By Powerscourt on 03/08/2020
Powerscourt Coronavirus Briefing – 03 August 2020
ANALYSIS
As global figures for July are released, revealing a trend of cases doubling every six weeks, governments and businesses continue to play whack-a-mole around the world.
Melbourne has re-entered a strict lockdown, with restrictions on shops opening, a limit on the distance from the home people can exercise, a night-time curfew and other by now familiar curbs on activity. The expectation is that this will last for a period of six weeks.
Closer to home, UK Prime Minister Boris Johnson met with Chancellor Rishi Sunak to plan future lockdown measures should they prove necessary, potentially including shielding for the over-50s or a personalised risk rating system.
Meetings of the Greater Manchester Council and emergency services over the weekend led to the declaration of a major incident for the region after a surge in COVID-19 cases. Major incidents are more often declared as the result of a terror attack or natural disaster requiring a coordinated multi-agency response. It would allow a region to access extra national resources and the police to draft in the army if called for.
In a further blow for the travel industry and holiday plans, two cruise ships have reported Coronavirus breakouts just weeks after it became possible to take a cruise again. Cases were recorded in passengers after leaving the MS Roald Amundsen in Norway and in those on board the Paul Gauguin in Tahiti.
There are hopes that two new tests purchased by the government from DnaNudge and Oxford Nanopore will help improve processes in hospitals and care homes before winter comes. They are faster than others available to date, returning results in just 90 minutes, and can detect both Coronavirus and flu using a kit or onsite pop-up lab. Critics are concerned that they are not yet on international lists of approved tests.
Finally, in some positive news for the income investor, Peel Hunt has released analysis which suggests some recovery in the paying of dividends before the year is out. About 27 companies that cancelled dividends earlier in the year are likely to restore them in 2020 and about £25bn of dividends are pending across the FTSE 350.
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WHAT ARE COMPANIES SAYING?
Retail & Consumer
Heineken
The brewing company reported a drop in revenue and a 11.5% reduction in volume of beer sold, but said it had witnesses a gradual recovery. CEO Dolf van den Brink said: “Heineken has entered the crisis with a strong financial position, a diversified global footprint, great brands, superior consumer and customer intimacy and highly dedicated and talented teams. Moving forward and as markets recover, we will leverage these unique strengths to chart our next growth chapter.”
Carnival
The world’s largest travel-leisure company announced that while its concepts and certifications for the restart of its cruise operations have been developed and confirmed with the responsible authorities, final approval of short trips by Italy has not been given, resulting in the cancellation of certain trips. The company said its preparations were “intensive” and had been carried out with the support of health experts and national and international authorities.
Industrials & Transport
GlaxoSmithKline
The pharmaceutical company announced that it is in discussions with the European Commission for up to 300m doses of the COVID-19 vaccine candidate it has developed with Sanofi. The company described this as a “key milestone in protecting and serving the European population against COVID-19”.
Senior
The manufacturing and engineering group said its results have been significantly impacted by the virus and the 737 MAX, with revenue falling 30%. Confirming further job cuts, CEO David Squires said: “The Coronavirus pandemic has had a profound effect on our markets and customers, and we anticipate that the impact will be with us for some time to come. Whilst we are doing everything possible to sustain jobs, regrettably we have had to extend and broaden the scope of the restructuring in response to the impact of COVID-19 on our business.”
Financials & Real Estate
HSBC
The bank reported a steep fall in its first half profits and that it has set aside further reserves for bad loans in the expectation of more defaults. The bank said it had given more than 700,000 payment holidays. CEO Noel Quinn announced an acceleration of the restructuring plans revealed at the beginning of this year: “Having paused parts of our transformation programme in response to the Covid-19 outbreak, we now intend to accelerate implementation of the plans we announced in February. We are also looking at what additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable business.”
Hiscox
The specialist insurer announced its interim results, highlighting its operational resilience during the crisis with 95% of employees working remotely and no staff being furloughed. The group has set aside $232m for COVID-19 related claims, with $150m of this for previously announced claims for event cancellations and travel claims. CEO Bronek Masojada said: “Our investment in technology has paid off in all areas and supported our growth in Hiscox Retail and Hiscox London Market. Our long-held strategy of balancing volatile big-ticket risks with our more steady retail earnings in the US, UK and Europe provides both stability and opportunity.”
Hammerson
The shopping centre owner and manager released a response to press speculation this morning, which confirmed the company is considering an equity raise by way of a rights issue and that it is in advanced discussions with a JV partner about the disposal of its interests in certain assets. The statement also confirmed that the company has recently secured approval for the issuance of up to £300m from the CCFF. The company said that sales and footfall, as well as Q3 rent collection, have continued to increase.
Purplebricks
The online estate agent announced its full year results this morning, reporting UK instructions down 23%. The company said the market has been recovering since mid-May supported by the government’s stamp duty holiday. CEO Vic Darvey said: “Despite the challenges of COVID-19, our strategic initiatives are being delivered at pace to accelerate our digital and data capabilities, and with a very healthy net cash balance of £66m, I’m confident that we can take advantage of the changing landscape. The Group is encouraged by the early signs of the housing market rebounding well following the lifting of the lockdown and the Government’s Stamp Duty holiday.”
Winkworth
The estate agent provided a market update, saying it has seen a “significant recovery in sales interest” since the stamp duty holiday was announced in July. The company noted that it is too early to say how the rise in activity will translate into completed sales. CEO Dominic Agace said: “This has now been our busiest July in at least the past five years. The changes in stamp duty have turbo-charged the market. Our network is reporting a significant uplift in activity at all price levels, with a focus not only on London and the commuter belt, but also on towns and cities with a longer commute, reflecting the move to a more flexible working landscape.”
IN THE NEWS
Coronavirus testing machines give result in 90 minutes – The Times
Ministers face backlash over plans to extend the shielding programme to over-50s this winter – Telegraph
Secrecy has harmed UK government’s response to Covid-19 crisis, says top scientist – The Guardian
