By Powerscourt on 11/05/2020
Powerscourt Coronavirus Briefing – 11 May 2020
Prime Minister Boris Johnson had, at best, a lukewarm reception for his state-of-the-kingdom address on Sunday evening. The previous advice of “stay home” was replaced by “stay alert” but go to work if you cannot work from home. This means construction and factories. However, he also advised people to skip public transport and travel on foot, bike or by car. All this on the day that it was reported that Transport for London needs a £2 billion government bail-out.
Johnson said that shops and schools might be open at the start of June and some restaurants at the start of July. There was confusion as to what it all means but an immediate impact was that roads were noticeably busier on Monday morning. He will address MPs later today and have a virtual meeting with the public later.
Britons can draw cold comfort from the fact that the return to normal is not going to plan in other countries. South Korea, the best-in-class for much of the crisis, has reported clusters of cases in Seoul and has closed bars and restaurants again. Germany, which had eased restrictions, reports that the reproduction rate of the virus is rising again while China reported some new clusters.
Asian stock markets closed a little higher on Monday, encouraged by the general back-to-work trends with Tokyo at its highest level in two months.
One small indicator of the trend in Asia came from Nissan, which reported that sales in China for April were up on the same month in 2019 as the Chinese recovery picked up speed.
WHAT ARE COMPANIES SAYING?
Consumer and Retail
German consumer goods group Henkel has reported a big jump in first quarter sales of laundry detergents and household cleaners today, but a fall in adhesives and in beauty care as hair salons closed due to the coronavirus. Overall, sales for the group that makes Persil detergent and Schwarzkopf shampoo fell 0.8% to € 4.9 billion ($5.31 billion), just short of average analyst forecasts for €4.96 billion, a decline of 0.9% after stripping out the effect of currencies and acqusitions. Henkel said its laundry and home care business saw organic sales jump 5.5%, while sales at its adhesives unit which supplies the automotive industry fell 4.1% and beauty care fell 3.9%. Even with the pandemic affecting all areas of life, Chief Executive Carsten Knobel said, “we achieved an overall robust sales performance in the first quarter”.
The UK’s only listed provider of funeral related services performed 20,000 funerals in the first 13 weeks of the year, a rise of about 1%. The group said on today: “Should 2020 witness a large number of incremental deaths, beyond the 600,000 originally anticipated by the Office for National Statistics, then it is possible that 2021 and 2022 could experience a lower number of deaths than in 2019. The group will not speculate on the most likely outcome”. As a result of the crisis, the group scrapped limousine use while church services also stopped. Since the end of the quarter, the UK has witnessed in excess of 20,000 deaths in a single week, the highest since the beginning of 2000.
Industrials & Transport
London Heathrow Airport
The airport has reported a 97% drop in passenger traffic in April and said 200,000 people passed through its terminals for the month, the same number that it would typically serve in a day. Many were on the 218 chartered repatriation flights. Until lockdowns are lifted demand will stay low, the UK’s busiest airport said. Cargo volumes, which helped bring supplies of personal protection equipment with 1,788 cargo only flights at Heathrow, were still 60 per cent lower. Chief Executive John Holland-Kaye said: “Aviation is the lifeblood of this country’s economy, and until we get Britain flying again, UK business will be stuck in third gear”.
The state-owned airline, which suspended regular passenger flights in March due to the outbreak, has said that a recovery in travel was at least 18 months away. It reported a 21% rise in profit for its financial year that ended on March 31, but said the pandemic had hit its fourth quarter performance and it would tap banks to raise debt in its first quarter to lessen the impact on cash flows by the virus. It has been promised financial aid from its Dubai state owner, but has not said how much it expects to raise. Chairman Sheikh Ahmed bin Saeed said in a statement: “The COVID-19 pandemic will have a huge impact on our 2020-21 performance…We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption”. Notably, Emirates Group, which counts the airline among its assets, said it will not pay an annual dividend to its shareholder, Dubai’s state fund.
The Times today reports that about a dozen investment groups are circling the airline as it scrambles to secure a £500 million rescue from the government. This week its management will make presentations to prospective investors from the private sector, including Cerberus Capital Management, Centerbridge Partners, Apollo Global Management and Greybull Capital. The airline, which is being advised by the investment bank Houlihan Lokey, is set to discuss a range of proposals, from one or more of the investors buying equity stakes to the offer of commercial loans or other forms of credit. At the same time the airline will continue talks with the Treasury and Grant Shapps, the Transport Secretary, about government aid.
The airline has said today it had advised Airbus SE and Boeing Co that it did not expect to take delivery of any new planes in the near term as it grapples with a plunge in demand due to the coronavirus pandemic. The airline had expected to add three Boeing 787-9 jets to its fleet by the end of 2020 and to start taking delivery in August of the first of 18 Airbus A321neos due by 2022.
The airline has urged the government to keep any quarantine requirements on travellers arriving in the UK for only a short period. In response to the new quarantine measures for new arrivals coming to the UK, easyJet said any quarantine restrictions should not last beyond lockdown and should be regularly reviewed. A spokesperson for the airline said: “Quarantine requirements for passengers should only be in place for a short period, while the UK remains in lockdown…requirements should be regularly reviewed to ensure they are targeted and proportionate and do not unnecessarily constrain the important role that air travel will have in the UK’s economic recovery”.
German wind turbine maker Nordex has said it was unclear when it could issue a new outlook for the current year, saying supply chain issues caused by the coronavirus pandemic continued to hit its business. Chief Executive Officer Jose Luis Blanco said: “The effects of the coronavirus pandemic have been dominating everyday life in Europe and many other regions for several weeks now. The Nordex Group and the wind energy sector as a whole are being impacted by this crisis”.
The FTSE 250 technical products and services group has reported that headline profits rose 6% to £48.4 million in the six months to the end of March. Revenue over the same period was up 9% at £283.6 million. It has suspended its interim dividend as a result of the pandemic, which it said made the outlook for the second half highly uncertain.
The Japanese telco said today it forecasts operating profit will rise 0.9% to 920 billion yen ($8.6 billion) in the current financial year. Japan’s third-largest wireless carrier is a vital source of cash for its highly leveraged parent SoftBank Group Corp (9984.T), which is set to post a record annual operating loss next week as Chief Executive Masayoshi Son’s tech bets curdle.
IN THE NEWS
Boris Johnson announces lockdown exit plan – The Times
No end to lockdown yet but ‘careful’ easing begins, PM Johnson says – Reuters
UK splits over Johnson’s new ‘stay alert’ message – Financial Times
UK economy will not be back to work until July at very earliest – Raab says – Reuters