Powerscourt

By Powerscourt on 19/08/2020

Powerscourt Coronavirus Briefing – 19 August 2020

ANALYSIS

The S&P 500 index, generally recognized as most representative of US equities, hit an all time high close  of 3,389.78 on Tuesday, three points ahead of its previous high reach on February 19. The S&P is up 52% from its low on March 23. The remarkable rise is the strongest recovery in market history. It has been led by technology shares and helped by unprecedented government stimulus.

Amazon, which has helped drive the index, announced yesterday that it was taking 900,000 square feet of office in six major US cities. In welcome news for those worried about city life, it said that, in the long term, people will get back to working in offices. Don’t bet against Amazon.

Figures published this morning by the Office for National Statistics show that UK consumer price inflation jumped to 1% in July from 0.6% in June as lockdown measures eased further with rising petrol and clothing prices seen as the key drivers behind the move. CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.  It  is the inflation measure used in the government’s target for inflation.

The Retail Prices Index, another measure of inflation, also surged last month, to 1.6% from 1.1% in June.  RPI is used to calculate the cap on annual rail season ticket price increases in Britain so could prompt more issues for the beleaguered UK rail industry as it grapples with reduced passenger numbers and demands for more flexible ticketing options.

Despite the optimism amongst stockmarket investors in the US, the World Health Organisation has warned that the world is “nowhere near” achieving herd immunity against COVID-19.  Dr Michael Ryan of the WHO told a press conference yesterday that herd immunity is “not a solution that we should be looking to” as he warned people to stop pinning their hopes on the theory as a “COVID fix-all”.

The Irish government is increasingly worried about a surge in cases. The country was having “a good war” until recently but now has the fourth highest rate of growth in new cases in Europe. Two months ago, it was seeing 61 cases a week. Last week, it was 533. The government has reacted with a series of tweaks to its guidance.

In the UK, the Government has this morning announced that free coronavirus tests will be offered to more people to get a better idea of how many are infected at any one time.  The Office for National Statistics’ Infection Survey will test 150,000 people a fortnight in England by October, up from the current rate of 28,000.  The survey is separate from the mass testing programme of people with symptoms, as it aims to take a random sample of the general population with a view to aiding Governments efforts to identify emerging outbreaks promptly.

 

WHAT ARE COMPANIES SAYING?

 

Retail & Consumer

Love Hemp
The wholly owned subsidiary of World High Life reports 57% growth in sales from June to July 2020, with the wellness industry “showing no signs of slowing down”. Online sales remain significantly higher than pre-COVID levels, with this channel making up 62% of sales in July, compared with 40% of sales in June. As the government takes steps to stimulate the economy and lift consumer sentiment, Love Hemp CEO, Tony Calamita, states that they are seeing a welcome boost in physical store sales as well. 

 

Industrial 

Hochschild Mining
In their interim results published this morning, Hochschild Mining reported revenue of $232 million, down $122.5 million from the previous year. Adjusted EBITDA was $80.6 million, down almost half from the previous year. CEO Ignacio Bustamante stated that the company entered the crisis with a strong balance sheet and liquidity, providing the group with the ability to implement a crisis response and protect the business through the outbreak.

Kenmare Resources
Mozambique-focused Kenmare Resources has seen its profit fall by over 40% in the first half of this year on the back of lower production levels. The Dublin-listed group reported profit after tax of $12.7m for the six months to June 30, down from $21.9m the corresponding period last year, according to interim results. Revenue for the period was $116.8m, a 5% decrease on the first half of 2019, while EBITDA was down 13% to $37.2m.

Kazatomprom
Kazatomprom, the world’s largest uranium miner, will keep its output reduced by 20% through 2022 in order to help the market recover, the group reported this morning. This decision to keep production similar year-over-year and extend production curtailment into 2022, is indicative of a global uranium market that is still recovering from a long period of oversupply, according to CEO Galymzhan Pirmatov. The full implementation of this decision would remove up to 5,500 tonnes of uranium from anticipated global primary supply in 2022.

Ofgem
The energy regulator has ordered an investigation into the National Grid after the cost of maintaining the system during lockdown hit a record £718m. The UK’s electricity system has suffered a historic plunge in demand after measures were imposed to curb the spread of coronavirus in March, falling to its lowest level of usage in nearly 40 years. As a result, the cost of balancing the grid between March and July was 39% higher than expected.

Riverstone Energy Limited
In their interim results announced this morning, Chairman of Riverstone Energy stated that the first half of 2020 has been a very difficult period for the group as the pandemic led to six months of “extremely weak performance” for REL. A supply-demand imbalance for oil and gas, as well as a turbulent market environment has resulted in several challenges for portfolio companies. Total comprehensive loss for the six months was $355.18 million and REL ended the period with a Nav of $5.48, compared to $9.66 in the previous period.

Tracsis
The leading provider of software, hardware and services for the rail, traffic data and wider transport industries reports expected group revenues of £48m, down from £49.2m, for the year ended 31 July 2020. Despite the impact of the pandemic, the group expects to report a pre IFRS 16 EBITDA margin in the region of 20%, leaving adjusted EBITDA before the adoption of IFRS 16 and adjusted profit less than the previous year. The majority of EBITDA has been generated from the company’s Rail Technology & Services Division, given this has largely been protected from the impact of COVID-19. 

 

Healthcare

Sensyne Health
The clinical AI company working in partnership with the NHS to improve patient care and accelerate the discover of new medicines has announced the development of DBm-Health, a new software application for people with diabetes. The application was developed in response to the success of GDm-Health for women with diabetes during pregnancy, particularly during the COVID-19 outbreak. 

 

IN THE NEWS

UK inflation hots up as culture and recreation prices climb – Financial Times

Diners claim Sunak discounts on 35m meals – The Daily Telegraph

Emergency coronavirus loans have provided £53bn in credit – The Times

New record as S&P 500 defies crisis – The Times




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