Powerscourt

By Powerscourt on 15/07/2020

Powerscourt Coronavirus Briefing – 15 July 2020

ANALYSIS

More good news on vaccines overnight. Moderna Inc., one of the front-runners in the race for a vaccine, said on Tuesday it had produced an immune response in all 45 candidates in an early stage trial, a promising initial step. Shares in Moderna, having closed at $75, went close to $90 in afterhours trading valuing the company at almost $35 billion, up more than 300% this year.

The UK has seen a dramatic fall in cigarette consumption during the crisis, claims the anti-tobacco charity Action on Smoking and Health (ASH). It says that 17% of smokers aged 16-29 have successfully quit while 7% of smokers over 50 have also managed.

It isn’t only the tobacco companies who are suffering. Norwegian undertakers are turning to their government for support. The country’s successful response to the virus has reduced mortality generally, while restrictions on funeral attendance are also hurting.

Japan, a country to recover early from an initial wave of coronavirus, yesterday warned that cases are creeping up in the capital, Tokyo, where the City council announced that new cases have been above 100 for six days in a row. Australia is also dealing with an outbreak in Victoria, where there have been 238 new cases overnight. Officials warned residents to observe social distancing rules or risk tougher lockdown measures.

These numbers are, of course, tiny when compared to other countries.

The US announced 65,000 new cases overnight to Tuesday. California, Texas, Missouri and Nevada all set one-day records as the virus surges in the West and South.

With cases continuing to soar, President Trump continues to turn on the phalanx of doctors, health policymakers and economists urging America to slow down. On Tuesday he lambasted Los Angeles and San Diego, California’s most populous cities, for closing schools again amid rising numbers of cases, forcing teaching for the next academic year online. President Trump said this was a “terrible decision”. On Monday California governor Gavin Newsom rolled back much of the reopening which has taken place since the start of this year.

The Wall Street Journal has an interesting editorial arguing against lockdowns and for personal responsibility.

The actions by the President are the latest escalation against health experts who have been warning for weeks that the administration’s attempts to power on with reopening in the face of the virus will have dire consequences. On Tuesday, the Administration ordered hospitals to bypass the Centers for Disease Control and Prevention and send data about coronavirus cases and deaths directly to a central database in Washington, raising fears that the administration is seeking to massage the data.

Europe, for now, is in a stronger position, and France celebrated public health workers as heroes during Bastille Day celebrations on Tuesday but policymakers and officials are aware that the US experience shows how easily the virus can resurge. A day after the UK mandated the wearing of masks in shops, France’s President Emmanuel Macron said he wanted to make mask wearing mandatory in enclosed public spaces, perhaps as soon as August.

Wall Street enjoyed a good day with the Dow Jones Industrial Average rising 2.1%. Asian indices diverged today: Japanese indices rose while Honk Kong and Shanghai are down after President Donald Trump announced that Hong Kong would no longer enjoy differentiated status compared to China: “No special treatment, no special economic treatment and no export of sensitive technologies.”

 

WHAT ARE COMPANIES SAYING?

 

Consumer & Retail 

ASOS 
In a trading statement, the online fashion retailer shared that Group sales had increased by 10 per cent to £1bn in the four months to the end of June, when compared to the same period last year, assisted by “strong growth in lockdown product categories” such as casual-wear, active-wear and beauty. However, against the backdrop of continued social distancing, ongoing restrictions of events and an uncertain economic outlook for customers in their twenties, the company remains caution on the short to medium term outlook on demand. 

Dixons Carphone 
The electronics retailer published its final results today, including that Group adjusted profit before tax had fallen to £166m for the period, down from £339m for the previous year. Revenue from its Mobile business fell by 20 per cent, with sales worse than expected due to the enforced closure of one in three stores, and low sales transfer to online. CEO Alex Baldock said: “We’ve learned a lot during this crisis and will emerge a better business from it. We’ve pioneered new ways of shopping, empowered our colleagues to move faster, and seen how technology is set to play an ever-bigger role in everyone’s lives”. 

Dunelm Group
The homewares retailer provided an update on current trading performance today, reporting that total sales for the past 16 weeks (from 8 March to 27 June) declined by 29 per cent. Store like-for-like sales fell by 49.7 per cent, balanced out by online sales growth of 85.2 per cent. Following lockdown, it began a phased reopening programme in mid-May which saw all 173 stores open by June 22. 

Big Yellow Group 
The self storage provider has published a trading update today for the first quarter ended 30 June, reporting reduced activity levels during the lockdown across both the domestic and business customer bases, with total move-in and move-out activity down by around 15 per cent in June year-on-year. The company has seen increased activity from both individuals and businesses since mid-May when the lockdown began to be eased. 

Burberry 
The luxury fashion house has issued a first quarter trading update, in which it shared that retail revenues had fallen by 45 per cent in the 13 weeks to June 27 year on year. The company expects its second quarter (to the end of September 2020) to continue to be materially impacted by the pandemic, with tourist flows remaining negligible and store operations facing significant headwinds, with some remaining closed or operating with reduced trading hours.

 

Industrials & Transport 

Severn Trent 
The water company published a trading update today in which it announced that it has “not yet seen evidence that would change [its] initial estimates for the impact of Covid-19”. The company continues to guide a £50-£85 million negative impact to 2020/21 revenue, which the Ofwat regulatory model will allow to be recovered in 2022/23. Cash collections have been broadly inline with the same period a year ago, but the company anticipates an increase in Covid-19 bad debt as government support schemes come to an end. 

Hochschild Mining 
The company released its production report for the 6 months ended 30 June today, sharing that it had delivered attributable production of 32,712 gold equivalent ounces in Q2, decreasing from 126,84 for the same period last year. It attributed this fall to the impacts of Covid-19 and the operational stoppage at all three of the company’s mines in South America. Operations at the Inmaculada mine are currently halted due to a number of cases of Covid-19, with the team expected to remobilise during the week beginning 20 July and scheduled to reach full production by the end of the month.

 

Financials & Real Estates

McCarthy and Stone 
In its half year results released today, the developer and manager of retirement communities shared that it had seen a fall in revenue of 64 per cent, with the closure of sales offices and sites under construction from mid-March resulting in a 44 per cent decrease in the number of legal completions to 471, compared to 845 in 2019. It was included however that the company’s early response to the Covid-19 crisis resulted in infection rates being 27 per cent lower than the over 65 UK population, and four times lower than the over 85 group. 

 

IN THE NEWS

State likely to lose billions on emergency loan scheme – The Times

Coronavirus inflicts catastrophic damage to economy – The Daily Telegraph

Global stocks boosted by coronavirus vaccine hope – The Financial Times




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