By Powerscourt on 20/10/2020
Powerscourt Coronavirus Briefing – 20 October 2020
ANALYSIS
The City of London Corporation, the centuries-old body which still governs London’s financial district, is thinking about how to revive a City devastated by the pandemic. Ideas being discussed include incentives for small businesses and arts organisations to move into the area, a wholesale review of capital markets regulations and changes to travel to make remote and flexible working easier.
“We must reimagine London in order to seize the moment”, Catherine McGuiness, policy chair at City of London Corporation, was quoted as saying in the FT.
Coronavirus is dramatically reshaping the the entire UK political and social landscape. What little of the social contract that remains between England and the other UK nations is seriously frayed, and now major cities within England itself are engaged in damaging brinkmanship over how to manage the pandemic.
The Westminster government’s stand-off with the North of England is becoming more entrenched and acrimonious by the day. Now London has promised to unilaterally impose a Tier 3 status – the most stringent level of restriction – on Manchester, the largest city in the North-West, if an agreement isn’t made with local leaders by noon today. Liverpool is already in this strict category, which is devastating local businesses.
Andy Burnham, Mayor of Manchester, backed by other local leaders, is pushing for more financial support from the UK government as a quid pro quo if the region is to be put into the strictest restriction level. The government says Burnham is risking a healthcare crisis in Manchester’s hospitals, many of which are reported to be operating at capacity.
Wales yesterday announced what it describes as a “fire break” – a lockdown lasting until November 9 and designed to “turn back the clock” on rising virus numbers. Under the plans, announced yesterday by First Minister Mark Drakeford, schools will take an extended half term, people will be told to stay at home and pubs, restaurants and non-essential shops will be shut. The Republic of Ireland yesterday announced a similarly tough regime, implementing an country-wide shut down for six weeks.
The UK’s fragmented and inconsistent approach to coronavirus restrictions has led to some farcical situations. The Daily Telegraph today highlights the village of Staithes, in North Yorkshire, which finds itself an unlikely Berlin in the Yorkshire countryside: split in half by different regimes. The village is split between two different county councils and 40 homes in the village find themselves in the relatively stringent Tier 2 category, while the rest are in the more relaxed Tier 1 category.
One villager told the newspaper that he is unable to cross the stream to visit his local pub 100 yards away due to the rules.
In the US President Trump, now in the final stages of his Presidential election campaign and appearing to be emboldened by his recent brush with coronavirus, has attacked the health experts who he believes to be holding back US economic recovery.
In a conference call for campaign staff, to which journalists were invited, the President attacked Dr. Anthony Fauci, the leading US immunologist and the standard-bearer for public health measures such as mask-wearing.
“People are tired of COVID,” Mr. Trump is reported to have said on the call. “I have the biggest rallies I’ve ever had. And we have COVID. People are saying: ‘Whatever. Just leave us alone.’ They’re tired of it.”
But cases appear to be on the rise again nationally following a recent lull. The US recorded over 70,000 new infections last Friday, its highest level since July.
Shares fell widely in Asia into Tuesday, with investors becoming increasingly alarmed at the prospect of a disputed US election and concerns about virus levels in Europe. Major US corporate earnings are expected this week, from companies including Netflix and Tesla.
WHAT ARE COMPANIES SAYING?
Industrials
AirAsia
The Financial Times revealed that AirAsia, Tony Fernandes’ long haul airline, is saddled with Rm63.5bn ($15.3bn) of debt. Earlier this month, it unveiled a restructuring plan to cope with “severe liquidity constraints”. AirAsia X’s deputy chairman told local media at the weekend the unit had “run out of money”, adding it was liquidating its Indonesian business and writing down its 49 per cent stake in Thai AirAsia X. The long-haul arm’s share price has plunged 77 per cent this year. As a result, AirAsia has been forced to seek financial support from the Malaysian government, a decision that Mr. Fernandes told the Financial Times was “solely out of Covid, where we lost so much of our sales” despite the fact that according to the analysts, AirAsia X was struggling before the pandemic hit and that the unit has registered a full-year net profit just twice.
Financials & Real Estate
Bellway Homes
Bellway, one of the UK’s largest house builders, has announced its preliminary results. Its performance has been significantly affected by the COVID-19 pandemic; the number of housing completions fell by 30.9%, extended site durations, enhanced health and safety requirements and non-productive site costs due to lock-down-related interruption to construction all led to notable exceptional and non-exceptional COVID-19 expenses. Profit before tax fell by 64.3% to £236.7 million (2019 – £662.6 million). However, Bellway announced an encouragingly strong start to trading into the new financial year with a record forward order book at 4 October with a value of £1,869.6 million1 (29 September 2019 – £1,311.6 million) and overall reservations up by 30.6% to 239 per week (1 August to 29 September 2019 – 183 per week) in the nine weeks since 1 August.
Reckitt Benckiser Gp
The global consumer health and hygiene company Reckitt Benckiser Gp has reported a strong quarterly trading performance. This quarter has seen a +19.5% like-for-like increase in Hygiene and +12.6% like-for-like growth in Health, driven by high demand for brands like Lysol and Dettol as a result of the pandemic. Reckitt Benckiser Gp is on track to deliver low double digit like-for-like net revenue growth for the full year. Laxman Narasimhan, RB’s Chief Executive Officer, said: “With a world-class portfolio of hygiene, health and nutrition brands and a clear purpose – to protect, heal and nurture in the relentless pursuit of a cleaner and healthier world – we are uniquely placed to help tackle the challenges the world is facing.”
Retail & Consumer
Gamesys
The online gaming group has reported a strong Q3 2020 performance in its latest update on trading. Showing results ahead of expectations despite the ongoing coronavirus pandemic, Gamesys total revenues increased by 31% to £190.0 million compared to Q3 2019 on a proforma basis, reflecting growth in its active customer base. Revenues in percentage terms increased by high double-digits in Asia and there was another very solid performance in the UK. In Europe, Spain continued to make progress and the US has maintained good momentum with healthy double-digit top line growth. Lee Fenton, Chief Executive Officer, Gamesys Group plc, commented: “Despite the challenges of COVID-19, our workforce is providing seamless business continuity as most of them continue to function remotely in line with guidance.”
TMT
Softcat
The leading UK provider of IT infrastructure products and services has released its full year results to 31 July 2020. Softcat has demonstrated a strong performance across the year despite the impact of COVID-19, and has extended its record year on year growth in revenue, gross profit and operating profit to sixty quarters. The company’s reported that its customer base grew by 3% and gross profit per customer was up 8% on a full year basis. Graeme Watt, Softcat Chief Executive Officer, commented: “The robust nature of our growth and the strength of our bank debt-free balance sheet means we are well-positioned to seize the long-term opportunities within our market. We were able to deliver these results without the need for redundancies, and our plans for 2021 are to continue to invest in skills and talent to meet our growth ambitions and further enhance our market share.”
IN THE NEWS
Heathrow to offer £80 rapid coronavirus test for departures – THE FINANCIAL TIMES
Britain’s second Covid wave is more of a ripple – but still a threat – THE TIMES
Vaccine ‘unlikely to eradicate Covid’, Sir Patrick Valance tells MPs – THE TELEGRAPH
