Powerscourt

By Powerscourt on 04/09/2020

Powerscourt Coronavirus Briefing – 04 September 2020

ANALYSIS

More evidence of the booming UK housing market this morning from Rightmove plc which says houses are selling faster than at any time in 10 years, helped by stamp duty incentives.

The UK services sector grew at its fastest rate in more than five years in August, as measured by the IHS Markit/CIPS purchasing managers’ index. This reflected pent-up demand across the housing market and a gradual recovery in demand for business services.

The numbers of cars, pedestrians, and cyclists is now close to pre-lockdown levels in London and North East England, according to ONS.  (The central London economy will receive a further modest boost from Monday 14th September, when Powerscourt begins a staged return to the workplace!).

Asian stock market indices saw relatively modest falls on Friday after substantial losses in the US on Thursday when the S&P 500 fell 3.5% and the tech-based NASDAQ-100 was down more than 5%. Some attributed the US losses to profit-taking after the spectacular rally which had seen markets rise 55% since the nadir of late March. Others attributed losses to mixed economic data and mounting concerns about how quickly the economy would recover. Democrats and Republicans remained locked in stalemate over another fiscal stimulus package. Bloomberg reported that Jezz Bezos, founder of Amazon, lost $9 billion and Elon Musk of Tesla lost $8.5 billion in the sell-off.

Pressure is mounting on the UK government to introduce Coronavirus tests at airports amid warnings that the existing quarantine system is crippling the travel industry. More than thirty countries, including Germany, France, and Austria, already test travellers at airports. Aviation industry figures said that airport testing is the only way to avert the demise of UK aviation.

In the meantime, coronavirus tests have been rationed in parts of the UK due to a lack of capacity. The government insisted rationing was only happening at the margins as they concentrated tests on infection hotspots.

The cost of the UK government’s Eat Out to Help Out scheme was £522 million according to figures released yesterday. Almost 85,000 restaurants participated in the scheme. Barclaycard said dining out increased by more than 30% last month compared with July.

 

WHAT ARE COMPANIES SAYING?

 

Retail

Costa
Britain’s biggest coffee shop operator has announced it will cut up to 1,650 jobs. Costa Coffee said that the continuing impact of the coronavirus slump had required it to make “difficult decisions to ensure that as many jobs as possible are protected long-term”. Costa has made no specific mention of shop closures, saying only: “In terms of store closures, we open new stores, renovate stores and close stores throughout the year as part of our operating business.”

Amazon
Amazon is to increase its British workforce by a third this year to satisfy the country’s growing appetite for online shopping according to The Times. The giant ecommerce group has already hired 3,000 new employees this year and plans to take on a further 7,000 by Christmas, increasing its headcount in the UK to more than 40,000.

Pret A Manager
The Financial Times reported that Pret A Manger is planning to deliver dinners to city dwellers and open more suburban branches as it fights to revive its business after the sudden loss of its traditional office worker clientele. It has also announced it will launch a £20 per month coffee subscription service. Pano Christou, Pret’s chief executive, acknowledged the brand had been too reliant on London, where it made the highest profits before Covid-19. “We haven’t done a great job in marketing Pret outside of London,” he said in an interview with the Financial Times. “We have been too rigid in taking the concept outside of London as a London concept.”

Co-op
City AM reported that Co-op is preparing to open a large new stores and create up to 1,000 new jobs as part of a £130m investment programme. The chain said this morning that it is planning to open or extend 65 stores, with a further 100 sites earmarked for refurbishment. 

 

Industrials 

Ryanair
Ryanair, Europe’s largest airline, today announces the successful pricing of the non-pre-emptive placing of new ordinary shares of €0.006 each in the capital of the Company to institutional investors and certain others following yesterday’s announcement.  A total of 35,242,291 new Ordinary Shares in the Company have been placed by J&E Davy at a price of €11.35 per Placing Share raising gross proceeds of approximately €400 million. Davy is acting as sole bookrunner in respect of the Placing.

Virgin Atlantic
The Telegraph reported that Virgin Atlantic Airways is expected to slash another 1,000 jobs as part of its £1.2bn rescue deal. The airline already cut 3,150 roles less than four months ago, as well as the closure of its Gatwick Airport base. These new cuts would mean Virgin Atlantic’s workforce will have halved from its pre-pandemic levels of 10,000 staff. 

 

Financials & Real Estate

The Berkeley Group
The British property developer provided a Trading Update for the period 1 May – 31 August 2020. Berkeley’s trading has been resilient over this period and supports existing guidance of £500 million of pre-tax profit for the full year and our commitment to its shareholder returns programme of £280 million per annum. The Group said “We now anticipate a more even split of profit between the first and second halves of the year, reflecting levels of production that have been better than initially anticipated and our decision not to furlough staff.” 

Competition and Markets Authority (CMA)
As part of its ongoing investigation, the CMA is today opening enforcement cases into 4 leading housing developers it believes may have broken consumer protection law in relation to leasehold homes. The CMA is focusing on certain practices of: Barratt Developments, Countryside Properties, Persimmon Homes and Taylor Wimpey. The move comes after the CMA uncovered troubling evidence of potentially unfair terms concerning ground rents in leasehold contracts and potential mis-selling. It is concerned that leasehold homeowners may have been unfairly treated and that buyers may have been misled by developers.

Capital & Regional 
The UK focused REIT with a portfolio of dominant in-town community shopping centres, announced its half year results this morning. All seven of the Company’s community shopping centres remained open throughout lockdown, 605 stores, representing over 96% of units are now back open. Occupancy has remained high at 95% but footfall was significantly impacted by COVID-19. Visitor numbers currently improving week on week.  76% of rent in respect of the first half of the year has now been collected and rent collection for the third quarter of the year is running at 54%. Net Rental Income was down £9 million to £16.2 million (June 2019: £25.2 million), largely as a result of COVID-19, driving reduction in Adjusted Profit to £4.6 million (June 2019: £14.8 million).

Rightmove
Rightmove has analysed over 200,000 properties that sold between 8 July and 31 August to reveal the impact of the temporary stamp duty holiday. Sellers taking advantage of the surge in buyer demand are more likely to find a buyer within the first week of marketing compared with this time last year. One in seven properties sold by agents did so within a week of being listed on Rightmove, up from one in ten in 2019. Just under one third of homes sold within the first two weeks of marketing, compared with one in five in 2019.

Pre-Emption Group (PEG) 
PEG is extending, to 30 November 2020, its recommendation that investors, on a case-by-case basis, continue to consider supporting placings by companies of up to 20% of their issued share capital over a 12-month period. The PEG’s original recommendation on additional flexibility, introduced as a temporary measure on 1 April 2020 as a direct result of the severe business implications of COVID-19, has been very well received by the market. Of the £23.7 billion raised in the UK market since the start of the year, over 125 of the issuances have been accessing emergency funds, generally at a small discount to the prevailing market price.

 

Agriculture

MHP SE
International agro-industrial group said the Company delivered a “satisfactory performance” for the six months ended 30 June 2020. Despite the effects of the COVID-19 pandemic and quarantine measures worldwide, MHP was able to substantially offset these reductions in demand as a result of increased demand for poultry in the Ukrainian domestic market.  Poultry prices were also adversely affected in both domestic and export markets. Despite the impact of COVID-2019, the Company has largely continued to operate normally.  A full range of measures has been implemented to prevent the spread of infection within the Company and as of the date of this report, absenteeism of employees at MHP’s facilities is at the same level as last year.  

 

IN THE NEWS

Sunak gives short shrift to plans for refinancing billions in Covid loansFinancial Times

UK businesses slash investment as coronavirus crisis bites – Financial Times

Eat Out to Help Out scheme: taxpayers pick up £522m bill – The Times

Back to work advice creates confusion – The Times




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