipeline. The company said it had a substantial pipeline “prior to the first reported case of COVID-29 in the United Kingdom” and the placing is to allow for the delivery of medical centres while “maintaining the strong balance sheet that enables the company to be a long-term partner to the NHS”. CEO Jonathan Murphy said “Assura has been doing all we can to support the health service and our GP partners where possible, such as assisting occupiers to optimise the use of space in their buildings and offering any vacant space to the NHS.”

Vistry Group

The housebuilder announced that its partnerships business has exchanged contracts with Homes England for 570 homes across the country with a gross development value of £105m. Group CEO Greg Fitzgerald said “Despite the current Covid-19 restrictions, the demand for affordable, quality homes remains high and we are very well placed to get these under way at pace.”

GCP Student Living

The student accommodation REIT announced that its forward purchase agreement to acquire a London asset had failed to meet the conditions of the FPA. In its announcement the company said it is assessing whether, “in light of the disruption caused by the Covid-19 pandemic”, the acquisition would be consistent with conservative borrowing levels.

Workspace Group

The flexible office space provider said it has received approximately 50% of rents due at end March to date and that customer discussions on rent deferrals continue on a case by case basis. CEO Graham Clemett believes the company will be well-positioned for the eventual market recovery: “Our model of freehold ownership of our properties gives us the flexibility and control to respond quickly to developments in the current uncertain environment.”



Financial Conduct Authority

The FCA announced its business priorities for the year ahead via RNS this morning, focussing on the challenges of coronavirus. The regulator says it will protect the most vulnerable, tackle scams the pandemic gives rise to, ensure fair treatment for consumers, keep markets working well and mitigate firm failures. Interim CEO Chris Woolard said “In a matter of weeks, coronavirus has altered the UK’s financial landscape dramatically. At times like this it is more important than ever that the FCA leads the way on the protection of consumers, firms and the markets.”




The company said its profit for the first quarter would likely come in ahead of estimates, though still near its lowest level in years, at $5.2bn. Revenues likely rose 5% year on year, although media report that a bigger hit is expected from the virus in the current quarter.



Boris Johnson spends night in intensive care after symptoms worsen – BBC News

Shares rally as spread of virus slows – The Times