Powerscourt

By Powerscourt on 07/01/2021

Powerscourt Coronavirus Briefing – 07 January 2021

ANALYSIS

Since Donald Trump lost the election in November, the US government’s response to the COVID-19 crisis has been more disjointed and underwhelming than before, as the President focused his energies on overturning the result. Apart from claiming credit for the early success of the Pfizer and Moderna vaccines, Trump rarely mentioned the rampant rates of infection spreading throughout the country.

The president’s reign came to an inglorious end last night when his supporters stormed Capitol Hill, apparently in a futile attempt to stop the transfer of power to President-elect, Joe Biden. COVID-19 has been knocked off today’s front pages by scenes of violent clashes in Washington. Trump’s legacy is going to be very controversial and it may take time for any reasonable analysis. But there is one issue that will have to be dealt with sooner rather than later.

Trump was the only western leader to directly blame China for the Coronavirus. He referred to it as ‘the China Virus’ on the presidential campaign. Other world leaders shied away from the blame game and instead focused on dealing with the pandemic. Yesterday both the British government and the Word Health Organisation itself described as “very disappointing” China’s decision to deny entry to a team of WHO experts who are investigating the origins of the coronavirus. According to the Daily Mail, when asked whether China was involved in a cover up, a Number 10 spokesperson said: “There are clearly questions that need to be answered about the origins and spread of the virus. Which is why we are supportive of the WHO independent international team of experts who will lead the investigation.”

China has denied that it has barred entry and blamed a ‘visa issue’ on the refusal of the team’s entry to the country. Beijing has asserted with increasing vehemence that the virus did not originate in China. How this standoff is resolved could have significant implications between the west and China long after Trump is gone.

The Daily Telegraph is reporting that the UK could authorise a vaccine from Janssen, a Belgian subsidiary of Johnson & Johnson as early as next month. The jab is seen as a gamechanger in the battle against the coronavirus as it requires one shot and it can be stored at room temperature, which means that it is logistically much easier to roll out. The Telegraph has an interesting table that shows that the UK has order 30 million doses from Janssen. In total,  the British have ordered 355m does for a population of 70m. Everyone is going to get jabbed, to be sure to be sure.

The European Medicines Agency (EMA) yesterday approved the Moderna vaccine, the second to gain EU approval following the Pfizer vaccine last month. A spokesperson for the agency rejected allegations that it is overly bureaucratic and unresponsive compared to its UK counterpart. He said that whereas the Medicines and Healthcare products Regulatory Agency (the UK regulator) had given temporary authorisation to the Pfizer and AztraZeneca vaccines, the EMA takes a more rigorous and long term approach to vaccine approval. The comments failed to quell rumblings of discontent in capitals throughout the EU as the slow rollout of vaccines continues to sow discontent.

Interestingly, the UK temporary approvals are not dissimilar to the “emergency use” that Russia granted to its Sputnik V vaccine.

Despite the chaotic scenes in Washington, S&P Futures and Asian markets rallied overnight. After an initial dip following a clean sweep of the White House and Congress as Democrats won two Senate run off races in Georgia on Tuesday, investors took the view that a Biden president will pursue a fiscal stimulus package that will help reflate the global economy. 

 

WHAT ARE COMPANIES SAYING?

Industrials 

Ryanair Holdings plc 
The Irish low-cost airline today warned it will carry even fewer passengers than forecast this financial year, after slashing its winter flight schedules in response to the new wave of lockdowns and travel restrictions in the UK and some other European countries. The airline now expects to run few, if any, flights from the UK and Ireland from the end of January until restrictions on movement are eased. Ryanair has resultantly revised its passenger forecast for the financial year from below 35m to between 26 and 30m passengers, less than a fifth of the 149m it carried in the previous year.

 

Consumer & Retail

Mitchells & Butlers Plc 
One of the leading operators of managed restaurants and pubs in the UK today releases a first quarter trading update, covering the 14 weeks up to 2 January 2021. The Company has faced a particularly difficult period, having had no sites open since 30 December 2020. This has come as a result of a second national lockdown, a reinforced national Tier system, followed by a third national lockdown, with progressively tighter restrictions across both the UK and Germany limiting operations. Resultantly, across the whole first quarter, total sales were 67.1% below the prior year while when sites have been open, trading has been 30.1% down on prior year across the period. The group welcomes positive news on vaccine approval and roll-out but remains conscious that the hospitality sector faces an uncertain future.

J Sainsburys pls
The UK’s second largest chain of supermarkets has today announced strong Q3 and Christmas performance against the backdrop of a particularly difficult trading environment. Christmas sales were up 9.3% like-for-like, while Q3 sales were up 8.6%. General merchandise sales grew by 6.0%, with Argos up 8.4%. Crucially, total digital sales saw an 81% increase and accounted for 44% of total sales. The group now expects to report underlying profit before tax of at least £330 million in the financial year to March 2021, having forgone business rates relief of £410 million. The Group remains focused on delivering strong performance throughout a third national lockdown and keeping all its employees and customers safe.

Entain plc
The British sports betting and gambling company today announces a recommended cash offer to the shareholders of Enlabs AB to tender all their shares in Enlabs to Entain at a price of SEK 40 per share. The offer values Enlabs at around SEK 2.80 billion (equivalent to approx. £250 million at the time of the announcement) and shareholders holding in aggregate around 42.2% of the total number of Enlabs shares have undertaken to accept the offer. The baltic region represents a highly attractive, locally regulated and fast-growing gaming market. Entain does not currently operate in these geographies and entry is aligned with Entain’s strategy to focus on growth markets which are locally regulated and taxed. Entain believes that a combination with Enlabs would allow Enlabs to accelerate delivery of its ambitions both in terms of growth within its existing markets and successful expansion into adjacent markets, including Belarus and Ukraine.

B&M plc
The UK’s leading variety goods value retailer today announces a Q3 trading update relating to the 13 week period between 27 September 2020 and 26 December 2020. Group revenue growth in the quarter was +22.5% on a constant currency basis while B&M UK stores opened saw revenue growth of +26.6%, including like-for-like growth of +21.1% in the quarter. 18 gross new B&M UK stores opened in Q3, helping to create over 500 new jobs. Previous guidance for FY21 Group adjusted EBITDA6 (on a pre-IFRS16 basis), issued on 3 December 2020, narrowed to be within the range of £540m to £570m, stated after the voluntary payment of business rates in FY21 amounting to approximately £80m

 

Financials & Real Estate 

TP ICAP plc
One of the world’s leading interdealer brokers has today released a trading update for the financial year end 31 December 2020. The group stipulates that as previously updated, revenue for the first nine months of 2020 was 1% lower on a constant currency basis than the first nine months of 2019, however while trading volumes remained subdued for the rest of the year, full year 2020 revenues are expected to be 1% lower than the prior year. This represents resilient performance for the franchise, largely as a result of its diversification strategy, with revenue achieved in Data & Analytics, Institutional Services and Energy & Commodities divisions offsetting much of the decline in revenue in Global Broking division in 2020 after a strong first quarter.

Pantheon International plc
One of the leading private equity fund investors in the world has today released its performance update at 30 November 2020. In the half year to 30 November 2020, the unaudited net asset value per share of 3,139.2p is an increase of +256.4p relative to the net asset value per share at 31 May 2020. Valuation gains added +431.9p and investment income asses +10.9p, while foreign exchange movements were -174.5p and expenses and taxes -11.9p. During the half year, the company made six new commitments, amounting to £14.6m and consisting of four co-investments (£8.6m), one secondary (£4.7m) and one primary (£1.3m).

 

IN THE NEWS

Coronavirus lockdown restrictions could stay until April, warns Boris Johnson – The Times

Vaccine scepticism among medics sparks alarm in Europe and US – Financial Times

GPs told to ‘stand down’ routine care and focus on Covid vaccinations – The Telegraph




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