By Powerscourt on 22/10/2020
Powerscourt Coronavirus Briefing – 22 October 2020
ANALYSIS
The results of a UK government study into the heightened risk from COVID-19 for people of black, Asian and minority ethnic heritage appear to suggest that there is nothing with a genetic basis that makes people from minority groups more likely to die.
Poverty and the inability to avoid the disease, as opposed to biological predisposition or racism, are likely to be the most likely drivers of a higher death rate. The study concludes that living in urban areas with high population density and in overcrowded households, as well as high-risk occupations and pre-existing health conditions are likely to be the main factors contributing to poorer outcomes for ethnic minorities from COVID-19.
Dr Raghib Ali, senior clinical research associate in epidemiology at the University of Cambridge, and a government adviser on COVID-19 and ethnicity, said: “I don’t think structural racism is a reasonable explanation [for these disparities].”
There has been growing evidence since the start of the pandemic in the UK that people from black and minority ethnic groups are up to twice as likely to die as white people, but experts have been divided as to whether there is a genetic cause for this.
Data supporting the apparent link between deprivation and poorer COVID-19 outcomes will likely fuel the anger of those who believe government actions to suppress the virus are disproportionately damaging the poor.
The UK is bitterly divided over how the government supports those communities which have been most impacted. Politicians in the hard-hit North of England, who have found a figurehead in Andy Burnham, Mayor of Manchester, have accused central government of pursuing health policies which hurt poorer communities.
Across Europe, a similar dynamic is playing out as coronavirus continues to grow.
France has become the second country in Western Europe to record more than 1 million infections, with over 34,000 deaths, after Spain, which has also passed the grim infection milestone. Germany, which until recently had appeared to be succeeding in keeping infection growth under control better than many European countries, saw cases rise by 10,000 in a single day for the first time, data from the Robert Koch Institute for infectious diseases showed earlier this week.
There are some signs of optimism, though, that young people have started modifying their behaviour to take account of social distancing, and that this is helping to curb the spread of the virus.
The “second wave” of COVID-19 infections which is now underway in the UK and across Europe was in part blamed on the influx of students into higher education after the summer, with student towns and cities such as Manchester turning into virus hotspots. Young people, with a relatively cavalier approach to contracting the virus, were thought to be acting as vectors, spreading the disease rapidly.
UK Health Secretary Matt Hancock was told yesterday, however, that there is evidence that young people have been frightened into following social distancing guidelines, and that this is helping bring infection rates down.
An analysis by The Times has found that student-dominated areas now have infection rates 2.5 times higher than elsewhere, down from five times higher two weeks ago.
This will come as a relief to SAGE, the body which advises the UK government on science, which has been seeking to dispel the idea that “herd immunity” among the young can be achieved without pushing illness levels up to damaging levels for older people, an idea which has appeared very compelling to many people frustrated at the economic and social impact of COVID-19 restrictions.
Letting younger people return to normal life while shielding the elderly from coronavirus would have “dire consequences for the NHS”, the government’s scientific advisers have concluded, according to an article in the Times.
A trial subject on the trial led by UK drugs giant AstraZeneca died on Wednesday, but the trial will continue. AstraZeneca said in a statement: “all required review processes have been followed”. Multiple reports said the volunteer had been on the placebo arm of the trial, not taking the AstraZeneca vaccine candidate.
Asian shares fell into Thursday amid growing frustration at the glacial pace of US stimulus talks and the continued surge of COVID-19 cases in Western countries.
WHAT ARE COMPANIES SAYING?
Industrials
IAG
One of the world’s largest airline groups today announced that total revenue had declined by 83 per cent to €1.2 billion compared to €7.3 billion last year. Operating result before exceptional items was a €1.3 billion loss compared to a €1.4 billion profit last year. This was due to the travel restrictions imposed by COVID-19 measures, with passenger capacity, measured in available seat kilometers declining 78.6% in the quarter. Similarly, passenger traffic declined 88%. Liquidity remains strong, but the impact of second-wave lockdowns is still cause for caution. IAG now plans for capacity in Q4 to be no more than 30% compared to 2019. Resultantly, the group no longer expects to reach breakeven in terms of Net cash flows from operating activities during 4Q 2020.
Travis Perkins
The UK’s largest builders’ merchants have revealed a strong recovery in Q3 due to a booming DIY market since lockdown. The group posted a 3.9% rise in like-for-like sales over the quarter, with growth of 8% last month. Travis Perkins has stated that larger building project work has had a slower recovery, with new housebuilding and commercial construction still ‘some way below 2019’, but explained that the boost in local trade activity means annual underlying earnings are now expected to be in the upper half of city expectations, between £222m and £261m. Chief Executive Nick Roberts states “We have reported a positive overall like-for-like sales performance in the quarter as our markets have continued to recover following the impact of the national lockdown earlier this year.”
Renishaw Plc
The global high-precision metrology and healthcare technology group saw a -6% change in total revenue. While this was largely due to a -8% change in its lead metrology sector, with revenue falling from £119.7m in the same quarter last year to £110.2m this year, there was strong performance in the healthcare sector with a +16% change from £4.9m to £5.7m year-on-year. Adjusted profit before tax also rose by a substantial 326% year-on-year from £4.3m to £18.3m. The group are in a strong financial position and plan to continue investing in the development of new products and applications, along with targeted investments in production, sales and marketing facilities around the world. They anticipate difficult market conditions due to the pandemic and all the uncertainty it has come with.
Rentokil
The pest control company has today reported a 9.8% rise in Q3 revenue as greater emphasis being placed on hygiene standards as a result of the Coronavirus pandemic has led to greater demand for their disinfection services. A 53% jump in the hygiene business has led to ongoing revenue reaching £754.6m for the quarter. While ongoing revenue in the Protect and Enhance category declined 11.7% in Q3, this was a significant improvement from the 27.3% decline in Q2. Rentokil are cautious over the future, anticipating demand for disinfection services to fall as businesses return to normal trading.
Financials & Real Estate
AJ Bell
One of the UK’s largest investment platforms, AJ Bell, today announced that for the year to September, customer numbers were up 27% to 295,305 while assets under administration were up 8% to £56.5b. Even with FTSE All-Share falling 19%, the firm performed strongly. Andy Bell, the CEO stated that their focus on meeting customer needs led to strong progress in the direct-to-customer market and a rise in inflows offsetting heavy falls in the UK stock market.
Retail & Consumer
Unilever
The consumer goods giant today announced that their 2020 Q3 performance has been ‘strong’, with volume-led growth demonstrating the resilience of their portfolio and their ability to rapidly and effectively respond to changes across consumer groups. The highlights include an underlying sales growth of 4.4%, with 3.9% of this being volume and 0.5% being price. While turnover decreased 2.4%, this was largely due to currency having a significant negative impact of 7.7%. Quarterly shareholder dividend maintained at €0.4104 per share.
TMT
Moneysupermarket.com
The consumer financial comparison site today announced that, due to ongoing COVID-19 disruption to several channels, group revenue declined 16% in Q3. While insurance performance was consistent throughout the quarter, with motor performing particularly strongly, travel restrictions have resulted in heavily subdued TravelSupermarket performance. Additionally, Trading dynamics saw weak performance due to tightened lending criteria and low product availability. Moneysupermarket.com still benefit from a strong balance sheet and hold a net cash position of £5m (30 September 2020). They predict the same ‘low level of savings available in energy’ will be likely to ‘limit growth in Home Services’ during Q4.
RELX
The global provider of information-based analytics and decision tools has published a trading update today for the first nine months of 2020. It shared that its Exhibitions business has been significantly impacted by COVID-19 since March, with government restrictions preventing most events from taking place in Europe and the Americas before the end of the year, but noted that they are now running again in China and Japan amongst others. The company’s three largest business areas (Scientific, Technical & Medical (SMT), Risk and Legal) which together accounted for 84% of revenue and 87% of adjusted operating profit in 2019, have continued to see a gradual improvement in underlying revenue growth rates since the end of the first half.
Daily Mail and General Trust
The British media company today issued an update announcing that they anticipate Full Year 2020 profits will be above current market forecasts. The board estimates adjusted revenue will be in the range of £1,205 – 1,215m and adjusted operating profit in the range of £85-90m. This performance has been achieved without government support including furlough schemes. Their performance was aided by Landmark, their UK property information business benefitting from an increase in property market transactions along with consumer media benefitting from advertising revenue being above expectations. Once again, they remain cautious about the future due to uncertainty around the impact of COVID-19. Full Year results will be announced on 23 November 2020.
IN THE NEWS
Sunak warned against tax raid as borrowing surges to £208bn in six months – THE TELEGRAPH
Inflation Rises After Eat Out To Help Out Scheme Ends – THE TIMES
Rishi Sunak set to provide more help for hospitality businesses – THE FINANCIAL TIMES
