Powerscourt

By Powerscourt on 08/07/2020

Powerscourt Coronavirus Briefing – 08 July 2020

ANALYSIS

Brazilian President Jair  Bolsonaro previously called Covid-19 “a little flu”. Now he has it. In the USA, 4,000 miles to the north, new infections remain stubbornly high with a 1.8% increase in cases. There have been 50,000 new cases in the US for each of the past four days and the total number of infections in the country is just about 3m. At the same time, there wasn’t a single new case in Beijing, the Chinese capital.

The Dow Jones and S&P closed down 1.5% and 1.08% respectively Tuesday. Asian markets were mixed overnight with China doing best. Federal Reserve officials indicated in interviews on Tuesday that they would support further stimulus through bond buying programmes. Richard Clarida, the Vice Chair of the Federal Reserve, told CNN the US was standing by to provide whatever support is needed.

Two events on Tuesday underlined the degree to which Brazil and the US, led by self-styled strongmen whose brand equity depends on flaunting consensus, are struggling. Donald Trump and Bolsonaro have both opted out of the more collaborative approaches to containment which appear to be helping other countries claw back some control. They have suggested that the impact of the virus is overstated – their economies are suffering as a result.

Bolsonaro, like US President Trump, has flouted policies implemented by regional Brazilian politicians to contain the virus and has turned not wearing a face mask into an art form. He and his aides celebrated US Independence Day at the US embassy in Brasilia, the Brazilian capital.

Meanwhile President Trump has followed through on his promise to take the United States out of the World Health Organisation after clashing publicly with its leadership earlier in the year over the role of China in the initial stages of the pandemic. His administration gave 12 months formal notice yesterday.

The US has now recorded over 130,000 deaths from the virus, with Brazil recording nearly 67,000. Deaths and cases in both countries far exceed those in the next hardest-hit countries.

Australia is struggling with an outbreak in Melbourne, with 134 new confirmed cases on Wednesday. Officials there are considering limiting travel in and out of the country. The state of Victoria is now closed to international arrivals.

Beijing has suspended meat imports from a number of overseas processing plants: something which is likely to lead to price hikes for Chinese consumers, but which also speaks to the apparent connection between meat processing plants worldwide and the virus.

UK Chancellor Rishi Sunak is today expected to unveil a so-called Plan for Jobs: a mini budget which will include a £2bn investment in job creation, including providing funding for employers to offer six month work placements to young people.

 

WHAT ARE COMPANIES SAYING?

 

Consumer & Retail 

Uber
Uber is launching its first permanent boat service in the world in London, as the ride-hailing group expands the transport services it offers customers during the coronavirus pandemic. The company will soon be deploying branded boats across the Thames, which users can book via the normal Uber app. Passengers will then scan a QR code to board. The move comes as Uber deals with a huge drop in passenger numbers for its taxi-hailing service around the world. Worldwide bookings fell 80% in April and Uber has cut nearly 7,000 jobs to protect its balance sheet. 

 

Industrials & Transport 

DHL
DHL will axe 2,200 staff working on a contract for Jaguar Land Rober, highlighting intense pressures on the car sector and raising fears of more redundancies at Britain’s biggest car maker. The logistics company has told its staff that 40% of them working at JLR factories and delivering parts to car plants are likely to lose their jobs because of a combination of the slump in demand for vehicles and ongoing efficiency measures. The bulk of the positions involve delivering parts to plants and production lines and are a mixture of full-time and agency roles, with a further 200 in back-office roles. 

Eurocell
In line with official guidance, Eurocell temporarily closed manufacturing plants on 23 March 2020. However, since 11 May, the company has implemented a phased reopening of the business. Group sales for the 6 months ended 30 June 2020 were £94 million, 31% below H1 2019. Performance in the 11 weeks to March 2020 was in line with expectations and there was no discernible impact on trading until the point of closure of the business. Since re-opening, sales have exceeded expectations with group sales for June 2020 6% up on June 2019 at £25 million.

Exillon Energy
The Russian oil exploration and product company with assets in two oil-rich regions of Northern Russia has this morning released an update on their delisting from the London Stock Exchange. The original timeline for the delisting was affected by the outbreak of COVID-19 and it’s impact on the business. However, Exillon Energy now intends to proceed and convene an EGM shortly to put the resolution to a vote by shareholders.

First Group
Prior to the outbreak of COVID-19, trading trends for the multi-national transport group were broadly similar with industry cost pressures largely offset by revenue growth and management actions. However, the impact of the virus in early March, traditionally a significant trading period for First Group, resulted in average passenger volumes declining by 90%. The decline was partially offset through initial cost actions but despite this, it resulted in a significant effect on revenue and a material impact to adjusted operating profit, which reduced to £256.8m.

Victrex
Whilst Q3 started strong for the innovative polymer solutions leader, Victrex saw a weaker end to the quarter as run-rates in May and June declined. On a year-to-date basis, group volumes are broadly in line with the prior year with group sales volumes down 12% to 805 tonnes and group revenue down 18% to £58.8m. Following a broadly stable performance in April, May and June started to see the impact of COVID-19 related headwinds across their markets.

Yellow Cake
The specialist company operating in the uranium sector has announced its full year results this morning, stating that the value of the company’s U3O8 holding has increased 26% to USD263.5 million, alongside the spot price increase of 6% to USD25.75/lb. Constrained supply, exacerbated by the impact of the COVID-19 pandemic resulted in the uranium spot price continuing to rise, stated CEO Andre Liebenberg. Yellow Cake expects that the uranium price will continue to see upwards pressure and are aiming to capitalise on the supply agreement with Kazatomprom at the appropriate time. 

 

Financials & Real Estate 

Liontrust Asset Management
The independent fund management group today announced its results for the year end, with adjusted profit before tax increasing 26% to £38.1 million and adjusted diluted earnings per share increasing 21% to 56.7 pence. CEO, John Ions, stated that the near shutdown of the UK has brought many external influences into play when announcing this set of results, however Liontrust Asset Management has been fortunate in that it has been able to adapt more easily than some others. Following their positive results, the company announced that the second Interim dividend will proceed as planned, with 24 pence payable on 21 August 2020. 

The Unite Group
The UK’s leading owner, manager and developer of student accommodation this morning announced the quarterly property value of the Unite UK Student Accommodation Fund (USAF) and the London Student Accommodation Joint Venture (LSAV). USAF’s property portfolio was independently valued at £2,789 million and LSAV’s investment portfolio was independently valued at £1,316 million, both unchanged over the quarter. However, this represents a 2.2% and 1.5% value reduction in the USAF and LSAV property portfolios respectively, reflecting income deductions relating to zero summer income and the impact of COVID-19 disruption on 2020/21 income. 

U and I Group
In the year ended March 2020, U and I Group made £11 million in development and trading gains, significantly below the £35-45 million target. This was as a result of delivery timings being delayed by significant market uncertainty and third-party delays in decision-making caused by Brexit, the General Election and the COVID-19 pandemic. The company’s investment portfolio capital value was also down 7.9% to £130.6 million, including their share of joint ventures, primarily reflecting the continued market decline in retail sector property values. 

 

TMT

Glaxo Smith Kline
Glaxo Smith Kline has teamed up with a Canadian company, Medicago, to use its adjuvant technology on a new candidate vaccine for COVID-19. The pharmaceuticals giant said that the deal could lead to the proposed vaccine being available in the first half of next year and 100 million doses being produced by the end of 2021. The companies will use Medicago’s plant-based production platform to make the antigen for the vaccine, while Glaxo will provide the adjuvants to enhance its effectiveness.

Medica Group
The UK market leader in the provision of teleradiology services, Medica Group, this morning announced a trading update for the six months ended June 2020. The group expects revenue for H1 2020 to fall to £17 million, compared to £22 million in H1 2019, due to the impact of the pandemic on radiology reporting activity. However, their cash position remains robust despite the decline in revenues, with a cash balance of £20 million, compared to £16.5 million in December 2019. 

 

IN THE NEWS

Stocks struggle as US virus outbreaks threaten recovery – Financial Times

Rishi Sunak to announce £2bn jobs fund to help young people beat coronavirus crisis – The Times




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