Powerscourt

By Powerscourt on 10/07/2020

Powerscourt Coronavirus Briefing – 10 July 2020

ANALYSIS

As the number of new daily coronavirus cases in the United States continues to surge, mobile phone data has emerged which appears to show that high infection rates in the worst-hit states are now dampening local economies.

In Arizona, Texas, Florida, Georgia and South Carolina, which had moved before other states during their push in May to reopen commerce, retail foot traffic has now fallen below other areas, according to information from data firm Unacast, which tracks human mobility via mobile phone and other data to draw conclusions about economic behaviour. In other words, those who allegedly prioritised economics over health are seeing their economies suffer.

A record 65,000 Americans tested positive for the virus in the past 24 hours making a total of 3.2m.

A Wall Street Journal analysis Friday outlines how a patchwork of inconsistent approaches to the virus, with wide variations from state to state, has made it difficult to control the spread of the virus. For example, on June 26, North Carolina mandated the wearing of masks across the state. In neighbouring South Carolina, the Governor said it would be impossible to follow suit.

“A mismanaged health crisis across many states means short-term gains will transform into medium-term sluggishness as social distancing relaxation is reversed and virus fear lingers,” Gregory Daco, chief U.S. economist at Oxford Economics, wrote in an analysis on Thursday.

Bad news is not a US monopoly. Hong Kong has announced that all schools are to close early for the summer as new infections surge. Australia is now slowing the rate at which its citizens can return from abroad.

China mainland stocks, which had risen over 16% in recent days, fanned by government encouragement, fell Friday, in line with other Asian markets. The state-owned China Securities Journal, which had talked the market up, warned investors against irrational exuberance.

In the UK, the Culture Secretary Oliver Dowden announced that swimming pools, nail bars and public gyms would reopen on July 25. “Normal life is slowly returning,” Mr Dowden said optimistically. But his comments came a day after a trio of British retailers announced a high street jobs bloodbath, with the impact of the UK government’s furlough scheme pointing to large-scale unemployment in the autumn. Boots, Burger King and John Lewis between them have announced plans to cut 7,000 jobs.

But while the British high street overall is struggling, one corner of retail is experiencing an unprecedented boom: cycle shops. Decathlon, the French sporting goods retailer, said it has waiting lists of up to tens of thousands of people waiting to buy. Earlier this week Halfords said bike sales had risen almost 60% in the 13 weeks to 3 July due to people seeking to avoid public transport.

 

WHAT ARE COMPANIES SAYING?

 

Consumer & Retail 

Dalata Hotel Group
The UK and Ireland hotel operator has this morning announced that it has successfully agreed an amendment to the Group’s debt Facilities Agreement to provide additional financial strength and flexibility as the company reopens all of its 44 hotels. Despite entering the pandemic in a strong position, the business faced significant challenges during the second quarter as a result of shutting their hotels. Having now reopened 42 of its hotels, the pace of bookings over the last week has been encouraging. 

DWF
London’s largest listed legal services company is to slash £15 million in costs as it battles the effects of the pandemic. DWF released a statement that it had taken “swift management action” to make the cuts during its 2021 financial year. It is understood that the company, which last year became one of the first law firms to float on the main London exchange, has started a round of redundancy consultations. 

InnovaDerma
The UK developer of beauty, personal care and life science products today provided a trading update stating that InnovaDerma expects revenues to be up 2.3% against the previous year at £13.2m. The significant impact of COVID-19 and the combination of higher online advertising costs, lower margins of DTC product bundles and the closure of bricks and mortar retails channels has impacted profitability for the group. As a result, InnovaDerma expects to make a much-reduced profit compared to the previous year. 

The Gym Group
The nationwide operator of low cost gyms has announced that it will begin to reopen its facilities on 25 July 2020, following the government announcement on 9 July 2020. The group will proceed with a phased reopening of 160 sites across England opening on 25 July and additional sites in Scotland and Wales following as soon as relevant local restrictions are lifted. In order to limit the risk of spreading the virus, The Gym Group have implemented a number of COVID-secure principles.

 

Industrials & Transport 

Aston Martin
Aston Martin’s first utility vehicle rolled off the production line yesterday, key to hopes of a turnaround at the luxury carmaker. The company has had a difficult time since it floated in 2018 as sales disappointed and it burnt through cash, prompting it to seek fresh investment from the billionaire Lawrence Stroll. Since then it has announced job cuts, is replacing its boss and has picked a new finance chief as it also responds to the coronavirus pandemic. The DBX is the company’s first foray into the lucrative 4×4 market, a late entrant compared with rivals such as Bentley and Rolls-Royce. 

Senior 
The international manufacturer of high technology components for the aerospace & defence industry has released a post-close market update this morning, stating that it has had robust cash performance in the period with £3m of net cash inflow generated despite the tough environment. Net debt is expected to be £239m, an improvement of £3m from 31 December 2019. Senior continues to undertake extensive scenario testing for 2020 based on a variety of end market assumptions and, under all scenarios tested, the group has sufficient liquidity under its existing committed facilities. 

Virgin Atlantic
Sir Richard Branson’s Virgin Atlantic is in talks with its payment-processing providers in an attempt to deliver a £1 billion rescue of the Heathrow-based airline. Denied a government bailout, the company is in talks with Lloyds Banking Group’s Cardnet subsidiary and with First Data, an American card processor, for a £200 million injection of working capital. It is hoping to persuade the pair to provide it with much-needed breathing space, stating that Cardnet and First Data were “the final piece of the jigsaw” in a rescue that could be announced next week. 

 

Financials & Real Estate 

Great Portland Estates

In a trading update for the quarter, Great Portland Estates CEO, Toby Courtauld stated that whilst the lockdown has started to ease and office pre-letting remains healthy, COVID-19 continues to disrupt the activities of many of its main occupiers, which in some instances is impacting their ability to make rent payments. Despite this, 69% of June rent has been collected and 82% of March rent. All offices in the Great Portland Estates group are now open and operating with COVID-19 Secure status and bespoke Return to the Workplace playbooks have been issued to all occupiers. 

 

IN THE NEWS

Britain won’t be part of EU coronavirus vaccine scheme – The Times

Pandemic profit prospects excite reinsurers – Financial Times

UK consumer spending down despite reopening of hospitality sector – Financial Times




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