By Powerscourt on 11/08/2020
Powerscourt Coronavirus Briefing – 11 August 2020
ANALYSIS
Despite tens of thousands of job losses being announced in recent weeks, overall UK unemployment remained near all-time lows in June according to data published this morning by the Office for National Statistics.
The ONS data shows that the country’s 3-month unemployment rate remained near record lows at 3.9% in June. The single month rate fell from 4.1% in May to 3.8%. Economists had expected unemployment to rise to 4.2% in June, up from 3.9% in May. However, this data clearly does not include recent announcements in July and August from a swathe of large businesses who have reduced their workforces.
Elsewhere, education has once again become a key flash point for the UK government. As the Prime Minister Boris Johnson lent his full force to a campaign to get schools reopened in early September, a report in the Times today claims that scientists at Public Health England are concerned that older children and teenagers may have as much capacity to spread the virus as adults.
If confirmed, concern over the risk that older children could restimulate outbreaks threatens to derail the plan to get schools open again by early September, something Boris Johnson has committed much of his political capital to, and which underpins the broader health of the UK economy. The government has consistently suggested that the risk of children spreading the virus is low.
Teaching unions on Monday called on the government to ensure that there was a “Plan B” in place to manage the impact of any local outbreaks arising from the reopening of schools, with one suggesting a rotating week on, week off programme for schools. But Johnson has called reopening schools a “national priority”.
Globally, coronavirus cases topped 20 million on Monday, according to data from Johns Hopkins University. The US still has the largest number of infections, while India and other Latin American countries are also sustaining large numbers.
Despite the damage the virus has done, five months after the World Health Organisation identified a global pandemic, Tedros Adhanom Ghebreyesus, who heads the organisation, said there are still “green shoots of hope”. He called on nations to work together in a coordinated fashion to turn the outbreak around.
But Europe, which for now has relatively low virus prevalence, remains braced for a second wave of infections. On Tuesday, the European Union’s health agency warned for the need for coordinated action to prevent this. France has ordered residents of a number of Paris streets to wear face masks.
WHAT ARE COMPANIES SAYING?
Industrial & Travel
InterContinental Hotels Group
IHG’s half year results showed operating profit down 82% to $74m and a operating loss of $233m. Group revenue was down 45% from the same period in 2019, to $1.25bn, with revenue per available room down by 75% in the second quarter. IHG said they had seen small but steady improvements in occupancy, rising to around 45% in July. Keith Barr, Chief Executive Officer said, “The impact of this crisis on our industry cannot be underestimated, but we are seeing some very early signs of improvement as restrictions ease and traveller confidence returns.”
Carnival
Seabourn, the ultra-luxury travel experience, announced today that it will cancel upcoming voyages for three cruise ships in its fleet as a part of its pause in global ship operations. Each ship have been given different effective through dates ranging from November 2020 to May 2021 (world cruise).The brand had previously announced a pause in its global ship operations from March 14 to November 20, 2020, depending on the ship, effectively cancelling all voyages scheduled to operate during that timeframe. The decision it said to cancel additional voyages is a proactive action to deal with the circumstances continuing to evolve from the global response to the COVID-19 situation.
Heathrow
Over 860,000 passengers travelled through Heathrow in July, down 88% on the previous year. In this update, the airport said this reflects a slight uplift in passenger traffic, since the start of this crisis, driven by the Government’s creation of the first ‘travel corridors’ on July 4th. More than half of these passengers, over 480,000, ventured to European destinations to make the most of the 2020 summer season, quarantine free. The vast majority of Heathrow’s route network (60%) remains grounded.
Petrofac
The provider of oilfield services to the international oil and gas industry said trading and awards were materially impacted by COVID-19 and the sharp fall in oil and gas prices. Business performance net profit cam to US$21 million for the half year with a net loss of US$78 million. The business has instead focused on structurally reducing costs, conserving cash and it is now on track to deliver US$125 million of cost savings in 2020. The longer-term strategy has transformed Petrofac into a more resilient, capital light business with a strengthened balance sheet and a clear commitment to sustainability.
Retail & Consumer
Domino’s Pizza
Half-year results for Domino’s showed a resilient UK and Ireland performance. UK like-for-like sales were up 4.8% whilst Ireland like-for-like sales were down 3.6%. Collection was switched off throughout Covid-19 lockdown period, resulting in Q2 collection orders down 87% but Q2 delivery orders increased by 22%. Statutory profit, including loss from discontinued International operations stood at £19.0m (H1 2019: £22.4m). Its deferred dividend will now be paid in September 2020. Covid-19 has accelerated its evolution to a digital business, with UK online sales up 15% and App sales up 19%.
Petra Diamonds
Petra Diamonds Limited announced that it intends to make use of the UK Financial Conduct Authority’s temporary relief in terms of corporate reporting during the COVID-19 crisis, which allows listed companies an additional two months within which to publish their audited financial statements. The Company has therefore decided to delay the announcement of its financial statements of its Annual Report and Accounts for FY 2020 to 17 November 2020.
Financials & Real Estate
Bellway
The property developer issued a trading update today reporting the number of housing completions in the period fell significantly, reducing by 31% to 7,522 (2019 – 10,892), as a result of temporary groupwide site closures during the ‘lockdown’ period. Bellway said it had a strong forward order book, comprising 6,588 homes (2019 – 4,878 homes), with a value of £1,760.2 million (2019 – £1,223.9 million), a solid platform for the year ahead. The temporary stamp duty holiday, effective from 8 July, and subsequent resurgence in the second-hand market, have since helped to boost customer confidence. As a result, private sales demand has continued to improve over recent weeks, with reservations throughout the typically quiet month of July averaging 140 per week (July 2019 – 162), 13.6% below the same period last year. The Board said they were keen to resume dividend payments as soon as there is more certainty with regards to the economic outlook.
Quilter plc
The financial services company published its interim results this morning reporting £71 million in profit before tax, demonstrating resilient performance (H1 2019: £89 million). Assets under Management/Administration of £107.4 billion (FY 2019: £110.4 billion) showed recovery from the first quarter-end position of £95.3 billion.
Cairn Homes
The leading Irish homebuilding company issued a trading update reporting for the six months ended 30 June 2020. The Company closed 207 new home sales (H1 2019: 390 closed new home sales) and generated total revenues of c. €80.6 million (H1 2019: €192.4 million). Despite the significant headwinds faced around production capacity and closed sites and show houses, Cairn Homes remained profitable in the six month period, at €5.6 million (H1 2019: €27.3 million). The Company said it was encouraged by the level of underlying demand and sales since show homes reopened in June 2020. Its closed and current forward sales pipeline has grown to 970 new homes as of 10 August 2020 (from 863 on 13 May 2020).
Derwent London
The property firm reported their interim results and increased the interim dividend 4.8% to 22p per share.” Gross rental income increased 5% to £97.8m from £93.1m in H1 2019. Paul Williams, Chief Executive, commented: “Recent events have highlighted the importance of offices for enhancing collaboration, social interaction and wellbeing to build business culture and attract and develop talent. Derwent London’s design-led and adaptable space will support our occupiers returning to their offices, an essential part of getting London back to full strength.”
TMT
Plus500
The online trading platform announced its interim results and reported a 281% increase in revenues to $564.2 million and EBITDA of $361.8 million representing year-on-year growth of 452%. There were unprecedented levels of New Customers and Active Customers, with client deposits of $1,653.4 million during the first half of 2020 (H1 2019: $467.1 million) representing growth on H1 2019 of 254%, and relatively low levels of customer churn.
IN THE NEWS
Bank of England will ‘step up QE’ if economy struggles again – The Times
Unemployment crisis builds with 730,000 jobs lost in pandemic – The Telegraph
UK retail sales remain robust in July – The Financial Times
Landlords see cracks in August rent as stimulus talks stall – The Financial Times
