Powerscourt

By Powerscourt on 01/06/2020

Powerscourt Coronavirus Briefing – 01 June 2020

ANALYSIS

Overnight, we had good news on the virus from Italy and China but bad news on the social impact in the US. The death at the hands of police last week of George Floyd, a black man in Minneapolis, continued to reverberate across America on Sunday night in race riots evoking the 1960s. There are protests in around 75 cities across America and violence in many with rioting and protests in Washington DC and New York among other cities.

The crisis has amplified decades-old fault lines. African Americans have been disproportionately affected by the worst impacts of the disease, both in health and financial aspects, according to recent data.

The rioting has business impacts. Walmart and Target, two of the largest US retailers, said they were shuttering some stores in areas hit by rioting and looting. On Rodeo Drive, the most upscale shopping street in Los Angeles, someone had daubed “Eat the Rich” onto the front of a Gucci store by Sunday evening.

Two separate manufacturing surveys in Asia, in Japan and South Korea, showed those two countries had suffered the sharpest slump in business activity for decades. But this was offset by Chinese manufacturing activity, which has bounced back to growth in May. Asian shares were positive overnight into Monday.

In the UK, fears that restrictions have been eased too quickly loomed again over the weekend, with a number of prominent scientists warning the Government it was moving too quickly. The warning comes as primary schools start to reopen and following the now familiar scenes of crowded beaches in Britain.

The counties hit hardest and earliest offered encouragement. Wuhan, where the virus was first seen, said it may have eradicated novel coronavirus through aggressive testing and tracing. Of 60,000 people tested on Sunday, there wasn’t a single “silent spreader” – an asymptomatic carrier.

A doctor who has helped lead the Italian response to the pandemic said that the virus is losing its potency. Dr. Alberto Sangrillo, head of the San Raffaele hospital, Milan, in the worst-hit part of Italy, said: “In reality the virus clinically no longer exists in Italy…the swabbed that were performed over the last 10 days showed a viral load…that was absolutely infinitesimal.” 

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WHAT ARE COMPANIES SAYING?

Consumer & Retail

Ted Baker
The Fashion brand has rolled out plans to raise £95 million through a stock issue to help it ride out the challenges posed by the pandemic, after reporting a loss of £79.9 million for the year to January. The company’s revenue slumped 36% for the 14-week period from 26 January –  02 May, mainly due to the stay-at-home orders to prevent the spread of the virus.

Primark
The fashion retailer’s owner, Associated British Foods, is working to re-open all of Primark’s 153 stores in England on June 15 in line with the country’s easing of lockdown restrictions. Primark is currently trading from 112 stores across Europe and the United States, representing 34% of its total selling space. By June it is planning to have 281 stores open or 79% of selling space. The group said it was still too early to resume earnings guidance for the remainder of the current financial year. Associated British Foods said: “Our initial view is that the implementation of social distancing could only affect sales to some extent in the higher density stores, which represented some 10 percent to 20 percent of pre-Covid-19 total Primark sales”.

Pret A Manger
The sandwich chain has hired consultants to help it renegotiate its rents as it seeks to mitigate the impact of the pandemic. It announced at the weekend that it had appointed Alvarez & Marsal and CWM, a retail property consultancy, to advise it on a “comprehensive transformation plan”, with a focus on its cost base. It said that the consultants would help Pret “examine the best options to adjust its business model in a new retail environment”, in particular addressing “leasehold pressures in the light of the changed market conditions”.


Industrials & Transport 

Celltrion
The shares of Celltrion, South Korea’s leading bio pharmaceutical company, shot up more than 7% today after the company said its pre-clinical animal testing showed very positive results with an antiviral antibody treatment for Covid-19. The treatment also showed improvement in symptoms such as runny nose and cough after the first day of therapy and clearing of lung inflammation within six days, the company said today. Test subjects high dose group showed a 100-fold reduction in viral load of the disease. Kwon Ki-sung, head of the company’s research and development unit, said: “[Celltrion] has the capability to roll out mass production of the therapeutic antibody treatment once it is ready”.

Embraer
Brazilian plane maker Embraer, the world’s third largest commercial jet builder, should obtain $600 million in credit lines from Brazil’s state development bank BNDES and private banks in June, government sources said yesterday. The loans will finance production to meet demand for passenger planes and executive jets, they said speaking on condition they were not named. A spokesman for Embraer confirmed that the company is in talks on financing proposals from the BNDES and private bank in Brazil and abroad to aimed mainly at providing working capital to cover plane exports.

Renault
Chairman Jean-Dominique Senard said yesterday that Renault has no plans to close its Maubeuge plant in northern France, two days after the carmaker announced 15,000 job cuts globally as part of a major restructuring. The recovery plan, which would eliminate 4,600 jobs in France, aims to consolidate the Maubeuge site’s vehicle production with that of the nearby Douai plant.

Hyundai Motor
South Korea’s Hyundai Motor has said its provisional May sales fell 39% on year to 217,510 vehicles globally, as the impact of pandemic continued to hit global auto demand in key markets.x

Balfour Beatty
The construction company has announced plans to cancel its final dividend for 2019 ahead of its annual general meeting. However, it intends to redeem in full the £112 million of preference shares that fall due on July 1.

 

Financials & Real Estate 

Capital & Counties Properties
The British property manager Capital & Counties Properties has said it has sealed the purchase of Hong Kong tycoon Samuel Tak Lee’s 26.3% stake in London rival Shaftesbury for £436 million. Capco said the stake was being bought from Veloqx, a trust fund set up by Tak Lee, at a price of 540 pence per share.

Sirius Real Estate
The leading operator of branded business parks and flexible workspace in Germany has announced financial results for the twelve months ended 31 March 2020. It said that in light of the “on-going uncertainty with regards to the impact of COVID-19 in the current financial year, the Board does not consider it prudent to provide full year financial guidance but will continue to monitor the situation and update the market in due course”. Equally, Andrew Coombs, Chief Executive Officer, said: “It’s good to be reporting another successful year, having achieved our sixth consecutive year of greater than 5% annual organic growth in our rent roll and 15 per cent growth in funds from operations, our key measure of operational performance”.

 

TMT

Samsung
The world’s largest memory chip maker said today that it has begun construction of a new domestic production line for NAND flash memory chips, betting on demand for personal computers and servers as the coronavirus prompts more people to work from home. Samsung said it is targeting the second half of next year to mass produce the chips, used for storage, on the added line in its plant in Pyeongtaek city, which is within a two-hour drive from the capital Seoul. Equally, Samsung said the additional capacity will also help meet demand for 5G smartphones and other devices, despite recent delays in deployments of 5G networks in Europe and other countries due to the health crisis.

 

IN THE NEWS

UK banks warn 40%-50% of ‘bounce back’ borrowers will default – Financial Times

Coronavirus: Quarantine will destroy travel firms, bosses warn – The Times

Pupils must go to school during summer or risk losing six months of education, children’s commissioner warns – The Telegraph

UK government must give direct support to manufacturing, says Make UK Reuters




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