By Powerscourt on 27/08/2020

Powerscourt Coronavirus Briefing – 27 August 2020


Will coronavirus kill off the financial district?

Figures from the BBC overnight suggest it might do. They show the extent to which coronavirus lockdowns have hollowed out the world’s financial centres by forcing millions to work remotely and have raised concerns about the long-term impact on the businesses which depend on those centres. A BBC study released on Wednesday found 50 major UK employers had no plans to return all staff to the office full time.

A number of major global corporations, among them BP, Google and Fujitsu, have already outlined fairly permanent shifts towards home working. Photographs of the City, London’s financial district, like a ghost town, were said to have worried UK Prime Minister Boris Johnson enough that they prompted his “back to work” plan in July. But subsequent worries about virus resurgence in Europe have resulted in many companies having to re-calibrate their drive to bring staff back into offices.

Now the director-general of the Confederation of British Industry, Dame Carolyn Fairbairn, has written in the Daily Mail of her concern that a permanent shift towards remote working won’t only impact the major corporations which are headquartered in financial centres, it could kill the entire ecosystem in these areas. Sandwich chain Pret a Manger – which relies on breakfast and lunchtime crowds – said in June it was shutting 30 outlets and cutting 1,000 jobs.

Dame Carolyn warned of “serious downsides” for the broader economy, including the impact on young people, if working from home becomes a permanent trend.

As the Republican National Convention rumbles on in the US, reports suggest that for the second time in under a week, the Trump administration is leaning on health officials for political gain. The Centers for Disease Control, which manages testing, issued revised guidance that asymptomatic people should not be tested for the virus, contradicting the advice of most US scientists.

The UK, alongside other European governments, is on high alert for resurgence of the virus in the autumn, particularly with the return of millions of children to school, and often adjusting policy on a day-to-day basis. But a report in the Financial Times today reveals growing disquiet in the upper echelons of the governing Conservative party about the government’s apparently tactical response to the virus, with 12 policy reversals since the start of lockdown in March.

Some positive news on vaccine development, though. Moderna Inc, one of the front-running companies in the race for a coronavirus vaccine, said on Wednesday its experimental vaccine induced immune responses in older adults similar to those in younger participants, offering hope that it will be effective in people considered to be at high risk for severe complications from the coronavirus.

Global COVID-19 cases topped 24 million, according to Reuters with India reporting a record daily jump of more than 75,000 infections. India is rapidly becoming the new epicentre of the virus.

Asian shares have eased off in Thursday trading following a strong early session after US indices closed up Wednesday. All eyes are on the forthcoming speech by Fed Chairman Jerome Powell at the annual Jackson Hole conference.





London Gatwick
London’s Gatwick airport announced plans to cut up to a quarter of its workforce as part of a major restructuring following a collapse in passenger numbers. Gatwick is entering into consultations with about 600 staff, and said it was in talks with the government over sector-specific support to help the aviation industry through the crisis. “If anyone is in any doubt about the devastating impact Covid-19 has had on the aviation and travel industry then today’s news …is a stark reminder”, said Stewart Wingate, Gatwick’s chief executive.

Rolls Royce
Rolls-Royce said it aimed to sell its Spanish unit ITP Aero and other assets to raise at least 2 billion pounds to boost its balance sheet, which was affected heavily by a travel slump brought on by the coronavirus pandemic. Revenues dropped a quarter to £5.8bn and at an underlying level the operating loss was £1.7bn. The company also announced that CFO Stephen Daintith had resigned to take up another opportunity, but said he would remain in his role to support an orderly transition as he leads a plan to make 1 billion pounds of cost cuts this year.

Oilfield services group Hunting reported a 63% plunge in first-half earnings as its clients cut back on spending due to the coronavirus-led crash in fuel demand, but it expects markets to improve in the fourth quarter. Jim Johnson, Chief Executive, said, “Hunting’s performance for Q1 2020 was in line with management’s expectations. The impact of COVID-19 and the actions of the OPEC+ group in late Q1 2020 led to the material decline in the global oil price, which has devastated the industry, firstly within the US onshore market, but followed by the weakening of US offshore and international markets… The outlook for the remainder of the year remains uncertain, as COVID-19 prevention measures continue to change daily.”

Hays Plc
Recruiter Hays reported that hiring has stabilised since May as its fees in the year to the end of June fell 11 per cent to £996m due to the coronavirus pandemic. Profit before tax slipped 63 per cent compared with a year earlier to £86.3m with the recruiter cutting about 1,000 jobs or 9 per cent of its workforce last month. “The pandemic severely impacted all our markets globally… Although many uncertainties remain, group fees have been stable since May and we see modest signs of improvement in [permanent hires],” said Alistair Cox, chief executive of Hays. The company did not propose a final dividend for the financial year but it said that it hopes to return to paying dividends when appropriate


Retail & Consumer

Advertising company WPP reported a 15.1% fall in second-quarter underlying net sales, compared with a consensus of down 20%. The company declared an interim dividend (10 pence) and said it was on track for cost saving targets as it sought to weather the COVID pandemic. The group also took a 2.7 billion pound ($3.6 billion) impairment charge which it said was due to the reassessment of acquisitions in light of the coronavirus and driven by discount rates.

Carnival, an international premium cruise line and tour company, announced that due to the continued progression of COVID-19 and related decisions of various governments, health authorities, and airlines regarding travel restrictions, Princess Cruises is extending its pause in cruise operations in Australia through December 12, 2020 which includes cruises throughout Australia and New Zealand.

French supermarket retailer Carrefour has agreed to buy 172 stores under the Supersol banner in Spain, in a deal worth an enterprise value of 78 million euros ($92.3 million). The company said that the stores and supermarkets being acquired were mainly in Andalusia and the Madrid region, and that they had posted net sales of around 450 million euros in 2019.

Flutter Entertainment 
Flutter, the owner of PaddyPower Betfair and SkyBet, reported that half year earnings rose 35% year-on-year as a jump in poker and gaming players more than offset a global sports shutdown at the group. The group expected adjusted earnings, excluding its US business, to be between £1.2bn and £1.3bn, around 10 per cent ahead of consensus forecasts. “The cancellation of sports and closure of our shops… was more than offset by an increase in the number of recreational customers playing our poker and gaming products globally, as people sought new forms of home entertainment,” Chief Executive Peter Jackson said.



Salesforce.com Inc
Salesforce.com Inc raised its annual revenue forecast and beat estimates for quarterly results on coronavirus-spurred demand for its online business software that supports remote work and commerce. Salesforce now expects revenue between $20.7 billion and $20.8 billion in the fiscal year 2021, up from its previous forecast of $20 billion.“What it really differentiates Salesforce broadly is we have these low-code values, where you don’t need to be a professional developer to set up Salesforce,” Taylor told Reuters in an interview. “Right now, a week lost means you could be out of business.”

The Hut Group Ltd
E-commerce group The Hut Group Ltd said it was considering an initial public offering on the London Stock Exchange, targeting proceeds of at least 920 million pounds ($1.21 billion). If listed, the company said it plans to have a free float of at least 20% of its issued share capital and a fixed offer price that would give it a pre-money equity value of 4.5 billion pounds, the company said.

Samsung plans to allow some workers in South Korea to work from home in September under a pilot programme, a company official said. Samsung, which makes chips, displays, smartphones and other devices in South Korea, said production has not been affected by the coronavirus resurgence in the country.



Senior Tories express anger over Johnson policy U-turns – Financial Times

Moderna Vaccine Produces Antibodies in Trial of Older People – Bloomberg

Powell expected to begin laying out Fed’s new monetary policy approach – Reuters

EU eyes initial COVID-19 vaccination for at least 40% of population – Reuters

No plan for a return to the office for millions of staff – BBC