Powerscourt

By Powerscourt on 16/07/2020

Powerscourt Coronavirus Briefing – 16 July 2020

ANALYSIS

To the extent that there is a silver bullet for the world economy, it’s a coronavirus vaccine: a development which would at a stroke enable people to interact safely and normally. Today, there are growing signs that such a vaccine may be a reality within the next year.

Multiple reports suggest that the closely-watched Phase I data from the experimental virus candidate backed by AstraZeneca being trialled at Oxford University, which is probably the most advanced vaccine candidate in development, have shown signals for the efficacy of the vaccine. The Lancet said the data would be published early next week.

Dr Anthony Fauci, the top immunology expert in the US, who has been at odds with President Trump throughout the virus crisis, told Reuters Wednesday he is optimistic that a vaccine may be approved by the end of the year, although the UK Health Secretary Matt Hancock said it was more likely to be 2021. 

But at the same time, a study from King’s College London found that coronavirus antibodies decline quickly, suggesting that a vaccine would need to be administered on a repeat basis to give effective production.

Melinda Gates, who leads the Bill & Melinda Gates Foundation with her husband, Microsoft founder Bill Gates, has broken with the couple’s previous political neutrality to express disappointment with the Trump administration in its handling of the coronavirus crisis in an interview with the Financial Times. In particular, the Gates Foundation, which controls nearly $50 billion in philanthropic investment and is one of the most significant backers of the coronavirus vaccine hunt, chastised the administration for repeatedly undermining the views of independent scientific experts, such as Dr Fauci, for political gain.

UK Prime Minister Boris Johnson is expected on Friday to urge the UK public to get back to work, after the Governor of the Bank of England, Andrew Bailey, raised alarm privately to senior Tory MPs about the impact on the UK economy of people’s reluctance to return to their workplaces after having been struck by the deserted City of London. But the impetus to return to work will not have been helped by farcically confusing guidance from the UK government on the wearing of face masks.

Downing Street on Wednesday appeared directly to contradict the advice of Health Secretary Matt Hancock who had earlier said that some food shops would not be excluded from the requirement to wear masks. Confusion around the wearing of masks has become the latest symbol for government indecision and citizen confusion.

China’s economy has returned to GDP growth in the second quarter, the government statistics authority said Thursday, following a steep slump earlier this year. Growth at 3.2% exceeded forecasts, but still betrays weak consumer confidence.

Major world stock markets closed significantly higher Wednesday, with the FTSE 100 index closing up nearly two percentage points, but Asian markets were lower Thursday.

 

WHAT ARE COMPANIES SAYING?

 

Consumer & Retail 

GVC Holdings
The global sports-betting and gaming group announced its Post Close Trading Update and said it had “a encouraging start to the year, despite the impact of COVID-19” with Group net gaming revenue was down 11%, but Online net gaming revenue (NGR) up 19%. Online NGR grew 22% in Q2, despite overall performance being impacted by sports cancellations, demonstrating the strength and diversification of the Group’s geographic, brand, channel and product offering. However, UK Retail like-for-like NGR was down 50% driven by store closures for much of Q2. GVC also announced Kenneth Alexander is leaving the business after 13 years. He will be succeeded by Shay Segev, its chief operating officer.

SSE
SSE said coronavirus impacts on operating profit for the first three months of trading are in line with expectations, with the total for 2020/21 still anticipated to be in the range of £150m to £250m before mitigation. SSE continues to keep this assessment under review and will provide guidance on adjusted earnings per share later in the financial year. SSE said its dividend provides income for people’s pensions and savings and is particularly vital given the economic consequences of the coronavirus pandemic. It intends to declare a 24.4p interim dividend in November 2020 for payment in March 2021, based on an estimated RPI of 1.5%.

Hays plc
In its fourth quarter trading update, Hays reported group fees were down 34%, with markets greatly impacted by the Covid pandemic. Overall, May/June fees were sequentially stable. While current activity levels have improved, there are not yet signs of positive fee momentum.  Full-year operating profit is expected to be between c.£130-135 million, down from £248.8 million the previous year. Its cost base has been reduced by 21% versus pre-Covid levels, partially helped by certain temporary cost savings. In the UK & Ireland specifically, fees were down 42%, with temporary work down 30% and permanent down 58%. Private sector markets were particularly tough with fees down 46% whilst public sector was down 30%. 

Marshalls plc
Marshalls plc, the specialist landscape products group said revenue for the 6 months ended 30 June 2020 was £210.5 million (2019: £280.1 million) which represents a decrease of 25 per cent year on year. Trading in June was better than expected with revenue 2 per cent ahead of June 2019. On a like for like basis the June average daily revenue was down 7 per cent compared to the prior year period. This is a significant improvement as April was 66 per cent down on a like for like basis. All continuing manufacturing sites are now fully operational and have been reorganised to accommodate appropriate social distancing requirements without any loss of productivity. As a result of the recent improving trading levels, Marshalls have not been required to access its additional bank facilities or the Group’s approved Covid Corporate Financing Facility commercial paper programme.

Carnival Plc
Carnival, one of the world’s largest leisure travel companies announced that pricing of $775 million and £425 million second-priority Senior Secured notes due by 2026. Carnival explained Covid-19 has had, and is expected to continue to have, a significant impact on its financial condition and operations, which impacts its ability to obtain acceptable financing to fund resulting reductions in cash from operations.

Biffa Plc
The UK’s leading sustainable waste management business issued a trading update and said trading in the first three months of FY21 has been slightly ahead of the Group’s base case scenario. Overall Group revenues, which in April were c.70% of pre-COVID-19 run rates, recovered in June to c.83% of pre-Covid-19 levels. The Industrial and Commercial (I&C) revenues during July are back to over 80% of pre-COVID-19 levels and landfill revenues are over 70% versus their low points in April. Following the £100m equity raise at the start of June, the Group has recommenced its investment programme which “will enable it to deliver its ambitious sustainability goals and growth in shareholder returns.” 

 

Industrials & Transport 

Anglo American 
The Mining company provided a production report for the end of the second quarter and said production declined 18% in the second period of the year. The group’s diamond production fell 54% in April-June, platinum fell 41% and both palladium and thermal coal decreased 32%. Kumba iron ore and manganese ore were also down. However, production of copper and iron ore from Minas-Rio in Brazil was up. From a production level of around 60% of total capacity in April, by the end of June it had reached about 90% of production capacity. For 2020 overall, Anglo America downgraded its metallurgical coal production guidance to a range of 16-18 million metric tons from 19-21 million tons; and thermal coal expectations to 21 million tons from 22 million tons.

American Airlines
American Airlines said on Wednesday it is sending 25,000 notices of potential furloughs to frontline workers. The Airline expanded that the notices are tied to the overstaffing it expects in October when U.S. government payroll assistance expires. It warned that demand for air travel is slowing again as COVID-19 cases increase and states re-establish quarantine restrictions.

 

Financials & Real Estates

Experian
The global information services company gave a trading update and CEO Brian Cassin summarised that “Experian has been very resilient” during the Covid-19 crisis. It has delivered growth in North America and Brazil during Q1, which helped offset weaker conditions elsewhere, and as a result total revenue was down just 1% at constant exchange rates, with organic revenue down 2%. In UK and Ireland both total and organic revenue, at constant exchange rates, were down 15%. The COVID-19 crisis, Experian said has shown the critical importance of data and through this challenging period, it has been working to support governments, hospitals, businesses and charities.  Experian said due to levesl of uncertainty around the extent or re-imposition of lockdowns, government action to support economies and the shape of economic recovery they do not intend to provide guidance for the year ending 31 March 2021.

 

IN THE NEWS

UK sheds 650,000 jobs during coronavirus lockdown Financial Times 

Sunak tells struggling businesses not to expect help with debts Financial Times 

Economy to suffer from ‘incomplete recovery’The Times 

Fresh hopes for Covid vaccine give markets a shot in the armThe Times




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