By Powerscourt on 29/05/2020

Powerscourt Coronavirus Briefing – 29 May 2020


Markets have sobered after a buoyant start to the week as investors digest the impact of various political explosions (mostly detonated by President Donald Trump). US stock markets closed down Thursday and most Asian markets were down overnight.

The primary sources of anxiety now are the sour relationship between the US and China, President Trump’s decision to open a new front in a war on social media and ongoing anxiety about a second wave of coronavirus.

The US President preannounced a news conference for Friday about China amid rising tensions between the world’s two superpowers. Trump is responding to China’s extension of security practices applied in the mainland to Hong Kong, a former British colony with a hitherto autonomous legal framework and which has strongly resisted mainland control. It is speculated that the US may ban many Chinese graduate students from American universities.

Trump on Thursday decided to goad the US social media giants with a threat of censorship via regulation, following a row with his favourite network, Twitter. The President signed an executive order to allow federal regulators more leeway to claim Twitter and other networks are curtailing free speech if they move to edit or delete contentious material. His action comes days after Twitter appended comments to two of his tweets questioning their veracity, part of a broader “fact checking” strategy.

This comes against the background of a worrying jump in the number of US coronavirus cases, with the one-day US death toll from the virus rising the most in the past week, fuelling speculation that the reopening of US states is fuelling a new peak. Meanwhile South Korea, considered one of the countries which has managed the pandemic best, has closed around 200 schools due to a sudden virus spike.

Britons were cheered by the announcement on Thursday that the UK will move to a more relaxed phase in its pandemic strategy, including a phased reopening of the retail industry and permission for groups of up to six people to meet while maintaining social distancing. UK employment data now appears to be moving in a positive direction as well. But Sir Patrick Vallance, the UK’s Chief Scientific Officer, warned that the country remains in a “fragile state”.



Consumer & Retail

Benchmark Holdings
The aquaculture health, genetics and advanced nutrition business announced its unaudited interim results this morning, confirming that H1 results reflect good performance in Genetics, driven by the successful ramp-up of their Salten facility. Benchmark Holdings was able to maintain continuity of supply and customer service throughout the pandemic with salmon markets remaining resilient and shrimp markets severely impacted. However, there is some evidence of recovery in countries emerging from lockdown. 

Eagle Eye Solutions Group
Eagle Eye, a leading SaaS technology company that enables real-time marketing through coupons, loyalty, apps, subscriptions and gift services, today provided a trading updated for the year. The business responded to the COVID-19 pandemic as anticipated, with supermarket customers remaining extremely active and a 10% decrease in monthly group revenue in the Food & Beverage, Leisure and Retail segments. 

eve Sleep
In this morning’s trading update, the direct to consumer sleep wellness brand announced that the Group’s revenues were in-line with expectations, despite the COVID-19 pandemic. Whilst weekly trading patterns varied substantially, sales of their premium mattress range and bedframes continue to exhibit strong demand and the Group experienced an increase in sales of pillows, bedding, toppers and single mattresses as households adapt to life in lockdown. As an online business, eve Sleep also stated that they benefited from the lack of high street competition following the March lockdown. 

The UK fashion chain, Monsoon Accessorize, is on the brink of administration, putting 3,500 jobs at risk and adding to the fast growing number of empty sites on the high street as a result of coronavirus. The 50-year old company plans to file a notice of intention to appoint administrators by the end of the week, with FRP Advisory set to be appointed to run the insolvency process. The retail group’s management are hopeful that if a buyer can be found, a “significant proportion” of jobs could be saved.

World High Life
World High Life has announced that their wholly owned subsidiary Love Hemp has now appointed brand and creative consultancy firm, Propaganda, as its marketing agency of record. In their statement this morning, the Group said that the partnership is incredibly important given that, in the weeks since WHO declared the COVID-19 outbreak as a global pandemic, the retail space has entirely evolved. Propaganda will work with Love Hemp to develop a twofold plan encompassing growing their digital estate while government restrictions are in place, along with supporting the growth that has already occurred.

Industrials & Transport 

American Airlines and Delta
The world’s two largest airlines are cutting staff and encouraging them to take buyouts and early retirement, as the companies adjust to how the coronavirus pandemic has shrunk demand for air travel. American Airlines has said it would cut 30% of the 17,000 employed in the ranks of management and support staff. It is offering buyout programmes for the next two weeks but will begin lay-offs if not enough people volunteer. Meanwhile, Delta will offer retirement and buyout packages to its staff of 91,000, including pilots and flight attendants.

In this morning’s AGM statement, Fresnillo’s Chairman stated that their response to COVID-19 has been the key focus over the past three months and as such, they have invested significantly in mental health support for their people and families and have also been involved in distribution of medical supplies. The Board and senior management have taken voluntary pay cuts in solidarity with the workers in Mexico who have been impacted by the virus. Operationally, the year was more challenging and therefore this impacted their financial performance. Whilst revenue was up, profits were down due to higher costs caused by operational challenges

Johnson Service Group
Trading for the first two months of the year, prior to the impact of COVID-19, was in-line with expectations for the leading UK textile services provider. However, the Group continued to see significant disruption across its markets. Johnson Service Group maintained a strong financial position due to the cash generative nature of their business model and confirmed that the proposed placing to raise approximately £85 million is intended to improve the Group’s liquidity position and strengthen the balance sheet.

The leading waste to product company has today released a COVID-19 update, confirming that their service has been unaffected by the virus and operating costs were reduced to preserve cash-flows, saving €60m during FY21. Renewi has made use of the government measures to delay wage and other tax payments and placed a strong focus on working capital due to the expected financial distress for some customers.

In the face of the coronavirus pandemic, SIG’s strong management response and robust trading in Germany, Benelux and Poland enabled the group to preserve their liquidity. However, the supplier of specialist building products and solutions still delivered an underlying revenue decline of 9%, impacted by market share losses in the UK and Germany. The Board has announced decisive actions taken to address their 2019 performance, including appointing a new leadership team and developing a customer-centric strategy that re-prioritises sales.

Financials & Real Estate 

AVI Global Trust
The London-based British investment trust dedicated to investment in companies trading at a discount to NAV, released their unaudited results for the half year ended 31 March 2020 this morning, stating that the first quarter saw stock markets fall sharply, resulting in the company’s NAV suffering. However, AVI Global Trust’s investment managers have now implemented their business continuity plans, stabilising the volatility experienced.

Nationwide Building Society
Pre-tax profits have fallen at Nationwide Building Society, decreasing 44% to £466 million as it set aside cash for PPI mis-selling claims and expected credit losses associated with the coronavirus. The company said that its net interest margin fell to 1.13%, down from 1.22% the prior year. Mortgage lending slipped to £31 billion, down from £36 billion last year. Chief executive of Nationwide, Joe Garner, warned that some of the targets set may not be achieved in the short term as the full impact of coronavirus on their members and businesses becomes clearer. 

TR Property Investment Trust
TR Property Investment Trust, the large British investment trust dedicated to the property sector, announced their full year results this morning, stating that the unprecedented impact of COVID-19 has swept aside much of the relevant of previous market conditions. Their revenue earnings were still marginally ahead of the prior year and so the Board has announced the final dividend will proceed as planned. 



Johnson outlines phased reopening of shops and schools Financial Times

Global stocks drop with Trump expected to hit back at China Financial Times

Bosses will have to pay fifth of furloughed staff wages The Times

Travel and hotel firms demand scrapping of quarantine plan Sky News