Powerscourt

By Powerscourt on 25/04/2020

Powerscourt Coronavirus Briefing – 25 April 2020

ANALYSIS

The Dow Jones Industrial Average rallied on Friday afternoon after US President Donald Trump signed the fourth government stimulus bill since the pandemic began. This despite the prospect of a potentially volatile week ahead, with a glut of earnings, a Federal Reserve Meeting and Q1 economic data due.

Still in the US, companies and authorities rushed to make clear that people should not use cleaning products containing bleach as a treatment. This came after President Trump made what he later described as sarcastic comments on the subject at a White House Briefing. His support for malaria drug hydroxychloroquine was also cast into doubt by the US Food and Drug Administration, which warned doctors not to prescribe it due to reports of sometimes fatal side effects.

The UK government’s bid to hit its own testing target suffered a setback yesterday. After announcing the expansion of testing for key workers, supplies of home test kits ran out within two minutes. The Department for Health and Social Care had to apologise after its test booking website became overloaded and stopped accepting applications.

In France, Finance Minister Bruno Le Maire announced a €7bn loan package for Air France-KLM last night. He also confirmed that a deal for Renault worth around €5bn would soon follow. Dutch Finance Minister Wopke Hoegstra confirmed that the government of the Netherlands would make €2-4bn available to Air France-KLM.

 

WHAT ARE COMPANIES SAYING?

 

Consumer and Retail

JD Sports

Yesterday sports-fashion retailer JD Sports announced three measures to help preserve capital during the crisis. First, it is cancelling its final dividend and “maintaining flexibility” around its commitment to resume payments in the future. Second, the board and senior management team have agreed salary reductions of at least 25% with chairman Peter Cowgill volunteering a 75% salary reduction. Finally, it is deferring the payment of bonuses and other contractual incentive payments.

Co-operative Group

The grocer said yesterday that the crisis will cost it approximately £200m and that this will not be fully offset by increased food sales and government help. CEO Steve Murrells said “No part of our business has been unaffected by the outbreak of the virus and we have played a critical role in communities throughout the UK.”

 

Financial Services & Real Estate

Legal & General

The financial services giant said yesterday that “despite the evolving situation with Covid-19, Legal & General remains well placed to deliver strong, attractive growth and returns”. In an update to the market it said performance was broadly in line with the prior year and that its balance sheet remains strong with a robust solvency ratio. The group said it had maintained all employees’ jobs at full pay and launched initiatives to help meet growing social needs, including accelerating sponsorship of research into elderly care. CEO Nigel Wilson said “Our current strength underpins our future focus and determination to use Inclusive Capitalism to help address the economic dislocation caused by the pandemic and to help drive economic growth over the longer-term.”

American Express

The card issuer’s first quarter profits beat expectations, however it saw a fall in consumer spending towards the end of the quarter. The company is “aggressively reducing costs” but has committed to not cut jobs for Covid-19 related reasons. CEO Stephen Squeri said “The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we’re now in a different world.”

 

Industrials & Transport 

Lufthansa Group

The airline group’s CEO Carsten Spohr issued a statement to employees yesterday afternoon in which he announced that at the end of the crisis operations are likely to continue with 100 fewer planes and 10,000 fewer staff. Currently the company employs 140,000 employees with a fleet of 760 aircraft. Spohr said “We will probably regain our footing in 2023. Then the Lufthansa Group will be a different company.”

Dyson

Sir James Dyson said yesterday that an “entirely new” ventilator model developed by his company is now “mercifully” no longer required by the UK government. Dyson had provoked controversy in March by announcing a contract for its design before a government announcement was made. Dyson said “I have some hope that our ventilator may yet help the response in other countries but that requires further time and investigation. The team have worked 24/7 to design and manufacture a sophisticated ventilator in a very short timeframe – I pay to tribute to their exceptional expertise and commitment.”

Mitsubishi

The Japanese car maker said yesterday in a statement that the fall in demand for its vehicles had “greatly exceeded” expectations. It announced that it will cancel its final dividend and cut base pay for executives by up to 30% for the 20-21 fiscal year. The company said it expects a $241m loss for the year ended March 2019 – more than five times its earlier forecasts.

 

TMT

Facebook

The social media company announced yesterday that it would launch new services including Messenger Rooms to compete with video call services Zoom, Houseparty and Google Hangouts. CEO Mark Zuckerberg appears to be looking to capture the social call market: “I think we’re soon going to have the leading video rooms product for social use cases”. Facebook’s announcement caused a one-day fall of approximately 10% in Zoom’s share price.

Verizon

American telecoms company Verizon said yesterday that the virus has slowed its core wireless business, losing 68,000 phone subscribers in the first quarter. Verizon saw new business customers, but these were offset by a decline in new consumer accounts. The company plans to press on with its plan to roll out faster 5G networks with CEO Hans Vestberg saying “It’s a little bit too early to say we’re going to have changes in social patterns in the U.S. Initially, I don’t think so. People live where they live and that’s going to continue to be the same,” he said. “Dense urban areas will continue to be dense urban areas.”

 

IN THE NEWS

‘Covid-secure’ offices to get Britain back to work – The Times

Up to 100,000 workers falling through furlough cracks – The Telegraph

US banks pull back from lending to European companies – Financial Times

 




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