Powerscourt

By Powerscourt on 23/07/2020

Powerscourt Coronavirus Briefing – 23 July 2020

ANALYSIS

A new global arms race is underway, and its biological. The most powerful countries in the world are now falling over themselves to stockpile COVID vaccines even before they are approved for use.

The US government on Wednesday agreed to pay nearly $2 billion to Pfizer and German biotech BioNTech for a highly experimental COVID-19 vaccine which will be provided to Americans free of charge if successful. The agreement commits the US to 100 million doses of the vaccine, should it be approved, with the potential for an additional 500 million doses.

The deal underlines the fact that a COVID vaccine is now no longer just a healthcare and economic policy goal – it’s a geopolitical status symbol. The US, Russia, China and the UK in particular are now jostling for a seat at this top table. Last week Kirill Dmitriev, Chief Executive of the Russian Direct Investment Fund, told the Financial Times that around a third of the Russian population could be inoculated by early 2021 if a vaccine being developed there is successful.

The vaccine gold rush comes as the virus continues to debilitate some of the world’s largest economies. The US continues to hit grim coronavirus milestones, averaging more than 66,000 new cases daily, double the rate a month ago.

In India, one of the fastest-growing sites of infection, government tests suggest that one in four people in Delhi have coronavirus antibodies.

Most major developed economies are into their second or third round of stimulus. Australia on Wednesday reported its largest budget deficit since the Second World War due to the spiralling costs of emergency measures designed to protect jobs.

Those countries which are beginning to find firmer footings on their recovery plans are now positioning themselves to deal with the inevitable political fallout. In many places, coronavirus has polarised the voter bases of nations and pushed radical views to the fore.

UK Prime Minister Boris Johnson no doubt has this in mind as he travels to Scotland today where he plans to lobby the Scots on the enduring benefit of being part of the United Kingdom. The virus has exposed the significant existing faultlines between the four nations which comprise the union, particularly England and Scotland.

Johnson talked of the “sheer might” of the United Kingdom. Whether this will persuade the already sceptical Scots – who had a much more robust lockdown and far lower infection numbers than England – to abandon a fresh independence referendum, remains to be seen.

Major US stock indices closed higher Wednesday, but Asian shares sagged on Thursday, largely due to continuing tensions between the US and China.

 

WHAT ARE COMPANIES SAYING?

 

Retail & Consumer

Chilango
One of the pioneers of the Mexican restaurant scene has filed a notice of its intention to appoint administrators and has hoistered a “for sale” sign. Chilango, which as recently as January had gone through a company voluntary arrangement, said in a letter to investors that it had not been able to mitigate the impact of coronavirus and that RSM, its restructuring adviser, would be launching a sale. It said that Eric Partaker and Dan Houghton, who founded Chilango in 2007, would not be buying the business back out of administration.

John Lewis
Dame Sharon White, the boss of John Lewis Partnership, is preparing for a showdown with Andy Street, the West Midlands mayor and former boss of the store chain, this week over the retailer’s plans to shut its Birmingham store. John Lewis has announced plans to shut eight “financially challenged” stores, including its newest store in Birmingham – which was opened in 2015 by Mr Street. John Lewis has not made a profit on the store, partly because its location failed to attract customers and partly the coronavirus pandemic accelerating the shift away from shopping in store.

Nichols
The soft drinks group behind Vimto has become the fourth British company to rejoin the dividend list after restoring the final dividend of 28p scrapped in March because of coronavirus uncertainty. Nichols, which is still 34.7% owned by its founding family, has declared a 28p-per-share interim dividend, joining Focusrite, Palace Capital and Land Securities in restoring payouts

Tate & Lyle
Food ingredients maker Tate & Lyle stated this morning that demand improved in June compared to the previous two months as coronavirus restrictions eased and more restaurants, bars, cinemas and other public facilities opened. Demand started to recover sequentially during the quarter as some US states began to ease lockdown restrictions. However, remaining cautious, the company said the full extent of the pandemic’s impact still remained unclear.

Unilever
Unilever saw turnover weaken in its latest half-year results as the impacts of coronavirus hurt sales in emerging markets, while sales in developed markets rose, it announced today. However, it beat analyst expectations of a 4.3% drop in underlying sales, posting just a 0.3% decline for the second quarter. Unilever also announced that after exploring options for a sale of its €3bn tea division, it will keep its operations in India and Indonesia. 

 

Industrials & Transport 

Bodycote
The world’s largest supplier of heat treatment services has this morning reported that their results for the past six months were significantly impacted by the pandemic-related downturn. Revenue was down 16.3% at £306.7m and headline operating profit was down 43%, at £37.8m. Immediate cost saving initiatives were implemented at the outset of the virus and restructuring activities have stepped up and are yielding permanent future annualised cost savings of £58m.

British Airways
British Airways has struck a deal with pilots over sweeping job cuts in response to the coronavirus pandemic. Up to 270 pilots face compulsory redundancy under measures agreed by the British Airline Pilots Association (Balpa). The agreement will be seen as a key step in BA’s response to the pandemic, which has left the flag carrier fighting to stay afloat.

Carnival
Due to the continued progression of COVID-19 and related decisions of various governments, health authorities and airlines regarding travel restrictions, Carnival has announced that Princess Cruises will be extending its pause in cruise operations. The pause will impact all cruises sailing in and out of Australia and all sailings in Asia, the Caribbean, California Coast, Hawaii, Mexico, Panama Canal, South America, Antarctica, Japan and Tahiti/South Pacific through December 2020.

Croda International
The speciality chemical company reported their results for the six months ended 30 June, recording a 4.9% decline in core business sales and adjusted operating profit 9.9% lower than the same time last year. However, despite the challenging COVID-19 conditions, the group has maintained a strong balance sheet and healthy cash generation that supports continued investment in R&D and M&A.

G4S
Security contractor G4S has reported first-half operating profit that beat market expectations, getting a boost from a solid performance in its core security business, but said it would still hold off on paying dividends. The group sold off most of its cash handling business in February to US peer Brinks Co to focus on its security business. Profit fell 4.6% year-on-year to £187m. However, analysts had expected operating profit of £159m, according to a company compiled consensus.

Johnson Matthey
Chemicals company Johnson Matthey warned this morning that performance would be second-half weighted as visibility on demand remained limited. The company said first-half results were ‘materially’ below last year, largely due to weaker activity in its clean air division. Clean Air sales were down about 50% in the first quarter, primarily driven by weaker consumer demand and temporary customer shutdowns in Europe and the Americas.

Petra Diamonds Limited
For the year FY20, Petra Diamonds has experienced significantly reduced activity throughout the diamond market pipeline, as a result of the unprecedented impact of COVID-19. Revenue decreased 36% to $295.8m and the group total on mine cash costs is expected to be largely in line with guidance. Net debt as at 30 June 2020 is $658m, due to lower sales and the capitalisation of the deferred coupon payment on the company’s loan notes.

Petropavlovsk
Petropavlovsk, one of Russia’s major gold mining companies, this morning reported a 42% increase in total gold production and a 39% increase in total gold sales in the half year trading update for 2020. Despite the pandemic, the company’s operations and logistics have not been interrupted and construction of the new flotation facility at Pioneer continues, with the expectation that the plant will be fully operations in Q4 2020.

Polymetal International
Polymetal International this morning posted significantly stronger revenue for the second quarter, as it benefited from improved gold prices and sales volumes. The FTSE 100 precious metals miner said its revenue rose 30% yo $641 million in April-June compared with a year earlier, although gold sales volumes were up only 3%, at 324,000 ounces. Overall production rose 2% to 358,000 gold equivalent ounces in April-June, and gold output increased 5% to 318,000 ounces.

Scottish Power
Scottish Power has reported rising profits but warned of problems ahead as the coronavirus pandemic is expected to leave customers unable to pay their bills. EBITDA rose in the first half of the year in all three of their divisions, led by a £116 million increase in the renewables division, to £329 million. The company said this was driven by the start-up of the East Anglia One offshore wind farm last year, though its onshore wind farms also benefited from windier weather.

 

Financials & Real Estate

AJ Bell
Financial markets have rebounded, but remain volatile for investors, according to Manchester-based investment platform AJ Bell today. In a third quarter trading update for the three months to June 30, it reported that total customer numbers increased to 282,619, up 26% over the past 12 months and 8% in the quarter, with total net inflows in the quarter at £1.2bn.

Alliance Trust
Alliance Trust announced this morning that it is on course to pay its 54th increased final year dividend in a row, despite the impact of coronavirus on its portfolio companies. The Dundee-based investment company today announced an interim dividend of 7.19p, up 3% from 6.98p for the first six months of last year. Its net asset value per share at June 30 was 837.2p down from December 31 at 875.9p, but up slightly from the same time last year

Brewin Dolphin Holdings
In their trading update for the third quarter, Brewin Dolphin announced continued resilient performance supported by market recovery and organic growth. Total funds increased by 12.8% to £46.7bn in the quarter, with discretionary funds increasing 13.7% to £40.6bn.

Countryside Properties
Rising demand for affordable housing has prompted Countryside Properties to launch a £250 million share placing. The FTSE 250 housebuilder plans to invest £150 million in its partnerships business, which delivers affordable homes for housing associations, council and the private rented sector. The remaining £100 million will be used to strengthen the company’s balance sheet after the impact of the pandemic-related lockdown.

Hansard Global
The specialist long-term savings provider issued its results for the financial year, stating that new business was up 2.5% from the previous year at £159.8m. Whilst the COVID-19 environment impacted their Q4 business, resulting in new business being 13.2% lower than the same time the previous year, the group’s technology-based processes and business continuity preparedness assisted in mitigating the impact. The Latin American region was the highlight for Hansard Global, with new business growth finishing up 44% higher than the previous year.

IG Group Holdings
Leader in online trading, IG Group Holdings has announced good performance in Q1-Q3 FY20, boosted by exceptional Q4 results. Full year net trading revenue grew 36% to £649.2 million, with profit before tax increasing 52% to £295.9 million. Through the pandemic, IG Group continued to invest in technology infrastructure and systems that enabled their workforce to transition to remote working whilst handling exceptional trade volumes and client onboarding.

 

TMT

Kin and Carta
In a financing and trading update released this morning, Kin and Carta confirmed that organic net revenue for H2 is expected to decline 20% compared with the same period last year, due to the effects of the COVID-19 pandemic. In addition, the company’s banks have agreed to increase the ceiling on its quarterly leverage covenant to up to 5.0 times EBITDA (previously 2.5 times) for four quarters, commencing with quarter ended 31 July 2020.

Relx
The global provider of information-based analytics and decision tools this morning reported that its three largest business areas earned a combined first half revenue of £3,300m and adjusted operating profit of £1,056m for the six months ended 30 June 2020. Exhibitions however, was significantly impacted by the pandemic with first half revenue of £201m and an adjusted operating loss of £117m. As a result, Relx has confirmed that the outlook for the remainder of 2020 is highly uncertain.

Sage Group
The multinational enterprise software group reported 6.5% growth in its third quarter, reflecting a resilient performance against the background of more challenging trading conditions as a result of COVID-19. Q3 recurring revenue increased by 6.5% to £421 million from £395 million a year ago. Total group revenue for the quarter improved by 1.1% to £460 million, from £455 million in the same period last year. 

 

IN THE NEWS

Virus gives Australia biggest deficit since WW2 – BB

Face masks to become compulsory in takeaways as Government tightens law – Daily Telegraph

Europe’s housing market shows signs of life – Financial Time

Care home visits allowed, but flowers, hugs and kisses banned – The Times




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