Powerscourt

By Powerscourt on 24/07/2020

Powerscourt Coronavirus Briefing – 24 July 2020

ANALYSIS

Its official, the resurgence of coronavirus is crimping the US economic recovery.

Applications for unemployment benefits have started to tick up for the first time in nearly four months, the Labor Department said on Thursday.  Overall, hiring is still offsetting layoffs, but the restrictions being imposed on reopening by states are hitting jobs. A Reuters poll of leading economists suggested many had revised down their growth forecasts. Goldman Sachs and other leading banks have cut their third quarter economic growth forecasts. Major US stock indices reacted accordingly, with the S&P and Dow both closing down over a percentage point on Thursday. Asian markets were rattled by the rapidly deteriorating relationship between the US and China.  

On Thursday, the US recorded deaths from coronavirus topped 1,100 for a third day in a row, with total cases approaching 4 million. President Trump said he would no longer hold the Florida portion of the Republican Party’s nominating convention in August due to the virus, the latest indication that the President sees the link between curbing large gatherings and controlling infections.

The UK government has announced plans to vaccinate all adults over the age of 50 for flu from September, part of a drive to ensure the NHS does not seize up in the event of a cold weather resurgence of the virus.

Meanwhile face masks have again become a flashpoint in a democracy policing the behaviour of private individuals in response to the crisis.

As of today, it is against the law not to wear a face-covering in many British shops. But who is going to enforce this?

On Thursday, several large UK retailers, including Sainsbury, Asda and Costa Coffee, said they could not be held responsible for upholding  the new rules, saying it was the job of the police. But the Police Federation for England and Wales said its members couldn’t enforce this either.

If policing the behaviour of people in a public space such as a shop is difficult, it’s a lot worse in supposedly private settings and involving young people. Consider the difficulty of university administrators, seeking to police the behaviour of undergraduates.

A number of UK universities, including University College London, have now banned entry to halls of university residence for non-residents when the academic year restarts and Aberystwyth University has banned students from overnight stays. It remains to be seen how freshers, in a population group at very low risk of falling seriously ill, fuelled by hormones and alcohol, and away from home for the first time, can be incentivised to toe this particular line.

 

WHAT ARE COMPANIES SAYING?

 

Retail & Consumer

Cineworld
The world’s second-largest cinema chain will delay the reopening of its US movie theatres to mid-August as the coronavirus crisis persists in the country. The news follows rival AMC, the largest cinema owner in the US, which this morning said it would delay its reopening from 31 July to “mid to late” August.

Dyson
Dyson is axing 600 of its 4,000 UK staff in a scramble to adjust to the post-COVID world. Redundancies will be spread across the business but largely focused on retail roles, with Dyson employees working at department store concessions likely to be hit hard. There will also be cuts to the vacuum maker’s customer service team at its company’s headquarters in Malmesbury, Wiltshire, along with back-office function such as its legal department

French Connection Group
Fashion group French Connection reported this morning that sales since reopening have been low but improving on a weekly basis as coronavirus restrictions continue to ease. Online sales in the past 15 weeks were up 24% with physical footfall significantly reduced, as expected given the pandemic.

Hotel Chocolat Group
The premium British chocolatier this morning confirmed revenue of £136 million for the year ended 28 June, an increase of 3% compared to the previous year. Hotel Chocolat Group reported group sales of £92m, an increase of 14%, in the first half of the year and £45m, a decline of 14%, in the second half of the year. This can be attributed to the closure of all physical UK locations through March and June, coinciding with Easter and Mother’s Day, two of the three largest gifting seasons for the group. 

Pearson
In their interim results for the six months to 30 June, Pearson confirmed that they experienced significant disruption as a result of the pandemic, leading to underlying revenue decreasing 17% on the prior year. Group sales largely reflect the test centre and school closures, however there was gradual improvement from May to June as schools began to reopen. Adjusted operating profit also declined £167m to a loss of £23m. 

 

Industrials & Transport 

American Airlines
American Airlines pledged its brand and hard-to-get take-off and landing rights in New York and Washington to secure a $1.2bn loan, as it tries to weather the sharp downturn in travel due to the coronavirus pandemic. The Fort Worth, Texas, airline said it had reached a deal with the merchant banking division of Goldman Sachs for $1bn in senior notes, secured by a first lien on the “American Airlines” trademark and “aa.com” domain name in the US and some foreign jurisdictions.

Anglo Pacific Group
The global natural resources royalty and streaming company has announced a decrease in portfolio contributions to £18.5-19.0m in H1 2020 as a result of the recent softening of coal prices. Additionally, despite iron ore prices holding up well through the supply issues in Brazil, income from LIORC was lower due to planned capital expenditure. Overall, the group expects H2 2020 to be strong as demand recovers outside of the pandemic

Ferguson
Leading specialist producer of plumbing and heating products this morning announced a pre-close period update, stating that group trading has improved steadily from April with revenue trends in the following months sequentially improving. Blended Branches revenue declined 4.6% in the period whilst Waterworks and HVAC grew by 1.8% and 12.7% respectively. Ferguson expects the ratio of net debt to the last 12 months adjusted EBITDA to be below 1.0 times as at 31 July. 

 

Financials & Real Estate

Stenprop Ltd
The UK multi-let industrial property company today published a trading update for the period to 30 June, stating that there was further improvement in occupancy across the MLI portfolio to 92%, up from 91.1% as the previous year end. Stenprop received £0.79m per annum of new rental income, contracted through 25 new lettings and 17 lease renewals, less than the same time the previous year. 

 

TMT

Airtel Africa
Despite the impact from the coronavirus, Airtel Africa experienced a good start to the year with their customer based growing 11.8% and revenue increasing by 6.9% to $851m. The provider of telecommunications and mobile money services worked with governments, regulators, partners and suppliers throughout the pandemic to ensure that their network was able to cover the restrictions on movements and socialising, resulting in a constant currency revenue growth recorded across all key business segments.

Daily Mail and General Trust
The owner of the Daily Mail slipped into a loss in the second quarter of the year after a fall in advertising revenues but said its media division had swung back into the black. Daily Mail and General Trust reported an operating loss of £2 million between April and June, compared with a profit of £22 million last year. Revenues fell by 29% to £241 million for the period as lockdown hit advertising income.

Relx
Revenues at Europe’s largest media company fell 10% in the first half after it cancelled a slew of exhibitions. The publishing and information conglomerate Relx said it had been unable to hold any corporate events from the middle of March to the end of May because of COVID-19. It held two exhibitions in China last month but has had to cancel or postpone others.

Vodafone
Vodafone, the world’s second biggest mobile operator confirmed today it would list its towers unit, named Vantage Towers, in Frankfurt in early 2021. The multinational telecommunications company stated it would set up a European mast company worth upwards of €18 billion a year ago. The spin-out, which has more than 68,000 mobile towers across nine European markets, became operational in May.

 

IN THE NEWS

Ministers spend £100m on new COVID-19 vaccine plant – The Time

Holidaymakers could face quarantine on return to Britain under new ‘red list’ alert system – The Daily Telegraph

Supermarkets refuse to enforce face mask rules – The Daily Telegraph




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