Powerscourt

By Powerscourt on 19/04/2020

Powerscourt Coronavirus Briefing – 19 April 2020

ANALYSIS

Weekend news coverage has focused on speculation around how a phased lifting of coronavirus restrictions might take place, with pressure mounting on governments to thaw the lockdown to prevent economic collapse.

The Sunday Times has reported that ministers in the UK are discussing the potential to start lifting the UK coronavirus lockdown as soon as May 11, with some schools starting to return, followed by a staggered lifting of restriction on some businesses where social distancing is relatively straightforward. The plan has yet to be greenlit by Prime Minister Boris Johnson, who is convalescing from coronavirus, but is said to have been drawn up in response to “apocalyptic” predictions about firms starting to run out of cash without some easing. Some other European countries, including Austria, Denmark and Spain, have begun to lift restrictions.

Frustrations were boiling in the US over coronavirus restrictions on Saturday, with protests in cities in Texas and Maryland calling on State administrations to reopen economies. The protests have been given encouragement by President Donald Trump via Twitter and in general commentary indicating the President is keen to restart America.

Despite signs that the virus is plateauing in New York, the worst-hit state in the US, scientific experts are continuing to call for caution in a broader reopening of the world’s largest economy.

This week sees the Q1 earnings season get underway in earnest in the US and Europe. In the US, around one fifth of S&P 500 companies are expected to announce results in the coming week.

Refinitiv, the global financial data provider, forecasts that stocks in the pan European STOXX 600 index will show a 22% drop in first quarter earnings across the season. With many companies ditching outlook statements and with financial forecasts regarded as at best notional, attention will be on companies’ cash position and the general mood music about the health of their markets.

Amid widespread economic gloom, one highlight is the relatively strong performance of technology companies, most of which are better adapted to the restrictions coronavirus has placed on work than more traditional firms.  The Sunday Times notes that funds holding only technology shares have fallen by just 2.7% this year, compared with a 20% fall in broader UK stocks, and many large tech firms have registered year-to-data share price gains.

 

 

WHAT ARE COMPANIES SAYING?

 

Consumer and Retail

ASDA

The UK’s third largest grocer has been squeezing fashion suppliers for discounts and cancelling orders despite enjoying record food sales. It has cancelled approximately a quarter of its orders for its own brand George. Separately, it told suppliers in Bangladesh it was only willing to pay 60% of completed orders. Factories also have the option to “defer the delivery of products”, but this pushes back payments. Asda told suppliers it would pay for some orders as a “gesture of goodwill during this unprecedented and difficult time”. A spokesman for the chain said: “Where there is product we are not able to sell at this time, we are offering to mutually cancel the order, and pay a proportion of costs within seven working days, as well as agreeing suppliers can resell items or donate them.”

Amazon

Reuters reports that Amazon has started to use thermal cameras at its warehouses to speed up screening for feverish workers who could be infected with the coronavirus. Notably, cases of the virus have been reported among staff at more than 50 of Amazon’s US warehouses.

Gucci

The Italian luxury brand plans to reopen prototype activities at one of its main Italian sites next week after reaching a deal with unions on health and safety measures for workers. Gucci said in a statement that a small group of workers will resume making prototypes for leather goods and shoe designs at its ArtLab site near Florence from April 20. A spokesman for the company said around 10% of the site’s 1,000-strong workforce will go back to work at this stage. Meanwhile, Gucci’s Chairman and Chief Executive Marco Bizzarri said in a statement: “This will allow us to lay the foundations for a wider reopening of our manufacturing sites and of the Made in Italy production chain once it will be permitted”.

 

Travel and Leisure 

EasyJet

The airline’s Chairman, John Barton, has accused founder Sir Stelios Haji-Ioannou of a “destructive” attack on the budget airline at the worst possible time. Haji-Ioannou has waged a long campaign against the airline’s order for 107 Airbus jets, signed in 2013 and costing an estimated £4.5bn. He has stepped up his fight by calling a vote to oust four directors, including John Barton as well as Chief Executive Johan Lundgren and Finance Director Andrew Findlay. Haji-Ioannou, who controls 34% of its shares, says the vote is a “proxy for cancelling the Airbus contract”.

Travelodge

Britain’s second-biggest hotel chain has drafted in restructuring experts as it haemorrhages cash amid the forced closure of most of its sites. Lenders that own the chain have hired Moelis and Deloitte to organise deals with its landlords, which have been asked to grant rent-free periods. Travelodge has closed all its hotels, except 48 kept open for key workers and vulnerable people. The company failed to pay its quarterly rent bills last month, telling landlords that its “comprehensive plan to stabilise the business” included asking them to suspend payments.

 

Financial Services & Real Estate

Virgin Money UK

Virgin Money UK has announced that it will cover the platform fee for its wholly-owned not for profit fundraising business, Virgin Money Giving (VMG), for the remainder of government lockdown. VMG will waive its platform fee on all donations and fundraising activity, including the ‘2.6 Challenge to save the UK’s charities’, from 18th April. This fee, set at 2%, covers the running costs of VMG to enable it to provide charities, fundraisers and donors with a safe and secure digital fundraising service without making any profits. David Duffy, CEO has stated that “with many charities seeing a large drop in their fundraising contributions during lockdown, we want to make it that little bit easier for all the generous donors, fundraisers and the charities they support…by covering VMG’s small platform fee for the rest of lockdown, we hope to help charities raise much needed funds to continue their valuable work during the worst of this pandemic”.

 

CVC Capital Partners

A proposed £300m deal by CVC Capital Partners to invest in the Six Nations, Europe’s leading rugby union tournament, has been delayed as the sport reels from a financial crisis resulting from the pandemic. The Luxembourg-based buyout group has plans to become the biggest commercial player in one of the world’s favourite sports, lining up a series of investments to reshape the global game. However, its proposed deal which would amount to approximately a 14% stake in the Six Nations has been held up. 

 

IN THE NEWS

Ministers plan for schools to reopen in three weeks – The Sunday Times

English councils handed £1.6bn to fight coronavirus – Financial Times

Boris Johnson starts to take back control – The Telegraph

 




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