By Powerscourt on 18/06/2020
Powerscourt Coronavirus Briefing – 18 June 2020
In a week that has already brought the UK Royal Ascot behind closed doors, last night’s Project Restart also brought two Premier League football matches, Manchester City v Arsenal (3-0) and Aston Villa v Sheffield United (0-0). The games brought football lovers together on social media if not in the stands but also gave them something to disagree on, mainly whether the artificial crowd noise on Sky Sports was a good thing or not. Everyone was in agreement that Arsenal were awful.
An update will come today from the Bank of England after its latest monetary policy meeting. In March it opted to pump £200 billion into the economy to get retail banks lending to businesses and today we might see more to kickstart growth.
Meanwhile, things are going bad in the US. New cases are up 3.4% in Texas and 3.3% in Florida. Two of the largest hospitals in Houston say they are “saturated” and cannot take new patients. Ron DeSantis, Florida’s Governor said would not reverse the reopening of businesses in his state despite the resurgent virus. He said: “We’re not shutting down, we’re going to go forward.”
That will have cheered President Trump who was bullish on short term progress when he spoke to Fox News last night: “We are very close to a vaccine. We are very close to therapeutics.” He added that he expected the pandemic to just “fade away”, even without a vaccine.
The difficulties of travel have been highlighted by a further confirmed case in New Zealand. A man in his 60s flew from Pakistan via Doha and Melbourne and wore a mask on his flight to New Zealand but developed symptoms two days after landing. His contacts on and off the flight are now being gtraced. In Australia Qantas cancelled most international flights until late October after the government confirmed a likely closure of the border until 2021, excluding some flights within the travel ‘bubble’ with New Zealand.
Using data from Refinitiv, the Financial Times has looked into which private equity firms have been treating the pandemic as a buying opportunity. The top 10, mostly US-based private equity groups by deal count have been doing deals at an aggressive pace for the last three and a half months, announcing acquisitions and investments worth over $40 billion since the beginning of March. KKR took the lead position with $16.9 billion in deals but EQT’s acquisition of the hand sanitiser producer Schulke in April also stands.
Finally, Boston Consulting Group said in a report that the pandemic had destroyed $16 trillion of wealth compared to a mere $10 trillion from the global financial crash of 2008.
WHAT ARE COMPANIES SAYING?
Consumer & Retail
The British model railway brand whose roots date back to 1901 reported an increase in revenue to £37.8m for FY20, despite coronavirus pandemic. Reported loss before tax also reduced significantly to £(3.4) million as they continue to implement their turnaround strategy. The product development cycle continues to improve and further investment was placed into it to facilitate more new releases. The group also raised £15 million through the recent share placing in order to improve their balance sheet strength during the pandemic.
Industrials & Transport
National Grid reported this morning an underlying profit up 1% to £3.5bn, stating that the impact of COVID-19 on earnings was primarily driven by a £117m increased provision for US bad debts. Whilst the company anticipates COVID-19 will continue to impact their financial performance going into FY21, National Grid expects this to largely be recoverable over the following years and intend to target asset growth of 5-7% in the near term, despite this impact.
In its interim results for H1 2020, Safestore Holdings reported a strong performance and confirmed its plan to revert to full operations with no assistance from the UK government’s COVID-19-related support schemes. Group revenue was up 8.5%, alongside a 7.3% increase in the interim dividend to 5.9p. Despite the pandemic, Safestore were able to maintain resilient operational performance and since the easing of lockdown, enquiries, new lets and occupancy have increased back to pre-lockdown levels.
The global provider of integrated manufacturing services and power products, Volex, today reported its preliminary results, with underlying operating profit increased by 46.3% to $21.6 million and revenue growth of 5.2%. Despite the COVID-19 pandemic, Volex confirmed it had experienced minimal disruption to the business and as such, their strategy to reposition the Group over the last 5 years has continued as planned.
Financials & Real Estate
The head of high-end housebuilder Berkeley Group has called on ministers to “get the feelgood factor” back into the housing market with tax cuts and incentive schemes for buyers. Sales for the company fell by about 50% in April and May as a result of coronavirus, the group said in their annual results. Rob Perrins, the company’s chief executive, urged the government to cut stamp duty and extend Help to Buy and called for the Bank of England to relax restrictions on banks’ mortgage lending. That would mimic interventions made following the financial crisis, which encouraged buyers back into the market, he said.
HSBC has restarted its plan to cut up to 35,000 jobs worldwide after a three-month pause, said Noel Quinn in a 6:15am email to 235,000 staff, including 40,000 in the UK. The decision to resume the cost-cutting plan was immediately criticised by the Unite trade union, which said staff were making huge sacrifices to keep the bank running. Mr Quinn said the spread of the virus had slowed in many countries and their economies were starting to emerge from lockdown, so now was the right time to restart the plan. He added that group profits fell in the first quarter and all indicators pointed to challenging times ahead.
Lloyd’s of London
Lloyd’s of London is to reopen the doors to its famous underwriting room in September, boss John Neal said on Wednesday in a letter to the chief executives of companies that work in the market. The Richard Rogers-designed building in Lime Street will reopen on September 1 at just 45% of normal capacity and with glass screens around the boxes.
In a statement from Duncan Sinclair, CEO of Mountview Estates, he confirmed that he believed trading results for FY20 were not influenced by the COVID-19 pandemic and that any influence or effects “should be considered as post balance sheet events”. In saying that, revenue for the company dropped a modest 0.8% to £64.9 million whilst all other performance indicators showed an upward trend.
SDCL Energy Efficiency Income Trust
In their full year results announced this morning, SDCL confirmed it had delivered on dividend target and demonstrated resilience in capital value and robust returns throughout the early stages of the COVID-19 pandemic. The company announced a full year dividend of 5.0p for 2020, alongside investments of more than £250 million in four additional assets and portfolios during the year.
A £500 million fundraising has been launched by Taylor Wimpey to take advantage of lockdown-related disruption to the market for development land. The FTSE100 housebuilder cited the “resilient and strength of the business” yesterday and said that it would return taxpayer funds it had accepted from the government’s furlough scheme.
Blue Prism Group
Despite disruptions from the COVID-19 pandemic, Blue Prism Group has announced strong first half performance in their interim results released this morning. Revenues have grown 70% and the company secured £1 million in new monthly recurring revenue. Its recent £100m fundraising will insulate Blue Prism Group from further or prolonged disruptions caused by the virus, stated Jason Kingdon, Chairman and CEO.
IN THE NEWS
Contact-tracing app will not be ready until winter, admits health minister – The Daily Telegraph
UK rail bailout hits £3.55bn and set to rise further – Financial Times
Global stocks slip on fears of coronavirus resurgence – Financial Times