By Powerscourt on 05/11/2020
Powerscourt Coronavirus Briefing – 05 November 2020
ANALYSIS
The US Presidential race remains balanced on a knife edge with Democrat candidate Joe Biden apparently within sight of a narrow victory, having won Wisconsin and Michigan on Wednesday night and with other states tilting his way. So, what have we learned about the pandemic?
We have one very clear takeaway from the election: coronavirus has become a lightning rod for economic fears, and voters’ response to coronavirus is largely dictated by economic security.
For decades blue collar workers, whose jobs tend anyway to be more precarious, have skewed Republican, particularly in the South and Midwest, moving away from their historical support for the Democrats. This trend has continued sharply in this election, suggesting many of these voters fear losing their job more than they fear the virus.
The small margin between the Trump and Biden results – in many states well under a percentage point of the popular vote – in large part reflects what Allister Heath in the Daily Telegraph calls “America’s new class war”: a deepening rift between white collar, educated people who have some protection from the virus due to their ability to work from home and those who have none but for whom keeping a job is the primary concern.
It is well-known that drug developers have poured money into the COVID-19 vaccine development market, but it should be worth it. Analysts at Credit Suisse and Morgan Stanley suggest that the market could remain large for many years, worth over $10 billion. They have written that because human immunity to the virus appears short-lived, any approved vaccine will need to be topped up at least once a year, helping to create a large and lucrative market which leaves space for many players.
As the UK goes into its second national lockdown today, the NHS has returned to its highest level of emergency preparedness. Simon Stevens, the Chief Executive of NHS England, warned that some medical procedures were now being cancelled as a result of rising COVID-19 cases and that within two weeks hospital occupancy due to COVID-19 would be higher than in May.
Prime Minister Boris Johnson easily won a vote allowing him to proceed with the controversial lockdown and averting a rebellion in his party on Wednesday, but several high profile Tory MPs, including former Prime Minister Theresa May, attacked his handling of the crisis in the House of Commons.
The UK recorded 492 deaths as a result of COVID-19 on Wednesday, the highest level since May. About 11,000 COVID-19 patients are being treated in hospitals.
The Bank of England early on Thursday extended its round of bond-buying stimulus by a further £150 billion as it sought to protect the UK’s struggling economy against the inevitable impact from the latest round of COVID-19 restrictions.
China will ban some travellers from Britain and Belgium and has imposed testing requirements on visitors from the United States, France and Germany, Reuters reports, in an attempt to protect itself from rising global cases.
US markets closed up strongly on Wednesday, apparently reflecting optimism that a clear winner on either side of the election was a possibility following fears of unrest. China shares ended higher on hopes that Biden, who takes a less confrontational approach than President Donald Trump towards the Chinese, could be within sight of a win.
WHAT ARE COMPANIES SAYING?
Industrials
Auto Trader Group
The UK’s largest digital automotive marketplace, announced half year results for the six months ended 30 September 2020. The Group note that demand for cars has been strong since early June, with consumer demand on Auto Trader consistently being 20% or more above prior year levels. Given their decision to allow retailer customers to advertise for free during April and May in response to Covid-19, revenue totalled £118.2 million and operating profit stood at £68.5 million for H1 2021. In response to the latest lockdown, Auto Trader will make its advertising packages free for December and extend November payment terms for a month. Nathan Coe, Chief Executive Officer, said: “As a result of the early and decisive actions that we took to protect our people and support our customers, we believe that our business, culture, and customer relationships are in a strong position.”
Wizz Air Holdings
The low-cost airline for short-haul and medium-haul point-to-point routes, today announced unaudited results for the six months to 30 September 2020. Total revenue decreased by 71.8% to €471.2 million and ticket revenues decreased by 78.9% to €201.8 million. József Váradi, Wizz Air Chief Executive commented on the results: “During the winter period, we expect conditions to be particularly challenging with ongoing travel restrictions due to COVID-19 as well as the seasonal drop in demand for travel. We will continue to focus on cost management and strive to maintain cash-positive flying with a disciplined approach towards capacity.
Inchcape
The multinational automotive distribution, retail and services company, released a trading update covering the period from 1 July to 30 September 2020. Group revenue was £1.9 billion: down 10% on an organic basis, and down 19% reported. Inchcape also reported a new distribution contract for Daimler El Salvador; their 4th new market in 12 months. Duncan Tait, Group Chief Executive: “Our Q3 results came in ahead of expectations, despite some continuing disruption caused by Covid-19. Whilst encouraged by how our business has rebounded, we are mindful that the pandemic situation remains dynamic.”
Biffa
The UK’s leading sustainable waste management company, announced its half year results for the 26 weeks ended 25 September 2020. Net revenues grew from £202.5 million in Q1 to £256.3 million in Q2. Various asset impairments and contract provisions, primarily from the impacts of COVID-19, has resulted in a Statutory loss after tax for the period of £43.2 million. Michael Topham, Chief Executive of Biffa, said: “We responded swiftly to the first wave of the pandemic and have emerged strongly in recent months with Group Net Revenue in September recovering to 93% of prior year levels.”
Financials & Real Estate
RSA Insurance Group
The insurance company today announced third quarter results. Group net written premiums of £4.64 billion were down 3% compared with the previous year (flat excluding the estimated impacts of COVID-19 and in line with their plans). RSA note that there was also a COVID-19 effect on premium income for customer reliefs and various other direct economic impacts, which has so far totalled £156 million. Stephen Hester, RSA Group Chief Executive, commented: “While COVID-19 has held back our profit overall, RSA’s inherent strength and the improvements we have made are driving the business forward in a pleasing manner.”
Retail & Consumer
Astrazeneca
The British-Swedish multinational pharmaceutical and biopharmaceutical company announced year-to-date and third quarter 2020 results. In the year to date, AstraZeneca delivered increases in the top line, profit and cash, underpinned by a strategy of sustainable growth through innovation. Revenue was up 3% to $6.58 billion in the third quarter. Pascal Soriot, Chief Executive Officer, commented: “Highlights of the sales performance included further success in Oncology and an acceleration in the progress of Farxiga. In the fight against COVID-19, we advanced our vaccine collaboration with the University of Oxford and are launching Phase III trials.”
J Sainsbury
The second largest UK chain of supermarkets posted their half-year report. Total Retail sales were up 7.1 per cent (excluding fuel) with like-for-like sales up 6.9 per cent. Grocery sales up 8.2 per cent and General Merchandise sales up 7.4 per cent. Digital sales grew 117 per cent to £5.8 billion, which represents nearly 40 per cent of total sales. Online groceries sales were up 102 per cent. The group also announced they are cutting 3,500 jobs and 420 Argos stores. Pointing to the importance of online sales, Simon Roberts, Chief Executive of J Sainsbury plc said: Around 19 per cent of our sales were digital this time last year and nearly 40 per cent of our sales are digital today.”
Hikma Pharmaceuticals
The multinational pharmaceutical group, provided an update on current trading.
For their Injectables business, the company are reiterating their guidance for core revenue of between $950 million and $980 million for 2020, with core operating margin in the range of 38% to 40%. Hikma are increasing their full year guidance for Generics division revenue to $720 million to $740 million, from their previous guidance range of $710 million to $730 million. Siggi Olafsson, Hikma’s CEO, said: “The breadth of our portfolio, the flexibility of our manufacturing capabilities and the strength of our commercial and distribution channels are enabling us to supply the medicines most needed by our customers, including those used in the treatment of COVID-19.
Tate & Lyle
The British-headquartered, global supplier of food and beverage ingredients to industrial markets, issued a statement of half year results for the six months to 30 September 2020. Revenue grew 4% to £1.39 billion with profit before tax also increasing by 3% to £180 million. The company note that in their Food and Beverage division, the Covid-19 pandemic changed demand patterns significantly in the half with reduced demand for out-of-home consumption, particularly in the food service sector, offset by strong growth in in-home consumption across categories such as bakery, dairy and soups, sauces and dressings. Nick Hampton, Chief Executive, said: “The first half of the year demonstrated the strength, resilience and agility of our business with Group profit higher, revenue growth in Food & Beverage Solutions and the interim dividend maintained.”
TMT
Aveva Group
The multinational information technology company provided results for the six months ended 30 September 2020. First half results were broadly in-line with the Group’s plan for the shape of the year, save for an increased FX translation headwind and two medium-sized subscription deals slipping from Q2 into Q3. Aveva posted revenue of £332.6 million. Chief Executive Officer, Craig Hayman said: “Given the Covid-19 disruption, AVEVA has performed creditably in what has been a relatively tough trading environment in the first half, and against very tough comparatives.”
IN THE NEWS
Sunak to give furlough cash to firms still shut after lockdown – THE TIMES
MPs warn against banks undermining extension to bounceback loan scheme – FINANCIAL TIMES
Covid-19 vaccine shortage fears as Britain misses production targets – THE TELEGRAPH
