Powerscourt

By Powerscourt on 25/06/2020

Powerscourt Coronavirus Briefing – 25 June 2020

ANALYSIS

The reopening of America is grinding to a halt, as coronavirus tears through the South and West of the US. The hospital system in Houston says it is overwhelmed as new infections in Texas hit a new high. Florida and California also had record numbers. New York and neighbouring states will require visitors from the worst states to quarantine for 14 days of face fines.

There is more: gamblers in Las Vegas will have to wear masks to enter many casinos, Walt Disney has delayed reopening its theme parks indefinitely and the 50th anniversary New York marathon, due in November has been cancelled. Meanwhile, the virus seems out of control in Brazil.

Hardly surprising that stock markets appear to have put aside the magical thinking of recent weeks, with the S&P 500 falling 2.6% on Wednesday. Asian markets were weaker overnight and the UK opened lower.

Health and disease experts have told US newspapers the rises can’t be explained by a steady increase in testing, as US President Donald Trump has claimed.

Apple Inc said on Tuesday it was closing a number of stories in Houston, Texas, the worst-hit US state in the current new wave. Gov. John Bel Edwards of Louisiana said on Monday he would postpone the next phase of reopening due to a growing number of cases in the state.

The problems in the US threaten to erode the slow progress recovery in Europe, which is generally making progress to rid itself of the virus.

The opposition Labour Party warned UK Prime Minister Boris Johnson on Wednesday that the UK’s own reopening programme, currently on track for July 4, could also lead to a resurgence of the virus if track and trace systems are not working properly.

The UK is set to open travel routes to France, Italy, Spain, Greece and Germany within a week, according to several reports.

A letter to the British Medical Journal, from a number of prominent doctors, warned that a second wave of the virus, or localised outbreak, is “a real risk”.

 

WHAT ARE COMPANIES SAYING?

Consumer & Retail 

Hostelworld Group plc 
Hostelworld, a leading global OTA focused on the hostel market, provided a trading update noting that COVID-19 has driven a sharp reduction in trading volumes in H1 2020. The group is unable to provide guidance on its results for the financial year ending 31 December 2020 given the continued uncertainty caused by COVID-19. It expects for a majority of hostels to be open by the end of July 2020, and that pent-up demand will lead to a quick recovery as travel restrictions ease.

Auto Trader Group plc
Auto Trader Group plc, the UK’s largest digital automotive marketplace, said its operating profits in June were likely to be 45 per cent below the same time last year. However, it reported an increase of revenue, up 4% to £368.9 million. The group noted that total Group costs are likely to decline at a rate of low-mid single digits as cost saving measures were taken in response to COVID-19 including not paying a final dividend for FY2020. The group said, “Given the situation, it is difficult sensibly to provide guidance on what the number of retailer forecourts or the level of stock might be over the coming months.”

Walt Disney Co
Walt Disney Co’s reopening of theme parks and resort hotels in California will be delayed until Disneyland receives approval from the state despite the original planned reopening on July 17. It noted that to reopen theme parks, it needed to “negotiate agreements with unions to return employees to work.” 

 

Industrials & Transport 

Qantas Airways 
Qantas Airways is cutting 6,000 jobs, grounding 100 aircraft for a year or more and raising A$1.9bn ($1.3bn) in fresh equity as part of a three-year post Covid-19 recovery plan. Qantas will continue to furlough up to 15,000 employees as it seeks to conserve cash amid what it expects to be a prolonged period of weak demand due to the pandemic. Alan Joyce, Qantas chief executive, said, “we have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term.

Easyjet
Easyjet is looking to raise up to £450m, almost 15 per of cent of its share capital, through a share placing in the face of deep losses during the critical summer season. It announced that passenger numbers in the period fell by 3m, or 7.4 per cent, and the group reported a pre-tax loss of £353m, compared with £272m for the same period in 2019. The loss was partly related to fuel hedging costs and seasonal factors. Johan Lundgren, chief executive, said the company had delivered a “strong performance” in the first half prior to the pandemic.

BAE Systems
British defence company BAE Systems announced that first-half profit would be impacted by the coronavirus pandemic, but its second-half performance would be much stronger as its business returns to “full operational tempo”. Demand for its defence equipment and services, which accounts for 90% of group revenues, remained strong but some manufacturing lines had been affected by disruption linked to the pandemic. The company said that its businesses that provide electronic systems to commercial aircraft and for other transport would be hit by weaker demand

Swissport
Air services group Swissport has announced plans to halve its UK workforce because of the huge slowdown in international travel. Jason Holt, chief executive of Swissport Western Europe, wrote to employees on Wednesday to tell them about 4,500 of its 8,500-strong workforce in the UK and Ireland would be cut. He added that the company’s revenue is forecast to be almost 50 per cent lower than last year

Royal Mail
Royal Mail will cut 2,000 management jobs as it looks to trim £130m from its wage bill, after profits slumped and the company decided not to pay a dividend next year. Royal Mail reported a pre-tax profit of £180m for the year to March, down 25 per cent from the previous year. Keith Williams, interim Executive Chair, said “We are implementing a three-step plan. Firstly, we’re taking immediate action on costs, which will result in a £130 million saving in people costs next year and flat non-people costs…Secondly, we’re accelerating the pace of operational change in the UK to address long-standing challenges and be sustainable for the long term. Thirdly, we’re working with all stakeholders to underpin the USO to ensure it reflects user needs and is modern, contemporary and sustainable.

Mitie Group
Outsourcer group Mitie said it plans to raise £201m through a rights issue and extend its credit facility. The group it will also fund a £271m acquisition of rival Interserve’s facilities management business. The business was proving to be more resilient to Covid-19 than it had initially expected but reported decreased in revenues of 12 per cent in April and May.

 

Financials & Real Estate

FBD Holdings plc
Insurer FBD Holdings has said it has put €22m aside to cover costs that may be incurred arising from all court cases involving pubs that are claiming cover for business interruption due to Covid-19 public health measures. FBD said it remains strongly of the view that its business insurance policies do not provide cover for a pandemic of this nature. The group will not proceed with the proposed dividend payment for FY2019 at this time. Solvency of group remains robust and is currently estimated at 178% even while continuing to deduct 2019 dividend.

The Unite Group plc 
Unite Students, the UK’s leading owner, manager and developer of student accommodation, announced that it is the first student accommodation provider to have its COVID Secure status accredited by the British Safety Council. It is introducing a number of new and enhanced COVID-19 secure operating practices for the 2020/21 academic year to comply with Government guidance. It is raising £300m to spend on new developments and anticipates a 2-3% reduction in property valuations in H1 2020. This reflects income deductions relating to zero summer business and the anticipated impact of COVID-19 disruption on 2020/21 income

Savills Plc
Savills, which sells homes and leases offices worldwide, said that because Covid-19 has had a “significant impact on global real estate market volumes,” its full-year financial performance would be “will be highly dependent upon extent to which regional transactional markets recover in H2.” It said, “given the wide range of potential outcomes at this stage, it is not currently possible to provide meaningful guidance for the year.

 

TMT

Apple Inc
Apple is set to shut seven of its retail locations in Houston, Texas again due to an increase in the number of novel coronavirus cases in the United States. “Due to current Covid-19 conditions in some of the communities we serve, we are temporarily closing stores in these areas,” Apple said in a statement. “We take this step with an abundance of caution as we closely monitor the situation and we look forward to having our teams and customers back as soon as possible.”

Transense Technologies plc
Transense Technologies, the provider of specialist sensor systems, announced that the company has granted a worldwide exclusive licence covering current and future iTrack technology for a period of ten years. The company does not currently envisage a significant short term impact on revenues. Trading results for the year ending 30 June 2020 are currently anticipated to be in line with previous expectations, although their presentation will reflect the iTrack operating business as a discontinued activity.

 

IN THE NEWS

Reopening time won’t save our profits, hospitality groups warn – Financial Times

Liverpool asks for government help to avoid 1980s recession rerun – Financial Times

Stocks sell off as coronavirus surge knocks recovery hopes – Reuters

 World faces $12 trillion Covid bill, IMF warns – The Telegraph

Destinations for first set of ‘air bridges’ from UK revealed – The Telegraph




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