By Powerscourt on 10/11/2020
Powerscourt Coronavirus Briefing – 10 November 2020
ANALYSIS
We have been writing a daily wrap for almost eight months and there is finally some light at the end of the coronavirus tunnel: a stunning breakthrough from one of the front-running vaccine candidates has generated worldwide euphoria as a jab now moves off the world’s wishlist and onto a concrete timetable.
US pharma giant Pfizer and its development partner, German biotech BioNTech, said on Monday that their experimental COVID-19 vaccine had been found to be 94% effective in the first interim data analysis disclosed from a late-stage trial of the vaccine.
For now, there are many, many caveats and many reasons the world needs to keep its feet on the ground.
The data released by the two companies yesterday is not complete, it is not yet peer reviewed by other scientists and the vaccine has yet to be approved for use in humans anywhere in the world. The technology upon which it is based, called mRNA, has not been approved for use in humans anywhere in the world. But, if the topline data disclosed on Monday holds up across the full data set for the trial when final results are published, the vaccine will have been shown to have a very high level of efficacy.
The reaction of normally sober scientists in the media is a sign of how positively surprised they are by the data, which exceeded most expectations. Pfizer’s own press release heralded “a great day for science and humanity”.
But it was the reaction of the normally circumspect Sir John Bell, Regius Professor of Medicine at the University of Oxford, a professional sceptic with a bone dry manner, that summed up how significant a breakthrough this is.
When asked by the BBC if this could mean a return to normality by the spring, Sir John, who is involved in a rival vaccine development programme, said: “Yes, yes, yes. I’m the first guy to say that, but I will say it with some confidence.”
Stock markets reacted with unbridled exuberance. The S&P 500 index closed 1.2% higher but at one point was up nearly 4%, an intraday record high. Europe’s Stoxx 60 and the FTSE 100 both closed up around 4%.
Politicians, conscious of the potential for things to go wrong between initial data and market approval, have gone out of their way to curb this enthusiasm. “The projections still indicate we could lose 200,000 more lives in the coming months, before a vaccine can be made widely available,” US President-elect Joe Biden said on Monday. “So we can’t forgo the important work that needs to be done between now and then to get our country through the worst wave yet in this pandemic.”
At a press conference yesterday at Downing Street, UK Prime Minister Boris Johnson warned that despite the breakthrough, people must continue to observe the national restrictions which have been in place for just over a week, with an emphasis on mask-wearing and social distancing.
“We’ve seen a swallow, but this is very much not the summer,” Johnson said at the briefing, one of a number of tortured metaphors he employed to describe the need for citizens to remain vigilant and urging people to continue to observe the national lockdown rules.
The Prime Minister, flanked by the deputy Chief Medical Officer Professor Jonathan Van-Tam, said that, subject to approval by UK medicines regulator the MHRA, the first UK citizens could be being vaccinated before Christmas.
Biden and his Vice President-elect, Kamala Harris, started the first week of their transition drilling into the coronavirus pandemic, taking detailed briefings from a newly-appointed advisory board and apparently undaunted by the noises off from supporters of President Trump who continue to claim the election, which Biden has narrowly won, was “stolen”.
Coronavirus is running rampant in the US at present. The vaccine news came after the US became the first country to cross a grim threshold of more than 10 million coronavirus cases, according to Reuters. As of Monday, there are nearly 60,000 people hospitalised in the US with COVID-19 and several states and regions are tightening restrictions on citizens.
Economically, the pain of continued lockdowns is biting. Investors continue to argue that a package of US stimulus will be needed as more and more companies face economic ruin in the short term. The UK Office of National Statistics said early on Tuesday unemployment has reached almost 5%.
But economists are optimistic over the medium term. Douglas McWilliams, an economist at CEBR, told the Daily Telegraph the vaccine was a “game-changer”, which could allow GDP to recover to 2019 levels by summer 2021.
“We’ll have to see exactly how fast the vaccine gets rolled out but I think GDP will recover pretty quick,” he said.
Asian stock markets continued the rally into Tuesday as global investors applauded successful trial data, but awareness of the likely delay to vaccine roll-out put the brakes on early gains.
WHAT ARE COMPANIES SAYING?
Industrials
Capita PLC
The international consulting, digital services and software business published a trading update this morning. Capita reported that the greater part of it’s revenues have remained resilient, with the vast majority of its staff able to deliver services for its clients. The year-on-year revenue reduction has been driven by both the impact of COVID-19, largely in Capita’s transactional businesses – such as travel and training – and contract losses announced in 2019. The revenue reduction this quarter has been mitigated through the cost actions taken over the last 12 months. Jon Lewis, Chief Executive Officer, said: “Our focus on our colleagues’ wellbeing and client service delivery has helped us deliver a resilient performance across most of our operations. Despite the ongoing challenges caused by COVID-19, Capita has continued to trade in line with our expectations.”
Meggitt PLC
The leading international company specialising in high performance components and sub-systems for the aerospace, defence and energy markets, today issues a trading update for the third quarter. Revenue was down 25% in the period, compared with down -30% in the second quarter. For the full year, Meggitt expects to deliver underlying profit between £180m and £200m and to be free cash flow positive in the second half. CEO, Tony Wood commented: “While we remain alive to the challenges which COVID-19 continues to pose, we are encouraged by recent news on vaccine development and the positive implications for air travel. With diverse end market exposure, strong market positions, and having taken a range of decisive actions, we remain well placed for the recovery.”
Electrocomponents PLC
The British-based global multi-channel distributor today reported its results for the half year. Headline profits fell by -28% to £74.3 million in the six months to the end of September, slightly above expectations and down from £103.4 million last year. Lindsley Ruth, Chief Executive Officer, commented: “Electrocomponents has delivered a resilient performance with significant market share gains and robust cash generation despite the challenges our suppliers, customers and teams have faced whilst keeping safe… We are in difficult and uncertain times and we remain cautious about the economic outlook. However, what has become clear, especially over recent months, is that our value-added solutions offer provides competitive advantage.”
Consumer & Retail
Premier Foods plc
The British food manufacturer announced today its half year results, showing an exceptionally strong performance and raising its full year outlook. Group revenue was up +15.0% and trading profit increased +28.7% to £65.8m after increased marketing investment and incremental Covid costs. In online, the group grew +112%, leading to a market share gain of 260 basis points. Alex Whitehouse, Premier Foods’ Chief Executive Officer, commented: “During this entire time, we have continued to drive our branded growth model, launching insightful new products and supporting our three biggest brands with above the line advertising. Consequently, we have continued to grow faster than all our categories, increasing market share in each one; a reflection not only of our strong brands but also the amazing performance of our supply chain colleagues to ensure product availability.”
Financials & Real Estate
Persimmon plc
The UK’s leading housebuilder announced its third quarter trading statement today. Persimmon reported a strong third quarter performance, supported by firm selling prices and resilient demand for new build homes. It also stated that throughout the initial national lockdown period, it retained all of its staff on full pay, without recourse to Government assistance, and provided necessary support to its suppliers and subcontractors to ensure operational continuity and enable a safe and structured re-start to site operations. Dean Finch, Persimmon’s Group Chief Executive commented: “Persimmon continues to perform robustly despite the significant challenges presented by the Covid-19 pandemic and we are currently on course to deliver a good result for 2020.”
Direct Line Insurance Group PLC
The UK’s leading direct car insurer posted a third quarter trading statement that showed an encouraging trading performance and good progress on strategic transformation. The performance was primarily driven by growth in its Green Flag and commercial divisions, which were up +9.6% and +12.4% respectively. The insurance group said its total written premiums slipped a marginal -0.8% to £851.5m in the three months to the end of September. Penny James, CEO of Direct Line Group, commented: “We are encouraged by our trading performance in Q3 where we saw a return to strong growth in Green Flag and Commercial and some improvement in Motor and Home own brands… This progress is testament to the flexibility and commitment of our people who have been successfully navigating through the Covid-19 pandemic.”
Land Securities Group PLC
The largest UK commercial property development and investment company released its half-yearly results today. Net asset value fell 9.5 per cent to £10.79p a share. The property company has written down the value of its shops, offices and other properties by a further £945 million alongside half-year results this morning. Chief Executive Mark Allan said: “While today’s results clearly show the impact of the pandemic on our business, Landsec remains in a fundamentally strong position… This strength also means we have been able to take a proactive and responsible approach to the challenges of Covid-19, supporting our communities and customers.”
TMT
DCC PLC
The leading international sales, marketing and support services group today announced its results for the half year. DCC performed strongly during the seasonally less significant first half of the year, with Group adjusted operating profit increasing by +8.3% (up 8.6% on a constant currency basis) to £176.1 million. The Group committed approximately £90 million in capital to new acquisitions in both Europe and North America since May 2020. Commenting on the results, Donal Murphy, Chief Executive, said: “With Covid-19 related restrictions now increasing again generally, the outlook for all economies in which DCC operates remains very uncertain. However, DCC’s diverse and resilient business model, the essential nature of the Group’s products and services and its extremely strong balance sheet ensure that the Group is well placed to navigate this ongoing uncertainty and continue its growth and development into the future.”x
Oxford Instruments plc
The leading provider of high technology products and systems for industry and research today announces its half year results. Oxford Instruments reported an order book of £204.6m, up 16.6%, it also revealed that reported and constant currency revenue was down by 11.0% to £140.3m as a result of customer site closures and the introduction of Covid-related working practices. Ian Barkshire, Chief Executive of Oxford Instruments plc, said: “We are adjusting to the external and internal effects of the pandemic and expect uncertainty to remain high. However, robust trading during the first half, combined with a strong order book, gives us confidence for the second half, absent a material increase in covid‑related disruption that could impact facility or customer site access. We expect full-year performance to be a little behind last year on a constant currency basis, ahead of current analyst forecasts.”
IN THE NEWS
Pfizer’s Covid-19 vaccine: ‘Normal life by spring’ after jab stops 9 in 10 infections – THE TIMES
US banks in line for windfall after Covid-19 vaccine progress – FINANCIAL TIMES
Oxford coronavirus vaccine results could be available within weeks – THE TELEGRAPH
