Powerscourt

By Powerscourt on 16/11/2020

Powerscourt Coronavirus Briefing – 16 November 2020

ANALYSIS

As a vaccine edges closer towards a reality, so does anxiety about vaccine safety.

In a BBC interview, former US President Barack Obama has warned about the division that is being created by a culture where “facts don’t matter”, with vaccine scepticism being one of the most pressing concerns. Obama suggested that the world may need a combination of “regulation and standards” to prevent conspiracy theories taking over.

His remarks come as it emerged that hundreds of NHS and care home staff in the UK have created a support group via social media which opposes vaccination and mandatory mask-wearing.

NHS Workers for Choice, No Restrictions for Declining a Vaccine, has signed up more than 250 Facebook members in a month, The Times reports. The group says it is not an anti-vaccine group and exists to support healthcare workers, but The Times claims it is full of alarmist anti-vax rhetoric.

President Donald Trump, who has yet to formally concede the US election of November 3rd, is not likely to help the US get on top of mounting infection levels or anti-vax sentiment. New infections in the US topped 177,224 on Friday, a daily record, with nearly 70,000 people hospitalised, according to the COVID tracking project.

Some US public health authorities are now talking about the need for a total nationwide shutdown – hitherto an impossibility – as they seek to get the virus under control. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota, said that COVID is a “nationwide event”.

A Wall Street Journal article notes that where previous infections were centred primarily around cities, such as New York or states such as Florida, the virus is now spreading everywhere. Americans, exhausted by the constant vigilance of social distancing, mask-wearing and shunning their loved ones, have let their guard down. There is mounting pressure on the President to work with the President-elect to allow a transition of power which would in turn facilitate better co-ordination to tackle the virus resurgence.

“It’s almost like passing a baton in a race – you don’t want to stop and then give it to somebody,” Dr Anthony Fauci, the leading US immunologist who has become a figurehead for critics of the Trump administration’s approach to controlling the virus, told CNN.

Biden’s new pick as White House chief of staff, Ron Klain, said on Sunday that the President-elect had been blocked from contacting key health officials such as Fauci by the Trump administration’s refusal to allow the transition process to begin, effectively making it much harder for Biden and his team to plan a virus strategy.

Meanwhile UK Prime Minister Boris Johnson appears to have let his guard down after it emerged that he was self-isolating after a Conservative Member of Parliament, Lee Anderson, tested positive for COVID-19 shortly after a meeting at Downing Street.

The Prime Minister planned to “reset” his fractured government following the resignation of his adviser Dominic Cummings last week, and this is a significant setback. The fact he was meeting MPs in person also raises questions again about his apparent disregard for the now well-established safety conventions around COVID-19, despite the continual invocation to citizens to observe the rules.

Nevertheless, Johnson on Monday was posting upbeat video messages on Monday claiming to be “as fit as a butcher’s dog” and promising to govern by Zoom.

Johnson & Johnson today launches a late-stage trial of a potential COVID-19 vaccine, with 30,000 to be recruited around the world. The UK will be the first location to test the virus, with 6,000 subjects.

Asian stocks rose strongly Monday, with Japan’s Nikkei up 2% on growing optimism about a vaccine, combined with positivity on resurgent Asian economies.

“There’s just mountains of cash sitting on the sidelines, waiting to be put to work,” a breathless Kyle Rodda, analyst at IG Markets in Melbourne, told Reuters News. European markets may be more circumspect, but Asian equities are leading the charge out of the current gloom.

 

WHAT ARE COMPANIES SAYING?

 

Industrials

Glencore 
The world’s biggest thermal coal trader has said it plans to lay off contractors at its coal operations in Australia’s New South Wales state due to a prolonged market downturn. Contractors at the Hunter Valley Operations (HVO) will depart next month, Glencore said in a statement. The miner holds a minority 49% stake of the joint venture with Yancoal YAL.AX, and manages the mine’s communications. “Hunter Valley Operations has initiated discussions with the mine’s workforce on changes that will be made to the coal processing requirements from January 2021 as a result of ongoing economic and energy demand impact arising from the COVID-19 pandemic,” Glencore said, without providing details about the number of contractors who would be made redundant. Adding that “the changes will not impact HVO’s permanent workforce numbers but some contracting roles in the mining, coal preparation and maintenance areas will not be required under the revised production plan.”

Smith’s Group 
The diversified engineer said this morning that it was on track to meet market expectations for the full year as it reported a dip in first-quarter revenue. In the three months to the end of October, revenue edged down 2% on an underlying basis. The company said it had delivered a “good” trading performance. Adding, “In a period of ongoing global disruption, the group continues to demonstrate its resilience, founded on market-leading positions and a high proportion of aftermarket revenues”.

Diploma 
The technical products and serves group said it expected to deliver ‘strong’ performance in the year ahead after reporting a fall in annual profit as acquisition-related costs hurt performance. For the year ended 30 September, pre-tax profit fell to £66.7m from £83.5m as revenue slipped 1% to £538.4m year-on-year. Acquisition-related costs rose to £17.3m from £13.1m. Its controls business, which was most exposed to the UK economy as well as some more structurally impacted end segments, saw revenue fall 12% to £156.6m. The company said that it expects “to deliver another strong performance in the year ahead with a return to underlying mid-single digit growth and historic margins, in line with market expectations”.

Saudi Aramco
Saudi Aramco has said it has hired a group of banks ahead of a multi-tranche U.S. dollar-denominated bond issuance, as the world’s largest oil company seeks to raise cash amid lower oil prices. The announcement comes as Gulf issuers show no sign of slowing this year’s blitz on international debt markets as they seek to plug finances hit by weaker oil prices and the coronavirus crisis. Issuances from the region so far this year have already shot through last year’s record, surpassing $100 billion. Goldman Sachs, Citi, HSBC, JPMorgan, Morgan Stanley and NCB Capital were hired to arrange investor calls starting on Monday ahead of the planned transaction, Aramco said in a bourse filing.

Kingspan
The insulation giant Kingspan has reported a 5% fall in sales in the year to date.  Sales in the nine months September 30 were €3.27bn. Underlying sales – pre currency fluctuations and acquisitions – were down 10pc over the period, according to a trading update from the group. Nonetheless, the Gene Murtagh-headed company expects to deliver a full year trading profit marginally ahead of 2019. In Kingspan’s insulated panel division, sales decreased by 6pc in the first nine months and by 3pc in the third quarter. Sales and order intake activity in a number of key markets were “positive” during the third quarter. France and Germany have been busy while the UK has been softer albeit with a more recent improvement in order intake, Kingspan said. Insulation board sales in the first nine months of 2020 were down 14pc and down 5pc in the three months to September 30. Sales in its light and air were up 30pc so far this year, boosted by the Colt acquisition, completed in April. Underlying sales in this division were down 9pc in the year to date.

 

Security

G4S
G4S predicted its retail cash solutions business (RCS) would increase revenue by 25% a year to hit $600m (£454m) by 2025 as it sought to beat off a hostile bid from Canada’s GardaWorld. The security company said the business was “market-leading and extremely valuable” that had grown rapidly and profitably since launch in 2015. The US cash management business has an addressable market of €13bn and is protected by high barriers to entry and patented software, G4S said. It should be compared with technology companies valued at more than 20 times earnings, G4S said. G4S highlighted RCS’s potential as it battled to repel a hostile takeover attempt by GardaWorld. The FTSE 250 company also revealed on 3 November it had rejected an indicative offer from US rival Allied Universal.

 

TMT

Vodafone 
the world’s second largest mobile operator, said it was increasingly confident about its full-year performance after a “resilient” first half, despite underlying momentum being obscured by the impact of COVID-19. Vodafone nudged up the target range for adjusted core earnings to between 14.4 billion euros and 14.6 billion euros for its 2021 financial year, compared to 14.5 billion euros for the previous year. For the six months to the end of September, its adjusted earnings fell by 1.9% to 7.0 billion euros on a 2.3% drop in group revenue to 21.4 billion euros, as the pandemic impacted roaming revenue and handset sales. Chief Executive Nick Read said the results underlined “increased confidence” in the outlook and demonstrated progress in increasing customer loyalty, growing its fixed broadband base and delivering 5G efficiently through network sharing. The slight upgrade to the outlook compared to a previous forecast for full-year core earnings to be “flat to slightly down” on the previous year, and analysts were forecasting on average 14.37 billion euros. Vodafone also confirmed its full-year free cashflow guidance of at least 5 billion euros before spectrum and restructuring costs.

Kainos
Public-sector demand for digital services during the pandemic has fuelled strong half-year revenue growth for Kainos. Sales for the FTSE 250 technology company climbed by almost a quarter over the six months to September, reaching £107m. Pre-tax profits doubled to £24m. The trends observed across Kainos’s end-markets support the idea that coronavirus has “accelerated the move towards greater digitisation”, the company said, while conceding that the crisis has taken place over a “relatively short period” characterised by volatility. Within Kainos’s digital services business, revenues rose by 16 per cent to £71.4m. As part of its NHS Digital work, the group supported home testing and the track-and-trace system. At the same time, other existing clients in the public sector have continued with their digital transformation programmes “at pace” during the crisis. Many commercial customers paused their projects earlier in the year, but sales activity showed a “marked increase” in the second part of the reporting period. Meanwhile, revenues for Kainos’s Workday operations – which tie into the products of HR software company Workday – grew by two-fifths to £35.8m. Bookings slowed down in the first weeks of the pandemic but have since picked up. The group plans to pay an interim dividend of 6.4p, having already made a special 6.7p return to shareholders in September. It opted out of a final dividend earlier this year as the Covid-19 crisis gathered pace. Shares in Kainos have risen by more than a half year-to-date and rose 2.4 per cent to 1,216p in early trading today. By comparison, the FTSE 250 index has contracted by more than a tenth since early January.

 

Biomedical

Johnson & Johnson 
US pharmaceutical group Johnson & Johnson is launching a UK trial of its experimental Covid-19 vaccine, after analysis of a rival jab last week sparked optimism that scientists are making progress in efforts to combat the virus. Through its Janssen subsidiary, the New Jersey-based drugmaker will administer its experimental vaccine to 6,000 UK volunteers in two doses in a phase 3 trial. Such trials are typically the last step before drugmakers approach regulators for approval. The vaccine under development by J&J uses an adenovirus vector to transport the immunising protein into the body. It is the third experimental vaccine to enter late-stage trials in the UK, following one developed by US company Novavax and another being jointly worked on by Oxford university and UK drugmaker AstraZeneca.

 

Financials & Real Estate 

Pimco
Dan Ivascyn of Pimco warned that the world will have to live with the consequences of the huge extra debts taken on by companies to see them through the crisis and by governments to bail out their economies. “We will come out of Covid with a lot more debt for companies and governments and that leaves us with inherent fragility,” Mr Ivascyn told the Financial Times. Pimco is cautiously optimistic that the development of vaccines will bolster the global economy next year, but Ivascyn said investors needed to continue to be careful.

PNC
PNC has agreed to buy the US operations of Spanish bank BBVA for $11.6bn in an all-cash deal that will create the fifth-largest US bank by assets, delivering a jolt to a fragmented industry that has been slow to consolidate. The transaction comes six months after PNC sold its stake in BlackRock for $17bn as it sought to bolster its balance sheet amid concerns over the future of the US economy due to the coronavirus health crisis. The sum paid for BBVA’s US operations almost exactly matches the after-tax proceeds of the BlackRock sale. The acquisition will give Pittsburgh-based PNC a presence in several important growth markets beyond its primarily mid-western and mid-Atlantic footprint, most prominently in Texas. Bill Demchak, PNC’s chief executive, characterised the two deals as a “substitution” that would help the bank build a nationwide franchise.

Simon Property Group
The largest shopping centre owner in the US, has reached a revised deal to buy rival Taubman Centers, ending the last big court battle among corporate buyers looking to exit a transaction struck before the coronavirus pandemic hit the country in March. The companies announced the new terms on Sunday, just a day before they were set to meet in a Michigan court over Simon’s attempt to walk away from the transaction following the Covid-19 outbreak. Under the agreement, Simon will pay $43 per share, a 9 per cent premium on Taubman’s current stock price but significantly below the $52.50 per share deal the two companies had agreed in February.

 

IN THE NEWS

Blow to Johnson plans for reboot as PM forced to self-isolate FINANCIAL TIMES

Charges for using roads to fill £40bn black hole – THE TIMES

Investors tell European firms to reveal ‘missing’ climate costs in their accounts  REUTERS




DAILY CORONAVIRUS BRIEFING - How business is responding to the crisis MENU