Powerscourt

By Powerscourt on 08/09/2020

Powerscourt Coronavirus Briefing – 08 September 2020

ANALYSIS

Britain needs you to shop, work, get back on the train and go back to school. It also needs you to social distance and wear a mask, or you might infect your grandmother. Confused? You are not alone.

With coronavirus levels rising sharply across most parts of Europe, citizens might hope for a joined-up response from officialdom. They will have to hope a bit longer: the guidance appears more muddled than ever and the mood music is sharply polarised between those pushing for normality and those arguing we are on the brink of a damaging second wave.

For the second day running, UK data show a large surge in coronavirus infections, apparently confirming a significant uptick in the number of people with the virus compared with the previous day.

2,948 people tested positive in the last 24 hours in the UK, bringing the total number of recorded infections to 350,100. The one-day total was only slightly down on the 2,988 cases reported the day before — itself the highest total since May.

The UK government is sufficiently worried that it is trying to worry young people – who are now driving the bulk of the infections – into adjusting their behaviour.

“People have relaxed too much,” the UK’s Deputy Chief Medical Officer, Prof Jonathan Van-Tam said. “Now is the time for us to re-engage and realise that this is a continuing threat to us”. 

But Professor Sir John Bell, Regius Professor of medicine at the University of Oxford and one of the UK’s most prominent scientists, has provided a surprising counterpoint to this view, writing in the Daily Mail that it is essential that the UK gets back to work.

“We have to remove or reduce fear of the virus so we can focus on the other essential parts of our recovery from the pandemic,” Sir John wrote. “Above all, we must avoid another national lockdown and get the economy back on track and fast.” Sir John said that testing is key to this.

Meanwhile the British Retail Consortium has warned that it may already be too late to save the British High Street. It warned that further job losses were likely in September with sales still below their pre-pandemic levels.

Spain has become the first western European country to log more than half a million Covid-19 cases, logging a total of 525,549 infections as concerns also grow over the rise in cases in France and the UK. According to the government figures, Spain has had 49,716 new cases in the past week, and 237 deaths. Around a third of the new cases and deaths are in Madrid, the region hardest hit by the virus.

The Spanish government has called for a pan-EU harmonisation of travel measures rather than the current hodge-podge. Foreign Minister Arancha Gonzalez Laya told RNE radio this morning that she was discussing with Britain and the EU how to take into account indicators other than just the number of cases to make decisions on imposing quarantines on travellers such as the number of tests, the number of symptomatic cases and the number of hospitalised patients.

In the US, coronavirus continues to play a starring role in the theatre that accompanies the build-up to the November Presidential elections.

President Trump, at a Labor Day rally in Wisconsin, accused his Democrat rival Joe Biden of “reckless anti-vaccine rhetoric”. The President has been positioning himself at the vanguard of a vaccine arms race but has been accused of politicising the development process, in particular by leaning on the US Food & Drug Administration. But it may be a first for the President – who has been embraced by anti-vaccination conspiracists around the world – to position himself as the leader of the pro-vaccination movement.

 

WHAT ARE COMPANIES SAYING?

 

Retail & Consumer

JD Sports 
The retailer has announced its interim results today, in which it reports that it has retained over 90 per cent of total revenues throughout the period. The company has also reinstated guidance for the full year, including that it anticipates “delivering a headline profit before tax for the full year of at least £265 million”. The company has cancelled its interim dividend however, with executive Chairman Peter Cowgill saying: “retail footfall remains comparatively weak and the recent strengthening of measures in many countries and the subsequent temporary closure of some stores reminds us that COVID-19 remains an ongoing challenge”. 

Royal Mail
In a statement published this morning, the postal service reported an increase in parcel volumes of 34 per cent in the five months to the end of August, and an increase in revenue of 33 per cent year on year. Total revenue has increased by £139 million, despite a fall in letter revenue of 21.5 per cent. It included that it saw costs related to the pandemic of £75 million, as a result of elevated absence, social distancing, and additional protective equipment, alongside other costs. The company said: “We continue to expect Royal Mail to make a material loss this financial year 2020-21 and will not become profitable without substantial business change”. 

Halfords
The motoring and cycling products and services provider said in a trading update today that sales for the first 20 weeks of the year were up 5 per cent compared to the last year. It said that this was driven by growth in the cycling market as a result of Covid-19, increasing demand in the motoring services business as cars come back on to the road, and the benefits of its new web platform. It also said that it has seen sales growth in strategic areas, with sales of electric bikes and scooters up 230 per cent year-on-year, and services related sales up 6.3 per cent. The company said that it expects profit for the first half to be in the range of £35-40m, but did not give guidance for the full year.

 

Industrials 

Ashtead
The equipment rental company has published its 1st quarter results today, reporting a fall in rental revenue of 8 per cent year on year, and a fall in profit before taxation of 35 per cent year on year. Chief executive Brendan Horgan said: “Assuming there is no significant COVID-19 second wave leading to major market shutdowns, like we experienced earlier this year, we expect full-year Group rental revenue to be down mid to high single digits when compared with last year on a constant currency basis”.

Easyjet
The airline has announced today that customer confidence has been negatively affected by the constantly evolving government restrictions across Europe and quarantine measures in the UK. It now expects to fly slightly less than the 40% of planned capacity it had previously guided for Q4 2020, as a result of continued schedule thinning. CEO Johan Lundgren said: “It is difficult to overstate the impact that the pandemic and associated government policies has had on the whole industry. We again call on the Government to provide sector specific support for aviation”.

DS Smith 
The packaging company has released a trading update today on the period since 1 May, in which it announces that the business has progressed well in line with expectations despite the macro-economic challenges of Covid-19. Its FMCG and e-commerce business has grown through the period, offsetting the “continuing challenging conditions in a number of industrial categories”. The company has also announced that, given the performance over the last quarter and improved clarity on the outlook, it intends to declare an interim dividend for the half year to 31 October 2020.

Meggitt 
The international engineering company has published its interim results today, reporting a fall in organic revenue of 13 per cent, with a 7 per cent growth in Defence revenue offset by a 27 per cent fall in Civil Aerospace revenue and a 6 per cent fall in Energy revenue. Underlying operating profit was 37 per cent lower year-on-year, at £102m. The statement included that the Board has taken the “prudent” decision not to pay an interim dividend, in order to retain cash within the Group.

Travis Perkins
In its interim results published today, the UK’s largest builders’ merchants reported a fall in revenue of 20 per cent, which the statement explains “demonstrated resilience despite the impact of the pandemic”. Adjusted operating profit fell by 81 per cent to £42m, but Group like-for-like sales trends in July and August have returned to close to prior year levels, supported by current strong trading in consumer DIY markets. CEO Nick Roberts said: “The actions we have taken to adapt and innovate in our businesses mean that the Group is well placed to continue to service our customers, support our colleagues, outperform our markets and generate value for our shareholders.

Signature Aviation
The aviation services company has announced its half year results today, reporting a fall in organic revenue of 31.3 per cent as a result of the impact of the pandemic on flight activity. Underlying EBITDA has fallen by 39.7 per cent year on year. Given the current macroeconomic uncertainty, the Group will not be declaring an interim dividend for 2020. Chief Executive Mark Johnstone said: “Building on our effective cost management and with our flexible cost base now aligned with anticipated flight activity, we expect improved performance in the second half compared to the first half”. 

 

Financials & Real Estate

Vistry
The housebuilder has published its half year results today, reporting a strong start to the second half supported by positive market trends, with its sales rate 20 per cent ahead of the prior year since 1 July 2020, at 0.73 sales per active site per week. CEO Greg Fitzgerald said: “We have seen positive sales trends since early May, with consumer interest higher than at any time in recent years”. The Group also shared that it is aiming to resume dividends in respect of 2021. 

 

TMT

Experian 
The credit-checking group announced in a trading update today that it expects revenue in the second quarter to be higher than previously anticipated. In July 2020 it stated that it expected organic revenue for Q2 FY21 to be in the range of flat to -5 per cent, but following stronger trading in July and August, has revised this. The Group now predicts this figure to be in the range of +3 to +5 per cent. 

 

IN THE NEWS

UK companies warn on mounting debt during pandemic – THE FINANCIAL TIMES

Public ‘too relaxed’ about virus, warns deputy chief medic as infections rise – THE DAILY TELEGRAPH

Furlough just prolongs the inevitable for doomed jobs, says Bank of England’s chief economist Andy Haldane – THE TIMES 




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