By Powerscourt on 03/07/2020
Powerscourt Coronavirus Briefing – 03 July 2020
ANALYSIS
European markets have opened strongly as recovery hope, for now, has overcome worries about America’s virus resurgence.
New daily US coronavirus cases have surpassed 53,000 as Fourth of July holiday looms. Independence Day, America’s biggest outdoors celebration, is likely to be a more sober affair as officials around the US have begged people to exercise restraint. In numerous parts of the US the typically exuberant approach to the Fourth is being caveated by warnings to organisers of parties and events to wear masks, keep lists of guests for tracing purposes and other party mood-killers.
The caution is unsurprising. Eight states reported single-day case records on Thursday: Alaska, Arkansas, California, Florida, Georgia, Montana, South Carolina and Tennessee.
Ahead of Independence Day, the US should have been celebrating positive employment data, with nonfarm payrolls surging by 4.8 million jobs in June, ahead of the average forecast of 3 million, as the hospitality sector reopened. But the alarming spike in virus cases is preoccupying public health officials and economists. Dr Anthony Fauci, the most senior infectious disease expert in the US, earlier this week warned that bars should be closed across the US to contain the virus.
Fears that the infection spike which prompted a local shutdown for Leicester in the UK may be extended have abated after data from Public Health England showed that virus cases in previously-identified north of England hotspots are largely in decline.
The UK is poised to reopen its hard-hit hospitality industry, with pubs opening on Saturday complete with a cumbersome system whereby drinkers need to book in advance to enable the source of any outbreaks to be traced.
Speculation is mounting about how the UK Government will seek to support the economy as the end of the furlough scheme approaches. The FT reports Friday that wage subsidy is one option favoured by the government as an alternative to further tax stimulus.
There are reasons to be optimistic on the healthcare front. In the US, Federal Health officials are in talks with the American Red Cross and others about a strategic approach to the collection of blood plasma from coronavirus patients, shown to be a promising treatment.
Meanwhile a high-profile COVID-19 vaccine developed by German biotech firm BioNTech alongside US pharma giant Pfizer, was shown in limited trials to engender a higher antibody response than that triggered in patients who have recovered from the virus. The vaccine is one of the most promising coronavirus vaccine candidates.
WHAT ARE COMPANIES SAYING?
Consumer & Retail
Rank Group Plc
The Rank Group is pleased to announce that, in line with recently updated Government guidance, the Group will commence the reopening of its Mecca bingo clubs from tomorrow, 4 July 2020, with social distancing measures. Initially it will be opening 35 venues in England, with further 30 venues expected to open throughout July and August. Underlying operating profit for the year ended 30 June 2020 is expected to be at the lower end of the previously provided guidance range of £48m to £58m after IFRS16 (£40m to £50m pre-IFRS16) due to the venues reopening costs being expensed.
Casual Dining Group
Last night, the restaurant group behind Café Rouge, Bella Italia and Las Iguanas chain was tipped into administration. Despite strong interest in the business the offers received “envisage a reduced restaurant estate”, forcing the administrators to take the “extremely difficult decision” to close restaurants. 91 of the Group’s 250 restaurants, affecting 1,909 of the 5,959 employees, have been closed with immediate effect after the appointment of administrators from Alix Partners.
Fuller, Smith & Turner Plc
As previously announced, Fuller, Smith & Turner P.L.C. had intended to publish its Full Year results today. However, the auditors have informed Fuller that they will need additional time to complete the formalities of the audit process, which has resulted in a further delay to the results. The delay is a result of the auditors’ internal processes, with Grant Thornton continuing to cite the complexities surrounding COVID-19 and related abnormal working arrangements as the reason behind the time taken to complete the audit. Fuller’s will now announce a revised date for its Full Year results for the year ended 28 March 2020 shortly.
Industrials & Transport
American Airlines
Executives said that American Airlines could have more than 20,000 front-line employees than it needs this autumn due to its reduced flying schedule according to the Financial Times. Doug Parker, chief executive, and Robert Isom, president, said in a memo to employees that, given reduced customer traffic, the airline anticipated that it would have 20 – 30% more pilots, flight attendants, airport agents, mechanics and baggage handlers than it needs. On Wednesday the airline decided to abandon 19 international routes from six hubs.
Essentra
In a pre-close trading update, Essentra reported all 71 manufacturing and distribution facilities are operational and broadly back to pre-pandemic levels of service. Like-for-like revenue trend improved as Q2 progressed; -17% in April, -10% in May and -1% anticipated in June. The most significant impact of the pandemic was in Components, with underlying demand in Packaging and Filters robust and marginal year on year growth achieved in June in both divisions.
Financials & Real Estate
Land Sec Group
Following the easing of restrictions on non-essential retail in England, Scotland and Wales, all its shopping centres, outlets and retail parks are now open. The Board has reviewed the position on future dividend payments and intends to reinstate payments following the half-yearly results announcement on 10 November 2020. In England, for the two-week period since non-essential retail opened on 15 June, footfall in its centres was 60% of the level achieved in the equivalent period last year and like-for-like store sales were 80% of the level achieved last year. Over the same two-week period, average transaction values were up 22% compared with last year. 60% of the net rent due on 24 June was paid within five working days compared with 94% for the equivalent period last year. Covid-19 has resulted in some customers taking longer to pay their rent, 75% of rent due on 25 March has now been received but overall, £30m of rent due on 25 March remains outstanding.
CMC Markets
The online trading company has said that its financial performance this year will be ahead of City expectations. In Q1 2021, the entire business has continued to perform very well, with client trading activity remaining around double that of the same period in the prior year as stated on 11 June 2020 in FY20 results. Client income retention for the period is materially higher than the 82% reported in H1 2020 and stockbroking net trading revenue also continues to benefit from the market conditions. As a result, net operating income for Q1 2021 is in excess of that reported for H1 2020 of £102.3 million. The Board is confident that, even in the event that more normalised client trading activity returns, with the strong underlying performance of the business, 2021 net operating income will exceed the upper end of current market consensus.
Numis
Numis issued a trading update and said that revenue for the third quarter was materially ahead of each of the first two quarters of the financial year with both Investment Banking and Equities delivering strong performances. Investment Banking benefited from an increase in capital markets transaction volumes which more than offset the decline in M&A deals and absence of IPOs. In addition, average deal fees were significantly higher during the quarter as Numis completed capital raisings for some of our larger corporate clients such as ASOS, Beazley, Ocado, and Unite.
Amigo Holdings
Further to the announcement on 22 June 2020, Amigo has yesterday entered into an amended Voluntary Requirement with the FCA. Under the terms of the amended VReq, the Company has agreed to reach a position by 30 October 2020 where all complaints are dealt with appropriately within eight weeks.
IN THE NEWS
Furlough scheme is stopping people working, says Boris Johnson – The Times
Sunak damps hopes of big UK tax cuts – Financial Times
Three-quarters of UK manufacturers set to cut jobs this year – Financial Times
Real-time data points to recovery gaining momentum – The Times
