Powerscourt

By Powerscourt on 26/11/2020

Powerscourt Coronavirus Briefing – 26 November 2020

ANALYSIS

For citizens to comply with mass COVID-19 vaccination programmes, they have to have absolute confidence in clinical trial data. With an increasingly vocal anti-vaccine movement seeking to stir up conspiracy theories about governments using vaccines to “control” citizens and amid general anxiety, it’s more important than ever that trials be run transparently and resulting data be shown to be free from manipulation or bias.

Now anomalies have appeared in the published data for the much-feted “Oxford Vaccine” candidate, from AstraZeneca, which could hurt its chances of approval and perhaps more worryingly, damage credibility for vaccines more broadly.

One of the striking elements of the late stage trial data disclosed earlier this week was the strong efficacy of the vaccine in subgroups of the trial in which the first of two vaccine shots was administered at a half dose. Scientists working on the trial had professed themselves to be baffled as to why this happened earlier this week, but in a statement on Wednesday, the University of Oxford disclosed that the lower dose was administered in part due to differences in management and measurement processes – effectively, by mistake.

Other variables in the trial, which may have influenced the efficacy of the final data, include the fact that this sub-group in the trial with the highest efficacy had skewed younger than most other sub-groups. It also emerges, inexplicably, that participants in different regions were given different placebos: UK participants were given a vaccine against an unrelated infection, while those in Brazil received saline.

“We just don’t have all the information we need to tell whether these results are reliable,” Natalie Dean, an assistant professor of biostatistics at the University of Florida, told the Financial Times. She contrasted AstraZeneca’s data with that from the trials of the vaccines from Pfizer and Moderna, which had more transparent trial protocols.

AstraZeneca’s shares have fallen more than 6% since the data was announced. (Please see footnote about Powerscourt and vaccines)

Meanwhile, the scale of the COVID-19 impact on the UK economy was laid bare yesterday, when an Office of Budget spending review confirmed that coronavirus has essentially cost the country three years of growth.

It said that between £21 billion and £46 billion in tax rises and spending cuts would be needed by 2025 because of soaring public indebtedness, including almost £400 billion of new debt this year, the highest in peacetime.

Chancellor of the Exchequer Rishi Sunak, though, in a surprising move, has committed to a clutch of new infrastructure projects, primarily targeting the North and Midlands of England, areas to have been disproportionately hit by the crisis and areas which, maybe not coincidentally, also saw a big swing towards the Conservative Party at the last election.

“Our health emergency is not yet over, and our economic emergency has only just begun,” Sunak told parliament. “So our immediate priority is to protect people’s lives and livelihoods.”

Sunak is directing funds to the government’s “levelling up” agenda and is cutting the UK’s foreign aid budget.

The focus on the hardest-hit regions comes ahead of likely horse-trading over planned new restriction “tiers” for the UK as the government prepares to phase out national lockdown. Secretary of State for Health Matt Hancock will today outline the approach which will replace the national lockdown in place for just under a month. Boris Johnson said the system is likely to be tough, managing expectation that it could lead to a more relaxed regime.

“We’ve got to keep our foot on the throat of this virus,” Johnson told Conservative MPs on Wednesday.

Germany has extended its lockdown into December to drive down the rate of COVID infection ahead of Christmas. Authorities in Sicily have asked for emergency doctors and nurses to be sent to the region as hospitals there struggle with a shortage of medical personnel.

Americans celebrate Thanksgiving today in unusually subdued circumstances, but nevertheless are travelling more than health officials would like, according to the Wall Street Journal. It cites data, driven by mobile phone usage, suggesting that mobility yesterday was 6% higher than a week ago. Infection rates are still soaring in the US, with deaths in nursing homes now exceeding 100,000

Asian shares traded higher into Thursday amid continued hope over COVID-19 vaccine progress.

Footnote: Powerscourt is an adviser to the Russia Direct Investment Fund which sponsors the Sputnik V vaccine candidate.

 

WHAT ARE COMPANIES SAYING?

Industrials

AA 
The AA is to return to private equity ownership after six years as a publicly quoted company. During that time shares in the car insurance and breakdown business — which were listed at 250p — have peaked at 416p in 2015 and then fallen as low as 15p during the Covid-19 outbreak. It is being bought for 35p a share by Towerbrook and Warburg Pincus. Creaking under £2.6 billion of debt, the legacy of the £3.1 billion millstone it inherited from the company’s last private equity exit, the AA is valued at only £219 million in the recommended cash deal. At its flotation in 2014 it was valued at nearly £1.4 billion. In a statement, the private equity firms said that the core strengths of the AA lay in its brand, market-leading positions and skilled workforce. “However, the consortium believes that the AA has been held back as a result of underinvestment and high levels of debt [and] needs committed, long-term owners to support the growth of the business and to invest in critical areas such as IT transformation, which in turn will generate new and better opportunities for customers.”

Aviva
The British insurer has said it expects to pay a total dividend for 2020 of 21 pence and increase it by the low to mid-single digits, and is exploring options for its remaining European businesses. Aviva’s new CEO Amanda Blanc has said the company wants to scale back operations in Europe and Asia to focus on core markets of Britain, Ireland and Canada. Aviva did not pay a final dividend for 2019 as a result of the coronavirus pandemic, bringing its total dividend for last year to 15.5 pence. Its total payout in 2018 was 30 pence. The firm cut its estimate of COVID-19 related claims in its general insurance business to £100 million net of reinsurance from £165 million, as lower claims frequency in the third quarter improved its overall performance.

Severn Trent 
The FTSE 100 water company has said it expects to recover lost revenue due to the pandemic within two years, thanks to Ofwat’s regulatory model, as it posted a fall in first-half profits and revenue. It expects turnover for the year to March 2021 to come in at £1.63bn-£1.67bn, down from £1.84bn last year, as the pandemic is still dragging down non-household water consumption, which is partly offset by increased household usage. Operating costs are expected to be higher due to increasing chemical usage to meet tighter sewage rules and expected COVID-19 related increases in household bad debt, it added. Underlying profit before interest and tax excluding property will be lower year-on-year, Severn Trent said, due to impact of lower energy prices on renewable energy revenue and COVID-19, while property profits will be between £2mln-£5.0mln, though the company expects to deliver £100mln profit before interest and tax by 2027.

 

Consumer & Retail

Boohoo
The British online fashion retailer has said it has appointed retired judge Brian Leveson to provide independent oversight of its programme to improve supply chain and business practices. In September, Boohoo accepted all the recommendations of an independent review which found several failings in its supply chain in England after allegations about working conditions and low pay, and set out steps to tackle the problems. The group said Leveson will report directly to the Boohoo board and his reports will be published, bringing both transparency and further independence to the process.

Disney
Walt Disney Co has said it will lay off 32,000 workers, primarily at its theme parks, an increase from the 28,000 it announced in September, as the company struggles with limited customers due to the coronavirus pandemic. The layoffs will be in the first half of 2021, the company said in a filing with the Securities and Exchange Commission. Earlier this month, Disney said it was furloughing additional workers from its theme park in Southern California due to uncertainty over when the state would allow parks to reopen. Disney’s theme parks in Florida and those outside the United States reopened earlier this year without seeing new major coronavirus outbreaks but with strict social distancing, testing and mask use. Disneyland Paris was forced to close again late last month when France imposed a new lockdown to fight a second wave of the coronavirus cases. The company’s theme parks in Shanghai, Hong Kong and Tokyo remain open.

Mitchells & Butlers
The U.K. pub-and-restaurant group, which houses the Harvester, Toby Carvery, All Bar One and Miller & Carter brands, said its pretax loss was £123. million in the year ended Sept. 26, compared with a profit of £177 million in fiscal 2019. Revenue fell 34% to £1.48 billion, while like-for-like sales fell by 3.5%, which the company said was better than market peers. The company said that early fiscal 2021 like-for-like sales were down 26.5%, driven by the second lockdown in England which started on November 5. Mitchells & Butlers said the market continues to be challenging and it is unable to provide guidance, with a level of material uncertainty stemming from a lack of clarity on the extent of lockdown measures.

Mulberry
Mulberry has cheered a “strong” reaction to the relaunch of its Alexa bag, as the firm showed sales have been hurt by the pandemic but were improving ahead of the current lockdown. The accessories firm, led by Thierry Andretta, has seen trade suffer due to lockdowns, with stores shut for months earlier this year, and branches in England that closed in early November only being allowed to reopen next week. In June the firm said it would look to reduce its workforce by 25% as it sought to reduce its cost base during the virus crisis. In the first half Mulberry recorded a adjusted pre-tax loss of £1.9 million, compared to a £10.1 million loss a year earlier. Revenue in the six months to September 26 dropped 29% to £48.9 million. Sales in the first quarter fell 39% and trading improved in the second quarter as sales declined 18%.

Britvic
The drinks group behind Robinsons and Tangos aid performance in the first half of the current financial year will “undoubtedly” be affected by COVID-19 restrictions, although it confides in the resilience of the soft drinks category. In the year to September 30, 2020, revenue shed 9% to £1.4bn while adjusted underlying earnings tumbled 23%. The FTSE 250 group cut its final dividend by 28% to 21.6p per share in line with its 50% pay-out policy. In the UK, volume and revenue declined, reflecting the significant impact of restrictions placed upon the Out-of-Home channels and On-the-Go consumption, while At-Home channel revenue increased, as consumers stayed home and bought family favourite brands such as Robinsons, Pepsi, Tango and 7UP, resulting in market volume and value share gains. However, margin was hit by the shift to larger At-Home pack formats but was partly offset by significant savings in advertising spend, the company said in its final results.

IN THE NEWS

Sunak says on Brexit trade deal: We can get there – Reuters

Spending review 2020: Covid costs ‘three years of growth to economy’ – The Times

Europe’s finance sector hits ‘peak uncertainty’ over Brexit – Financial Times




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