Powerscourt

By Powerscourt on 15/05/2020

Powerscourt Coronavirus Briefing – 15 May 2020

ANALYSIS

The deteriorating relationship between US President Donald Trump and China’s Xi Jinping cast a fresh pall overnight despite improving economic data from China, the most advanced major economy in recovering from the first stage of the coronavirus crisis.

The US President made petulant remarks in an interview with Fox News Thursday saying he would not meet the Chinese Premier and suggesting trade agreements between the countries could be torn up due to coronavirus. His remarks helped drag Asian markets lower on Friday.

The prospect of a post coronavirus cold war is just one of the factors putting the brakes on economic optimism. Against a backdrop of relentlessly bad employment data, concerns are growing about the mechanics of getting economies back to work, and how to reverse months of state-sanctioned fear on all-important consumer sentiment.

London’s Canary Wharf, the headquarters of British capitalism, this week issued detailed guidance to global tenants including Barclays, Citigroup and HSBC about how to manage a return to work for thousands of its professional services employees as many of these firms gear up to bring staff back. The guidance, which will likely be watched closely by other employers, includes one-way walkways and instructions not to pass on lifts.

At least they will be able to take public transport to work: the government is bailing out Transport for London(TfL) with £1.6 billion after the local government owned transport giant warned it was almost out of cash. The Tube has seen journeys drop up to 95%.

The challenge for business operators is to get workers and customers past a newly-learned fear of the basic human exchanges upon which consumption depends. The Chief Executive of fast-food chain Yo! Sushi told the FT that he would not reopen a single outlet until he was sure diners would return.

Media reports Friday suggested that London is starting to move beyond coronavirus, with just 24 people being infected with coronavirus every day. By contrast, the North East of England has become the new British epicentre, with around 4,000 new cases a day.

Meanwhile a second antibody test, from Abbott Laboratories, has now been approved to produce a test in the UK.

 

WHAT ARE COMPANIES SAYING?

 

Consumer and Retail

William Hill

The betting and gaming company said in a trading statement that it had “strong performance in international markets” led by its gaming business but that it had seen “material impact” from the cancellations of live sports and the closure of its UK and US retail estates. It split its announcement into “pre-coronavirus” and “post-coronavirus” for clarity. It said in the announcement that despite having to fully draw its RCF facilities, it was in a “strong financial position with significant headroom”.

Amazon

The US ecommerce giant has reportedly begun to return to normal levels. No formal announcement has been made but the state of emergency at the company is drawing to a close. On Wednesday, delivery estimates began returning to normal and the banner on the website warning customers of delays have been taken down. However, analysts have warned the costs for Amazon will continue to be high. Separately, the company has said it has donated 10,000 plastic face shields in the US and was on track to deliver a further 20,000.

Boohoo

The online fashion retailer confirmed that the proposed bookbuild announced yesterday to raise £197m was successful. The company plased shares representing 5% of the issued share capital, with Zeus Capital and Jefferies acting as coordinators and bookrunners for the placing.

 

Industrials & Transport 

National Express

In a brief trading update supplementing those it put out on 19 March and 14 April, the coach operator said that revenue for April was around 50% of the same month in 2019. However, due to the significant reductions in operating costs the company generated positive EBITDA, “slightly ahead of our expectations”. They also announced that they had won a new contract in the US and had started selling coach tickets in the UK from 1 July following government advice.

Petrofac

In its AGM statement the oil and gas company said that it had seen “significant disruption” as a result of Covid-19. As a result it has seen “material delays” which “will not be recovered in 2020”. It also notes the “collapse” of oil prices, causing delays in current tenders and the termination of a $1.5bn contract. The company has taken measures to make additional savings to those first announced including suspension of the final 2019 dividend and a 40% reduction in capital investment.

Transport for London

London’s transport operator has said that since Government lockdown was implemented, passenger demand has declined steeply, down 95% for the underground and 85% for buses. This has led to a loss of income of 90%, including from non-passenger incomes like advertising. It announced today that it has agreed an “extraordinary funding and financing support package” with the Department for Transport, including a £1bn grant and a £505m incremental loan from the Public Works Loan Board.

Novartis

The CEO of the Swiss pharmaceutical company that sold its vaccine business to GSK in 2015 has said that “if everything goes as we hope, it will take 24 months before we have a vaccine.” Despite some companies already testing the vaccine on humans, they must be widely tested before it can be administered at scale. 

 

Financial Services & Real Estate 

Canary Wharf

The Financial Times has reported that Canary Wharf, the London estate and home to Barclays, Citigroup and HSBC among others, has drawn up detailed plans to bring its tenants back to work as the pandemic eases. These plans include one-way routes, daily deep cleaning, limiting lift capacity and removing soft furnishings. The estate is due to be issuing new guidance to tenants this week.

Gresham House

The AIM-listed specialist asset manager said in an AGM statement today that its current trading is in line with expectations. Assets Under Management are up 13% on its position on 31 December 2019, despite the impact of the pandemic. Real Assets have grown by 15% since the same date, through a combination of fundraising and the acquisition of Resi REIT.

 

TMT

Computacenter

In a brief trading update, the UK technology business said that its current trading had “accelerated further” than it had stated on 23rd April in a previous update. The company said it secured some substantial contracts that meant that the first of 2020 was now considerably ahead of the same period last year. Despite this, they still chose not to provide formal guidance for the second half of the year.

DiscoverIE

The electronics manufacturer said that its final quarter was stronger than previously expected driven by a quicker than expected recovery in China leading to the reopening of some facilities there. As a result, its earnings are slightly ahead of their revised guidance from 19 March. It’s facilities in China, Sri Lanka and the US have now all re-opened with “limited but growing capacity”. Its sales for the first quarter of 2020 are currently running 10% lower than the equivalent period last year.

Time Out Group

The media and leisure company announced today that it had extended its £20 million loan from Oakley Capital Investments by drawing down £2.5m of the extension. The company said that in addition to cash reserves, this provides near term liquidity while it finalises longer term funding in response to the pandemic.

Monzo

Reports claim that digital bank Monzo is raising new funds from investors at a discount of nearly 40% to its previous fundraising. At its last raise in June Monzo was valued at more than £2bn, but the current deal is reportedly closer to 1.25bn, highlighting the impact of Covid-19 on unlisted tech businesses.

 

IN THE NEWS

Trump threatens to cut off relations with China – Financial Times

Manufacturing pessimism grows over recovery, survey finds – Sky News

Boris Johnson to launch war on fat after coronavirus scare – The Times




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