Powerscourt

By Powerscourt on 24/06/2020

Powerscourt Coronavirus Briefing – 24 June 2020

ANALYSIS

Coronavirus cases are surging in the South and West of the United States, Reuters reported, citing data a non-profit organisation, the COVID tracking project. The data shows 10 states reporting an increase of over 50% in cases over the past week including Texas, which has seen cases rise by 84%. Arizona, California, Mississippi and Nevada are all reporting record numbers. Washington, the first part of the US to be hit hard, continues to struggle with cases up 35% last week. Yesterday, its governor made face masks mandatory in public.

Anthony Fauci, the US’s top infectious disease expert, told a US Congressional energy and commerce committee that the surge in some states was “disturbing”.

Health experts and economists are keeping a close eye on evidence of a virus resurgence elsewhere. South Korea and China, countries which were credited with effective early management of the virus, have both reported recent outbreaks, as has Germany, which has effectively shut down Guetersloh district in North Rhine-Westphalia where 1,900 people have COVID-19. It is blamed on an outbreak at a meat processing plant. 

European countries worst hit by the virus, including Spain, France and Italy are seeing low rates of infection, but health experts are watching apprehensively, amid fears that complacency will lead to a resurgence, especially as foreign travel resumes. 

Boris Johnson announced that what he called Britain’s “national hibernation” would end, giving the green light for the reopening of pubs and most of the leisure industry by July 4 along with a relaxation of social distancing guidelines. The easing, apparently against the advice of some UK Government scientific advisers, came with a health warning from the Prime Minister that the “frost” could return if there is a resurgence of the virus, and that the Government would not hesitate to withdraw some of the new freedoms if health data suggested it was necessary. 

Mounting fears over a resurgence in the US have done little to dent the health of markets, however, with the S&P and Dow Jones both finishing up Tuesday and Asian markets holding strength overnight. A Wall Street Journal analysis highlighted the growing divergence between the tech-heavy Nasdaq index, trading up 13% year to date, and the Dow Jones Industrial Average, down 8.3%, underlining the degree to which tech stocks – the mainstay of the Nasdaq – are the new “safe haven”.

Data in the FT from the Investment Company Institute Tuesday also suggests that financial risk appetite remains high, with outflows from safe-bet money market funds totalling over $100 billion.

 

WHAT ARE COMPANIES SAYING?

Consumer & Retail 

A.G. Barr plc
A.G. BARR , which produces and markets some of the UK’s leading drinks brands, has continued to prioritise the safety and wellbeing of employees, suppliers, customers and consumers. The group has successfully introduced a range of enhanced safety and hygiene measures across all operations. Trading continues to be adversely impacted by the COVID-19 lock-down measures, with trends affecting major retail, impulse and hospitality channels continuing as previously indicated. Currently, it remains difficult to predict how the balance of the financial year will evolve, with the easing of lock-down restrictions and resulting impact on consumer purchasing patterns.

J Sainsbury plc
Sainsbury’s announced that in light of the COVID-19 situation and the UK Government measures that restrict non-essential travel and public gatherings, save for limited purposes, the Board has decided to close the meeting to shareholders.

Carnival
Carnival was downgraded from its investment grade credit rating from S&P Global.
The downgrade comes as Carnival works to secure a $1.5bn loan from its lenders  since the coronavirus pandemic rattled the travel industry. The company last week estimated it would burn $650m a month over the rest of the year. S&P estimated the company’s debts next year could be more than 10 times larger than its adjusted earnings before interest, taxes, depreciation and amortisation.

JD Weatherspoon plc
Weatherspoon has created the ‘Wetherspoon COVID-19 Secure Operating Plan’, which sets out how it intends to safely operate pubs on 4 July 2020. The company does not currently intend to start any new pub development projects in the next 12 months. A small number of projects that were “on site” when pubs closed will be completed in due course. The full year results are now due to be announced on 9 October 2020. 4,500 of its staff will not return to work or will be unable to return immediately. In a survey of about 36,000 employees, or 82 per cent of its workforce, 388 workers said that they do not plan to return to work at all, while almost 2,000 staff members said that they could not return to work immediately because they are shielding someone or are vulnerable themselves.

GNC Holdings
GNC Holdings has filed for bankruptcy protection as the vitamin store chain seeks to overhaul its business, put itself up for sale and close more of its stores. The group said it has struck an agreement in principle with its lenders and Harbin Pharmaceutical Group, an affiliate of its biggest shareholder, to purchase the business for $760m.

 

Industrials & Transport 

United Airlines
United Airlines said it plans to raise $3 billion in debt by issuing senior notes to increase liquidity in the wake of the COVID-19 pandemic. The senior secured notes are due 2027, the company said

Petrofac
Petrofac, a leading international service provider to the energy industry, said that as a result of COVID-19, Engineering & Construction financial performance for the first six months of 2020 has been significantly impacted by the deterioration in market conditions. Ayman Asfari, Petrofac’s Group Chief Executive, commented: “The health and well-being of our people, suppliers and our communities continues to be our top priority. I want to personally thank all of our employees for their hard work and dedication in enabling us to deliver safely for our clients in the most challenging market conditions. Nevertheless, despite all of our efforts, the COVID-19 pandemic and sharp fall in oil prices have materially impacted financial performance and new orders in the first half of the year.”

 

Financials & Real Estate

Rightmove plc
Rightmove plc, the UK’s largest property portal, offered all Agency and New Homes customers a 75% discount between April and July to support customers through the unprecedented shut down of the UK property market due to COVID-19. It will continue to offer Agency customers in England a 60% discount for August and 40% for September. It will continue to support customers in Scotland and Wales with a 75% discount for August and 60% for September

Zopa
Zopa, the world’s oldest peer-to-peer lender, has received a full banking licence. The 15-year-old company will introduce its first savings accounts this week before expanding into credit cards in the fourth quarter. Jaidev Janardana, Zopa chief executive, said in an interview: “We never thought we would be launching in such an extraordinary set of circumstances, but we believe that, if anything, these circumstances make the proposition even more relevant.

Crest Nicholson
Housebuilder Crest Nicholson reported a loss for the six months to April after writing down £43m of inventory. Crest said that there had been a “modest” number of reservations and completions during the lockdown period, but that reservation rates were now returning to pre-lockdown levels.

 

TMT

LoopUp Group plc 
LoopUp Group plc, the premium remote meetings company, has continued to trade materially above pre Covid-19 levels. Whilst it remains difficult to predict near term developments in working practices and business climate, the Group does expect to exceed revised market expectations in terms of revenue, EBITDA and cash generation for the current financial year.

Tribal Group plc 
Tribal, a leading provider of software and services to the international education market, expects results in the current year to be in line with market expectations. The Group has responded well to the challenges brought by COVID-19, benefiting from the strong annual recurring revenues that have been a key area of growth in recent years. Mark Pickett, Chief Executive Officer of Tribal, said, “I’m pleased with the resilient performance Tribal has shown against the challenging backdrop of COVID-19. We have managed our cost base tightly to preserve cash and have quickly adapted our working methods to deliver our services remotely to ensure and uninterrupted service for our customers. We will look to build this flexibility into our ongoing service offerings for the benefit of both Tribal and its customers.”

 

Healthcare 

Aurora Cannabis
Aurora Cannabis, licensed cannabis producer headquartered in Canada, announced a new round of staff reductions and plans to shut five facilities over the next two quarters, as the COVID-19 pandemic pummels the cannabis industry. It said that this will include cutting its selling, general and administrative (SG&A) workforce by 25% and will lay off 30% of production staff over the next two quarters.

Sanofi
French drugmaker Sanofi has agreed a potential $2 billion vaccines deal with Translate Bio, expanding their collaboration in development of an inoculation against COVID-19. The companies said they would expand their partnership to develop a wide range of mRNA vaccines.

IN THE NEWS

UK government in talks to support performing arts sector – Financial Times

Big law firms cut junior solicitor salaries as Covid-19 takes toll – Financial Times
Fauci, Citing ‘Disturbing Surge,’ Tells Congress the Virus Is Not Under Control –
New York Times

Boris Johnson announces beginning of the end of ‘national hibernation’ – The Telegraph

Coronavirus staycation boom brings both hope and anxiety – The Times




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