Powerscourt

By Powerscourt on 05/06/2020

Powerscourt Coronavirus Briefing – 05 June 2020

ANALYSIS

How to travel between countries will be a big issue in the coming days. British Airways failed to attend a meeting with Priti Patel, the Home Secretary, at which she was expected to discuss the UK government’s requirement for international travellers to self-quarantine for 14 days after June 8. It is reported that BA is unhappy at the lack of consultation over the rules which it sees as a hammer blow to the industry.

Other countries are doing it differently. The Czech republic announced this morning that it was lifting restrictions on travel from Germany, Austria and Hungary, having previously opened up to Slovakia.

The airlines industry, one of the sectors to be worst hit by coronavirus, is showing signs of renewed revival. On Thursday, US carrier American Airlines said it would be back to half its normal domestic flights schedule by July, prompting a 40% surge in the company’s stock and lifting other airline stocks. Ryanair jumped 4% at opening on Friday and is now up 57% since May 15.

Depressing US import/export data emerged on Thursday, pointing to the degree of damage that coronavirus has wrought. Imports fell 13.7% in April from March, and exports dropped 20.5%, the largest declines since record-keeping began in 1992.

Markets were mixed on Thursday, with the S&P reversing a five-day rally but the Dow closing slightly up. Asian markets were up slightly into Friday.

Orders for German industrial goods fell by over a quarter in April, figures from the Federal Statistics office showed. 

The UK public’s perspective on the government’s handling of the coronavirus crisis, both from a health and an economic perspective, has darkened in recent weeks, with Prime Minister Boris Johnson struggling to regain the political capital he lost over the Dominic Cummings crisis.

Figures from a number of data points suggested that consumer confidence did not improve significantly after the point, in early May, when the UK government signalled a relaxation in the lockdown. The data has alarmed economists who say it suggests a slow and lacklustre recovery with consumers reluctant to spend, and points to a need for further stimulus.

Two major scientific studies on Thursday were forced to retract data based on the same scientific registry. Both studies, in the Lancet and the New England Journal of Medicine, had drawn negative conclusions about the controversial anti-malaria drug hydroxychloroquine, which President Trump has vociferously backed as a potential prophylactic.

 

WHAT ARE COMPANIES SAYING?

Consumer & Retail

Revolution Bars
The UK bar operator has announced that it will be delisting and intends to apply for admission on AIM, following an equity raise also launched today to raise £15m. The company said that AIM enables quicker and cheaper fundraisings and is “a more appropriate listing venue for the company in the long term.” It said of its current raise that the funds would be used to achieve “an appropriate level of indebtedness and emerge from the Covid-19 pandemic in a position of strength.” 


Industrials & Transport 

Taylor Wimpey
The UK housebuilder said in a market update that “given the current backdrop, we expect the number of attractive land opportunities to grow over the coming months.” It highlighted that other land buyers had retreated from the market, which meant a number of sites will be available on “favourable terms”. It did however say that Covid-19 has reduced its sales so far this year by 40%, but that sales are now increasing and it has resumed construction at the majority of its sites.

American Airlines
The US airline announced on Thursday that it plans to fly 40% of its July 2019 capacity, boosting flights from New York City, Los Angeles and Washington as well as its Dallas Fort Worth and Charlotte hubs. It said it also plans to resume service to additional European and Latin American destinations in August. This means the airline will be flying 4000 flights on a peak day in July up from 2000 in May (although compared to a pre-crisis peak of 6800). The news prompted its shares to rise over 41%

Renishaw
The FTSE250 engineering company said that due to “ongoing macroeconomic uncertainty due to the Covid-19 pandemic” the Board has decided not to pay a dividend for the full year ending 30 June 2020. The company said its trading remains in line with expectations at the time of their recent trading update (12 May) and that it continues to closely manage the Group’s cost base.

Stobart Group
The aviation and energy group posted its full year results yesterday (to 29 Feb) and announced a proposed capital raise of over £120 million, split between an £80 million equity raise and an addition £40 million revolving credit facility. The company noted severe impacts as a result of Covid-19, and that it would be withdrawing from the rail & civil engineering business by the end FY21. It said it has placed over 50% of employees on furlough and reduced the pay of the Board and senior time, as well as preserving liquidity and freezing all discretionary expenditure.

 

TMT

Toshiba
The Japanese conglomerate forecast a 15.7% drop in annual operating profit compared with expectations of a small rise, despite effort sby the company to limit the impact of Covid-19 on its business. It forecast profits of 110 billion yen for the year to March 2021, down from 130 billion yen a year earlier. The company said it was now focusing on social infrastructure businesses that will be resilient to a global economic slump driven by the pandemic.

WANdisco
The automated data migration business announced it has won a contract with “one of the world’s largest airlines” to migrate analyitcal data to the Microsoft Azure cloud. In a quote from CEO and Chairman David Richards, the company said that due to Covid-19, companies were not able to “scale up or down the fixed costs of running on premise facilities in line with economic activity” and that by using the cloud they are able to do that

Gamma Communications
IN an AGM trading update, the telecommunication business said that it has seen “strong growth” in Q1 which is continuing into Q2, with the impact of Covid-19 not overly damaging outlook for 2020 or beyond. It highlighted robust revenue (being 93%) recurring and billed monthly with minimal cancellations. They did flag some extension of sales cycles due to cancellation of physical meetings, however said that they expect a return to pre-Covid-19 levels of growth with a lag.

 

IN THE NEWS

UK Dividend-paying groups use BoE support facility  Financial Times

Face coverings to be compulsory on public transport in England – The Times




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