Powerscourt

By Powerscourt on 29/06/2020

Powerscourt Coronavirus Briefing – 29 June 2020

ANALYSIS

It was hard to get a drink last night in Florida, Texas or seven Californian counties, including Los Angeles. Public health officials closed down bars because putting disinhibited drinkers in a crowded space is a great way to spread the virus. Pubs in Ireland open (sort-of) today and in the UK next weekend. Is it a good idea?

Asian markets started the week significantly lower as the global coronavirus death toll passed half a million and with signs that the global recovery may be more drawn out than previously suspected. This morning the Nikkei was down 1.3%, with European markets expected to open lower.

US markets cratered on Friday as a number of Southern and Western states halted economic reopening due to the virus. One quarter of the world’s coronavirus cases are in the US.

For a third consecutive day on Saturday, US cases leapt by more than 40,000. Health and Human Services Secretary Alex Azar warned on CNN that “the window is closing” for the country to get the pandemic under control. The surge in US coronavirus cases has been most acute in states which did not follow official recommendations to wait for cases to decline before reopening. Meanwhile, footballers from the National Football League have been advised by their union to stop group training because of health concerns.

The World Health Organisation warned last week that lack of global coordination and collaboration between countries had exacerbated the spread of the virus.

The apparent resurgence in the US and elsewhere is impacting a range of global indicators. Brent Crude dropped on Monday amid fear that renewed closures would impact demand.

Australia on Monday reported 75 new cases of the virus in the Melbourne region. Brett Sutton, the Chief Health Officer of the state of Victoria, said the state was close to losing control of the Covid-19 outbreak.

 

WHAT ARE COMPANIES SAYING?

Consumer & Retail 

Azzurri 
The casual dining chain behind the Ask Italian and Zizzi chains looks likely to be sold after attracting bids from five private equity and investment firms. The final bidders for Azzurri Group, created via a £250 million buyout of the two brands by Bridgepoint in 2015, are believed to include Towerbrook Capital Partners and Epiris, a former backer of Parkdean Resorts and TGI Friday’s. The group has about 310 restaurants, employing more than 6,000 staff. Its Zizzi brand includes three sites in Dublin and one in Shanghai while the group also has three Radio Alice restaurants. In June last year it acquired 13 Pod outlets from administration for up to £1.6 million for conversion to the Coco di Mama brand.

Lookers
The car dealership chain in the United Kingdom has updated shareholders on an investigation by Grant Thornton into the car dealer’s sales practices and suspected fraud. The company said that it was “implementing remedial measures to address these points and is continuing to invest in its systems and controls to further improve their robustness”.

Genus
Iain Ferguson, the Chairman of the housebuilder Crest Nicholson, has been named as the chairman designate at Genus, the livestock genetics company. He will take over from Bob Lawson, who retires in November. Mr Ferguson is a former chief executive of Tate & Lyle. He has been chairman of Stobart and Berendsen.

 

Industrials & Transport 

Airbus 
Chief Executive Guillaume Faury has been told newspaper Die Welt that: “For the next two years – 2020/21 – we assume that production and deliveries will be 40% lower than originally planned”. Airbus has so far said it could cut output by a third on average. On June 3, however, Reuters reported it was looking to hold underlying jet output at 40% below pre-pandemic plans for two years, adding pressure to cut thousands of jobs. 

Nissan 
Nissan has today blasted suggestions in media reports of a conspiracy within the company to oust former chairman Carlos Ghosn. Nissan’s Chief Executive also told investors that it has secured enough funding to survive collapsing salves caused by the pandemic. Ghosn’s 2018 arrest in Japan on financial misconduct charges has led to much speculation that the move was orchestrated by Nissan executives who opposed closer ties with partner Renault SA. Motoo Nagai, Chairman of Nissan’s auditing committee, told shareholders at the company’s annual general meeting: “I know that in books and the media there has been talk about a conspiracy but there are no facts whatsoever to support this”. Regarding securing funding,  Makoto Uchida faced a near two-hour grilling after reporting an annual net loss of ¥671bn and cancelled Nissan’s fiscal second-half dividend. Makoto Uchida said however: “We have sufficient funds to address this crisis despite the deterioration in our automotive free cash flow”, pointing to more than ¥2tn in unused credit lines and new loans the group had secured.

Rio Tinto 
Rio Tinto has said today that it has reached an agreement with Mongolia to domestically supply power to its Oyu Tolgoi copper-gold mine through a state-owned coal-fired power plant at Tavan Tolgoi. The Mongolian state owns 34% in the Oyu Tolgoi project, while Rio’s majority-owned Turquoise Hill Resources has a 66% stake in the project. 

 

Financials & Real Estate

SoftBank 
SoftBank has said it will repurchase up to 200 billion yen of its domestic unsecured corporate bonds from June 30 to July 17 as part of its plan to pay down debt. SoftBank Chief Executive Masayoshi Son is undertaking an asset monetisation programme to raise $41 billion to fund share buybacks and reduce debt, following a series of soured tech investments that drove the group to a record annual loss. 

 

TMT

Olympus 
Japanese technology group Olympus is beginning to see the unleashing of “pent-up demand” for tens of millions of surgeries that were cancelled during the pandemic, a resumption set to help revive the global medical equipment industry. Ross Segan, Olympus’ Chief Medical Officer, said in an interview: “You don’t want colon cancer and other related conditions out there undiagnosed…The market knows that so in places around the world where we’ve gotten a good handle on the rate of Covid, we’re starting to see that [resumed]. There will be pent-up demand that will drive procedure volume”.

Vodafone 
Vodafone is leaning towards floating its multibillion-pound European towers business in Frankfurt rather than London, in a move that would further tilt the company away from Britain. The company has separated its European tower infrastructure operations and is preparing for a potential initial public offering early next year. Nick Read, Vodafone’s Chief Executive, said last month that it was considering exchanges in Frankfurt and London for the IPO. It has invited advisers to pitch for a role alongside Rothschild, and is leaning towards Frankfurt, according to a Bloomberg report.

 

IN THE NEWS

Boris Johnson pledges a decade of spending on schools – The Times 

Prices are rising faster than official figures suggest – Financial Times

Global coronavirus deaths top half a million – Reuters




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