By Powerscourt on 10/09/2020

Powerscourt Coronavirus Briefing – 10 September 2020


Lockdown 2.0? Or a nimble and tactical precautionary measure which could nip a damaging second wave in the bud for Britain?

Boris Johnson, his government and his senior advisers are all emphasising that the new, more stringent measures the government introduced on Wednesday are about trying to prevent a second national lockdown. The most visible of these is what the government is calling the “rule of six”, effectively making it illegal for more than six people to gather for non-work reasons.

But the optics were clear: the Prime Minister at the lectern in Downing Street, flanked by grave-faced scientific advisers, evoked memories from the darkest days of March or April 2020 when the UK was in full lockdown. And the guidance was clear. Chris Whitty, the UK’s Chief Medical Officer, prepared people for up to six months of tougher rules as the weather turned cold, warning: “The period between now and spring is going to be difficult.” Coronavirus may yet be the grinch that stole Christmas 2020.

The pivotal question is whether the measures being imposed now will be enough to prevent the UK following the trajectory of mainland Europe and, in particular, of Spain. With half a million cases since the start of the outbreak and twice as many new infections per day as the next worst-affected country, Spain is the poster child for what went wrong in Europe and a fate the UK is keen to avoid. The UK’s relatively muscular response to address signs of a second wave are in stark contrast to Spain, where management of the virus has been largely delegated to regional governments.

One of the UK Prime Minister’s promises was a so-called “moonshot” testing programme designed to allow people to do tests on a daily basis. If they are confirmed as negative, this could potentially allow them what he described as a “passport to mingle”.

The vision is beguiling. But with the UK’s test and trace programme still struggling to keep up with the demand for tests, officials are warning that this may not be the best use of resources.

Meanwhile the pharmaceutical industry is assessing the impact of the pause in the late-stage clinical trial on the so-called “Oxford Vaccine”, the coronavirus vaccine candidate being led by the University of Oxford and AstraZeneca, one of the vaccine front-runners.

While the trial halt  has disappointed those who believed a vaccine could be just around the corner, experts point out that it is rare for a late-stage vaccine trial not to be paused, and that this actually serves to demonstrate that the experts are focusing on safety concerns. Francis Collins, the head of the US National Institutes of Health, told the US Senate: “When we say we are going to focus on safety and make no compromises, here is exhibit A.” Collins added that he was cautiously optimistic that a vaccine would be available by the end of the year but admitted this was a guesstimate.

With the US Elections looming, President Trump has walked into a fresh row about the way he has used management of the virus as a political tool. Veteran reporter Bob Woodward has written in a new book that Trump admitted to him in a phone conversation that he sought to play down the impact of the virus during the first part of the US lockdown, despite knowing it was deadly and easily transmitted. Trump confirmed the story on Wednesday saying: “We don’t want to instill panic, we don’t want to jump up and down and start shouting that we have a problem that is a tremendous problem.”

New York, which had a longer and more severe lockdown that most places, announced that it is to allow indoor dining at restaurants from September 30, at 25% capacity. That is almost three months after UK pubs and restaurants were allowed to reopen.

Asian shares opened up Thursday after the Nasdaq posted its best day since April on Wednesday, reversing an earlier sharp sell-off. The tech bounce helped support other global indices.




Retail & Consumer

Dixons Carphone
British electrical goods retailer Dixons Carphone reported lower mobile phone sales in the 17 weeks to 29 August and said it was in early stages of exploring the listing of a minority stake of its Nordics business next year. The group, which trades as Currys, PC World and Carphone Warehouse in the UK, said total revenue from its UK & Ireland mobile phone division fell 56% during the reported period. 

Dunelm Group
Dunelm Group reported today a fall in pretax profit on lower revenue for fiscal 2020 due to store closures amid the lockdown, but said recent trading has been strong. The homewares retailer made a pretax profit of £109.1 million for the year ended 27 June, compared with £125.9 million for fiscal 2019. Revenue fell slightly to £1.06 billion from £1.10 billion a year earlier. Online sales more than doubled year-on-year during the fourth quarter, Dunelm said. 

Games Workshop Group
Miniature wargames manufacturer Games Workshop declared a 50p a share dividend on Thursday as it said trading in the three months to 30 August was ahead of the board’s expectations thanks to a solid performance from the online segment. The FTSE250 company said current estimates show sales of around £90m during the period, up from £78m in the same period a year ago. Meanwhile, operating profit before royalty income is estimated at around £45m, up from £28m in 2019 and royalty income is expected to rise to £3m from £2m. 

Champagne and high fashion titan LVMH has cancelled a $16bn takeover of American jeweller Tiffany – sparking a legal battle between two of the world’s biggest luxury goods companies. The Paris-headquartered owner of Moet & Hennesey and Louis Vuitton said it abandoned the tie-up following pressure from the French government, which is fighting off threatened US tariffs amid a trade war with President Donald Trump. It also claims that COVID-19 chaos and violent protests across America have changed the situation.

Morrisons has posted a surge in sales in the second quarter as demand surged in lockdown – but profits took a hit from extra COVID-19 measures. Sales rose 12.3%, excluding fuel, in the second quarter, and 8.7% over the first half when fuel was stripped out. Fuel sales dived during lockdown with cars off the road, dragging total first half revenue down 1.1% to £8.73 billion, but the retailer said this is now “rebuilding”. Excluding fuel, revenues rose 8.8% to £7.55 billion. 

Pizza Hut
Pizza Hut plans to close up to 29 of its 244 restaurants in Britain, with the loss of up to 450 jobs. The closures will be achieved via a company voluntary arrangement, an insolvency process that enables businesses to shed uneconomic outlets and to cut rents. The chain said that it had resorted to a CVA to reduce its annual £23 million rent, which it could no longer afford because of rising costs and the impact of the COVID-19 pandemic. It said that it was keen to keep as many of its restaurants open as possible while limiting job losses.

Safestore Holdings
Safestore Holdings reported an increase in revenue for the third quarter of fiscal 2020. The London-listed self-storage company made revenue of £40.2 million in the three months ended 31 July, up from £38.2 million a year earlier. “Occupancy performances in June and July, as lockdown eased, were strong driving like-for-like closing occupancy for the group above prior year levels,” Chief executive Frederic Vecchioli said. Closing occupancy was up 5.0% at 5.18 million square feet, it said. 

Saga said this morning that it has proposed a £150 million capital increase that will see its former chief executive Roger De Haan join the company’s board. The UK provider of specialist products to the over-50s said it intends to raise gross proceeds through a firm placing of 224.4 million new shares to Roger De Haan at a 98% premium price of 27 pence a share, raising gross proceeds of £60.6 million. This will translate into Mr De Haan holding an interest of 20% in the company. 

Speedy Hire
Plant and tool hire specialist Speedy Hire said business is steadily improving as customers begin returning to work following the easing of lockdown restrictions. In a trading update ahead of its AGM today, the Newton-le-Willows-based business revealed that revenue has continued to improve over recent months as activity levels increased. So much so that, in response to customer demand, it relaunched its four-hour delivery promise in the UK and Ireland on 1 September, covering an expanded range of 350 products.

Sportech posted a widened loss for the first half of the year as its performance was hurt by the coronavirus pandemic’s disruption of sporting events. The London-listed betting technology business reported a pretax loss of £10.7 million for the six months ended 30 June, compared with a £2.5 million loss for the same period of 2019. Revenue declined 38% to £20.2 million, and adjusted EBITDA swung to a £1.2 million loss from a £3.4 million profit. 



Brick and block sales by Forterra in July and August recovered to 90% of pre-pandemic levels. The masonry products manufacturer revealed the impact of COVID-19 in its half-year results which showed a pre-tax loss of £23.3m for the six months to 30 June, compared to a £32.7m profit last period on revenue down to £122.4m from £193.6m. Forterra said trading since lockdown ended has exceed management expectations and it is looking to make a full-year profit of up to £32m. 

John Menzies
John Menzies report this morning that it expects to post losses in the first half as the pandemic has hurt trading, and that it has agreed a revised covenant structure with its banking group to mitigate the headwind. The aviation services group said revenue in the first half fell 33% year-on-year. “The revenue decline has had a significant impact on profitability and will lead to the group being loss making in the first half,” John Menzies said. 

Ricardo announced on Thursday that it swung to a pretax loss for fiscal 2020 after booking higher costs. The London-listed engineering and environmental consultancy said that for the year ended 30 June, its pretax loss was £5.3 million, compared with a profit of £26.5 million for fiscal 2019. The company said it booked £20.9 million of costs relating to specific adjusting items, compared with £10.5 million the year prior. Revenue was £352.0 million, compared with £384.4 million the year before. 

The boss of Ryanair has warned that Europe’s busiest airline may cut passenger estimates for its financial year to 50 million, a third of the number that it carried last year. Michael O’Leary blamed the chaos created by incoherent and inconsistent government travel policies, not least in Ryanair’s main markets of Britain and Ireland. He has spent recent months dialling down his optimism about how quickly Ryanair would emerge from the travel restrictions and economic hit caused by COVID-19.


Financials & Real Estate

Cairn Homes
Homebuilder Cairn Homes has reported lower revenues and profits for the six months to the end of June but said the underlying pent-up demand for home ownership has increased as a consequence of the COVID-19 lockdown. Cairn Homes reported an operating profit of €5.8m for the six month period, down from €27.3m the same time last year. It said that with a disciplined approach to cost and cash management, it maintained profitability despite production and sales constraints faced during and after two-month site closures. 

Lloyds Banking Group
Britain’s biggest high street bank has revived its restructuring plans by axing 865 jobs, months after it revealed gloomy forecasts for the UK economy. Lloyds Banking Group will begin shedding the roles from November, although the cuts will be partially offset by the creation of 226 new jobs. Like most of its rivals, the bank froze the shake-up due to the coronavirus crisis but is now reigniting its original plans. Those affected were told earlier in the year they would not lose their jobs before October. 

Goldman Sachs
Goldman Sachs is seeking to bring it’s 38,000 staff worldwide back to the office part time on a rota system as the firm kicks off the next stage of plans for a return to work. Chief executive David Solomon told employees in a memo that they will be contacted by managers in coming weeks with the aim of introducing team rotations, so that everyone who wants to is able to go into their office.

Zaim Credit Systems
The Russian-focused fintech group providing financial inclusion for those consumers who are not well served by mainstream lenders today announced their financial results for the six months to 30 June 2020. Interest income reduced by 26%, from £3.7m to £2.8m, partly as a result of the 16% reduction in the amount funded due to COVID-19 lockdown restrictions. COVID-19 restrictions, as well as regulatory changes and restructuring costs, also led to a net adjusted loss of £933m.




BT is poised to his millions of households with an inflation-busting bill increase, putting further pressure on workers as they confront the economic toll of COVID-19. The former state telecoms monopoly is to hike the price of its products by consumer prices index inflation plus 3.9% from March 31, raising hundreds of millions of pounds to help cover coronavirus costs and pay for broadband upgrades across the country. The move will hit all new and renewing BT users across its broadband, mobile, fixed-line and live sport services.

Dev Clever Holdings
Dev Clever Holdings announced this morning that trading for fiscal 2020 is in line with management expectations, and that it has secured a $1.2 million contract to undertake two COVID-19 careers impact assessments. The London-listed developer of mobile and immersive experiences said it will generate careers tracking data in line with data protection polices in both the US and India from a targeted 1,000 schools and colleges in each territory. The company said it is benefiting from an acceleration in forward momentum over the past several months. 


It’s morally wrong not to raise national living wage, insists TUC boss Frances O’Grady – The Times

Export support for small companies cut ahead of Brexit – Financial Times

Zero tolerance for furlough fraud – The Times