Powerscourt

By Powerscourt on 15/09/2020

Powerscourt Coronavirus Briefing – 15 September 2020

ANALYSIS

Some good news appears to be on the horizon in China, both on the medical and economic fronts. The head of biosafety at the Chinese Center for Disease Control and Prevention said she expects a Chinese COVID vaccine to be available by November or December of 2020. Wu Guizhen said: “It (the Chinese vaccine) will be very soon. The progress is very smooth.” China has nine vaccines of the 30 vaccines currently in human trials. Already, military and medical workers are being given experimental vaccines.

Retail sales, previously a weak spot for the world’s second-largest economy, have returned to growth for the first time since the coronavirus outbreak, in the latest sign that consumer spending is recovering there. Data released on Tuesday showed retail sales 0.5% ahead of the same month last year.

Europe, which for some months has looked across at the US with a degree of relief, is once again edging back towards crisis.

Coronavirus testing, which UK Prime Minister Boris Johnson has described as “world beating” is not working, according to reports, and could derail both the coronavirus recovery and economic recovery at the same time.

No coronavirus tests are available in the country’s ten worst hotspots for the disease, with shortages expected to continue for several weeks. UK labs are struggling with a backlog of swabs, and the towns (mainly in the North-West of England) with the highest COVID numbers have run out of tests.

After having spent weeks encouraging people to get tested if they had symptoms as part of a broader drive to renew economic normality and get children back into education, the government is back-pedalling on its testing website. The Times reports that ministers are drawing up plans to restrict what they describe as “frivolous” demands for tests after admitting that they didn’t expect demand to be as high as it currently is.  Around 200,000 COVID tests are being carried out daily in the UK, but demand far exceeds supply, as the return of children to school and the spike in demand from care homes has prompted many more people to seek tests than was expected.

National Health Service leaders told the BBC on Tuesday that the lack of available tests will soon hit the capacity of the NHS to treat sick people, as they are triggering staff shortages. The head of the British Medical Association will today warn that of a “triple whammy” of a non-COVID backlog of medical issues, a second spike and seasonal pressures on the NHS, and urge the UK government to support the NHS to meet the need this winter.

France is also in a bad position. Yesterday it recorded more than 10,000 new coronavirus cases in a single day, exceeding the infection numbers at the height of the pandemic in the spring of 2020.

The World Health Organisation has signalled that Europe is not “out of the woods” and that rising coronavirus infection numbers across the continent are likely to lead to rising deaths in autumn.

The WHO’s director general, Dr Thedros Adhanom Ghebreyesus told the AFP newswire that the “relatively low” level of deaths which the continent had seen in recent weeks would likely tick up into the autumn. Hans Kluge, WHO’s regional director for Europe, told AFP these numbers would probably rise in the next few weeks as there was a time lag between new cases and deaths. “It’s going to get tougher. In October, November, we are going to see more mortality,” he said.

As the COVID numbers in India top 80,000, Melinda Gates, the co-chair of the Bill and Melinda Gates Foundation, told the Guardian that COVID has “magnified every existing equality in our society – like system racism, gender equality and poverty”. Gates said the world’s poorest countries risk a decade of development progress as a result of failure to help them recover from COVID-19 .

Strong retail numbers in China helped lift Asian indices into Tuesday morning. 

 

WHAT ARE COMPANIES SAYING?

 

Retail & Consumer

Ocado
The online supermarket and tech infrastructure provider said that revenue for Q3 grew 52% as the channel shift to online groceries continues. As a result, it is expecting a 14% increase in full-year profit. In detail, the company said that average basket size was now £141, down slightly from the peaks during Covid-19 but still considerably up on last year equivalents. It also reported that basket sizes have increased by “around 5 items” as a result of the switch from Waitrose products to M&S, having their biggest ever forward order day on the day of the launch. 98% of customers are already shopping M&S.

H&M
Fashion retailing giant Hennes & Mauritz has said that its recovery from Covid-19 lockdowns was stronger than expected, with it now expecting to make a profit in the third quarter. It said that it predicts a pre-tax profit of around SKr2bn in Q3, significantly above analyst consensus of SKr350m. The company noted that this was due to “more full-price sales combined with strong cost control”, having seen revenue for Q3 fall 19% compared to the same time last year. H&M has opened 700 more stores since July, with now only 200 of its total 5,000 stores still closed

Domino’s Pizza
Britain’s largest pizza delivery chain said this morning that it would be creating 5,000 new jobs in the UK, including chefs and delivery drivers, on top of the 6,000 jobs it has created since the start of the pandemic. It also said tit would launch over 1,000 work placements for young people in stores across England, Scotland and Wales as part of the Kickstart scheme in the UK.

 

Industrials 

Marshalls
The specialist landscape products group said that in the first half of the year (to 30 June 2020) it saw revenue fall 25% year on year. However, the statement highlights that June revenue was down only 7% compared to the prior year, representing a “significant improvement from the early pat of the Covid-19 outbreak”. All Marshalls’ manufacturing sites are now operational having been closed for lockdown. Despite the fall in revenue, the company confirmed that it plans to repay in full the money it has received from the government through the furlough scheme, totalling £9.4m. CEO Martyn Coffey said “The decisive actions that have been taken have improved the efficiency and flexibility of our plants and will help Marshalls to emerge from the current market difficulties in a stronger competitive position.”

FirstGroup
The transport provider said in an AGM trading update that its performance was “stronger than expected” between 1 April and 31 August 2020, with adjusted operating profit and cash from operation ahead of expectations. The company said it was now expecting to deliver a small operating profit, despite the delayed start of in-person teaching by many schools in North America. Their First Transit business now has 67% of services operational and generating 80-85% of the revenue expected pre-crisis. On liquidity, FirstGroup said that it had £850m in free cash and committed undrawn revolving banking facilities, with net debt expected to be c.2x EBITDA at 30 September, within their covenant requirements of 3.75x.

Chemring
The defence technology business said that it expects performance for the year to be “towards the upper end of current analyst expectations.” Order intake at the firm was up 4% compared to the same period last year and the company said that order cover for FY21 is building. Order intake in the ‘Sensors and Information’ business was up 32%, with good progress being made in the US sensors business. In ‘Countermeasures and Energetics’, the company said that its Australian business had made “excellent progress” but that it was more challenged in its US division. CEO Michael Ord said that the company had “good momentum” and he “rmained confident” that the company’s prospects were strong.

Polypipe
The plastic piping manufacturer reported that pre-tax profit for the first half of the year was down 93%, with revenue down 22% to £173.6m. The company said however that trading had been “resilient” and that it had seen a “progressive improvement” from a lowpoint in April when revenue was down 66% compared to the prior year. It added that for those employees that had been made redundant, they would be reimbursing the government for the money given as part of the Job Retention Scheme and that they will not be using the Job Retention Bonus scheme. It said that it was tracking “well ahead” of its operating scenario set out in May and that while the Board was mindful of risks, it was encouraged by trading performance so far. That being said, it has not recommended an interim dividend.

 

IN THE NEWS

UK labour market sheds 695,000 jobs between March and August Financial Times

Coronavirus tests run out as labs struggle with demand The Times

UK jobless rate rises for first time since COVID-19 lockdown – Reuters




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