Powerscourt

By Powerscourt on 23/10/2020

Powerscourt Coronavirus Briefing – 23 October 2020

ANALYSIS

As the vaccines arms race surges towards its finish line, it has been easy to overlook the fact that drugs that treat COVID-19 will be as important as vaccines that prevent it. There is encouraging progress here.

On Thursday, US regulators provided full marketing approval to Remdesivir, making it the first therapeutic drug for the treatment of COVID-19 to gain wide authorisation.

The drug, which California-based biotech Gilead Sciences Inc will market as Veklury, cut the time for recovery from 15 days to 10 on average in a large study led by the US National Institutes of Health.

Remdesivir has been authorised for use on an emergency basis since spring and has been used to help alleviate the symptoms of some of the sickest patients.

On  a related topic, the Daily Telegraph reports today that a separate class of antibody drug is effective in tamping down the human immune system when in a state of coronavirus-induced overdrive. The so-called “anti-C5” drugs have demonstrated the ability to engender “startling recoveries” in the sickest patients.

Speaking at a coronavirus briefing on Thursday, Professor Paul Morgan, the director of the Systems Immunity Research Institute at Cardiff University, said the drugs were providing a lifeline for patients who were near death.

Approved vaccines are considered the most effective way to safeguard whole populations. However, the arrival of treatments which make it easier for sick people to survive a coronavirus infection will play a major role in de-risking the normal social activity which the pandemic has rendered dangerous, ultimately underpinning economic recovery.

For now, western policymakers remain caught in a relentless seesaw between tweaking social restrictions to protect public health and using various degrees of financial rescue to alleviate the impact these restrictions have on their economies.

This familiar dichotomy took centre stage in the final US Presidential candidates’ debate on Thursday night.

President Donald Trump, who had a bout of coronavirus after his first debate, has played down the risk of the virus throughout the pandemic. Now, behind in the polls, he returned to the theme that the US was  “rounding the corner” in its fight with the virus. Joe Biden, the Democrat candidate disagreed and said the US was facing a “dark winter” and continued to riff on the theme that the Trump administration has let the country down through an inept response.

US virus numbers are surging again, according to Johns Hopkins, which says the US is averaging over 60,000 cases a day. In North Dakota, contact tracers are so overwhelmed with work that there aren’t enough investigators to contact positive cases, according to CNN.

The Financial Times notes a striking contrast between soaring infection rates in developed western countries such as the US and much of Europe and relatively low rates in Africa which, despite apocalyptic predictions, so far has a relatively low caseload and has succeeded in keeping fatalities to a modest level.

The FT says it isn’t yet definitively clear as to why Africa has so far dodged the worst of the virus, but suggests that high levels of exposure to similar viruses among populations, supported by decisive action by African leaders, may have played a part. 

Meanwhile the UK government has walked into yet another row about social fairness and the perceived North/South divide.

Chancellor Rishi Sunak on Thursday unveiled a fresh rescue package designed to help firms support workers through the latest coronavirus surge. The roughly £13 billion injection, which includes tweaks to the wage support scheme to make it easier for companies to keep workers on, has enraged politicians in the North of England.

Earlier this week, the government refused to agree to a package of measures for the North after a stand-off with Andy Burnham, the Mayor of Manchester. On Thursday evening Burnham, in an interview with ITV, accused the government of “dividing and ruling” an exhausted and dispirited population by pitting the North and South against one another.

Asian shares have held steady into Friday after the US Presidential debate, with less than a fortnight to go until the US election.

 

WHAT ARE COMPANIES SAYING?

 

Industrials 

Essentra
One of the leading global providers of essential components and solutions, Essentra today announced their Q3 revenue has closed 6.7% down on prior year, on a like-for-like basis. All 72 of their manufacturing and distribution facilities have been open throughout Q3 however, with service broadly back to pre-pandemic levels. Due to the recent £100m fundraise, Essentra has further enhanced its balance sheet and liquidity opportunities. As a result, Chief Executive Paul Forman states that he is very proud of how Essentra have responded to the pandemic and rather than seeing it as a hinderance, he recognises COVID as a good opportunity to review general and admin costs to see how the firm can organise even better moving forward.

Qantas
Australia’s most popular airline have today announced that the country’s state border closures have hit their recovery, keeping capacity below 30% of pre-pandemic levels. This has resulted in a A$100m hit to revenues for Q1 with impacts expecting to continue to be felt into Q2. The airline has cut the chief executive’s salary and slashed jobs in an effort to weather the pandemic.

Renault
Revenues at the French carmaker dropped 8% in Q3 as the blow dealt by the COVID pandemic was somewhat softened by a rebounding European market. Quarterly sales fell 8.2% year-on-year at €10.4bn and the volume on sales was down 6.1%. However, with revenue falling 35% in the first half, this represents progress for Renault who were hit particularly hard by the pandemic. The outlook is positive – things appear to be recovering and they are currently in the midst of a three-year turnaround plan announced in May by chief executive Luca de Meo.

 

Financials & Real Estate 

Barclays Plc
Despite the pandemic, the bank and financial services company delivered a Q3 YTD Group profit before tax of £2.4bn. This represents a tangible equity of 3.6%, earnings per share of 7.6p and a common equity tier 1 ratio of 14.6%. They remained open throughout the pandemic and underwrote over £1tn of new insurance in Q2 and Q3. The outlook remains uncertain and subject to change depending on the persistence of the COVID-19 pandemic.

London Stock Exchange Group PLC
The global financial markets and infrastructure business announced resilient Q3 performance across the group despite challenging market conditions. Q3 total income was up 2% to £600m, with total income on a year-to-date basis up 6% to £1,835 million. The group continues to demonstrate strong operational resilience, prioritising the continuity of service for customers and employee welfare, with the majority continuing to work remotely through COVID. Their proposed acquisition of Refinitiv continues to make good progress and is expected to be completed Q1 2021.

BMO Commercial Property Trust Ltd
The platform for investors to gain exposure to the prime UK commercial property market today announced mixed performance. The capital return of the Company’s portfolio was -2.8% for the quarter with the retail and leisure sectors continuing to be marked down and the London assets at Conduit Street, St Christopher Place and Wimbledon Broadway falling 16.5%, 6.4% and 5.0% respectively. However, the industrial and logistics portfolio was robust and increased by 0.9% in the quarter and the outlook remains cautiously optimistic.

Mercantile Investment Trust (THE) Plc
One of the largest UK equity investment trusts today announced their half-year results with Company’s revenue account severely impacted by the consequences of COVID-19. Many portfolio companies either cut or cancelled their dividends and revenue return in the first half of the Company’s current financial year decreased from 4.32p per share to 1.40p per share year-on-year, a 67.6% decrease. Angus Gordon Lennox, the chairman admits that the immediate future continues to look uncertain as COVID-19 ‘rears its ugly head’. He does however, offer some optimism, confident that in the long term normality will return.

Empiric Student Property PLC
The owner and operator of premium student accommodation across the UK has today updated that despite the challenging conditions, they have achieved solid performance, with occupancy reaching 70% across the portfolio, compared to 94% last year. Rental growth is 2.4% and, while the uncertainty due to the pandemic means it is too early to commit to reinstatement of dividends, Empiric are confident about their long-term future, and they continue to trade profitably.

 

Retail & Consumer

Intercontinental Hotels Group PLC
One of the world’s leading hotel companies today announced that Q3 revPAR is down 53.4%, with year-to-date revenue being down 52.3%. Promisingly, occupancy improved to 44% from 25% in Q2, however 199 hotels remained closed at 30 September. Keith Barr, CEO said ‘despite the challenges we have faced, we have continued to open new hotels’ and remains generally optimistic about future prospects.

 

TMT

Airtel Africa
The provider of telecommunications and mobile money services today announce their half year results with consistent double-digit growth and stronger performance in Q2. Their customer base grew 12% to 116.4m while operating profit increased by 19.5% to $472m, an increase of 28.3% in constant currency. Raghunath Mandava, CEO expressed how vital the telecommunications industry was throughout the impact of the COVID-19 pandemic and as such, while he remains alert to potential of second lockdown repercussions, he also remains confident of delivering long-term sustained growth for shareholders.

 

IN THE NEWS

Boris Johnson voices frustration as Test and Trace records worst week – THE TELEGRAPH

Donald Trump and Joe Biden clash over racism, Covid and foreign interference in final election debate – THE TIMES

Drops in UK consumer confidence fuels double-dip recession fears – THE FINANCIAL TIMES




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