Powerscourt

By Powerscourt on 08/01/2021

Powerscourt Coronavirus Briefing – 08 January 2021

ANALYSIS

The third wave of the pandemic threatens to overwhelm health services in the UK, the US and across much of Europe as governments’ face logistical and supply problems in attempts to roll out vaccines.

According to the Financial Times, an unseemly spat has broken out between the European Commission and Germany over the procurement and supply of vaccines. Over the past few days, Germany’s noisy tabloid media as well as a number of contenders in line to replace Angela Merkel have lashed out at Brussels over alleged shortcomings in the bloc’s vaccines programme.

“The European Commission has probably planned too bureaucratically: too few of the right [vaccines] have been ordered and price debates have gone on for too long,” Markus Söder, leader of Germany’s Christian Social Union, said. The problem is that, even though the European Commission has the largest portfolio of vaccines in the world, it has an undersupply of the Pfizer/BioNTech vaccine which was developed in Germany.

The Commission bet heavily on the Oxford/AztraZeneca vaccine, but so far no formal application has been submitted to the European Medicines Agency and it is unlikely that any formal approval will be granted this month. The Commission has hit back and said that the procurement programme was collectively agreed by member states.

There are two longer term implications arising from the current situation. At the start of the pandemic, there were calls to give the European Commission greater control over member state’s health policies. There is likely to be a pushback against this following the standoff over vaccine procurement. Secondly, the authorisation of vaccines was the first post Brexit public relations battle between the UK and the EU. There is a long way to go and events may pan out differently, but so far there have been unflattering comparisons between a sluggish EU regime and the seeming nimbleness of the UK’s.

The Telegraph and The Times are both reporting on UK government plans to draft in the army in an effort to vaccinate 200,000 people a day by next week as part of the Prime Minister’s pledge to have 14 million people inoculated by the end of February. Both papers also report a catalogue of logistical problems and other planning issues that are currently hampering the rollout programme. But, as it stands, the UK remains well ahead of the EU and the EU. The Times is also reporting that an arthritis drug, Tocilizumab, has cut the risk of death by 24% in the sickest of covid patients treated by the NHS.

China has been pushing back at World Health Organisation attempts to investigate the origins of the coronavirus. However, the New York Times is reporting on an interesting development that has been overshadowed by the chaos in Washington over the past few days and that is a second Chinese vaccine made by Sinovac Biotech had a 78% efficacy rate in a large scale phase 3 trial held in Brazil. The vaccine is now expected to get regulatory approval and China plans to distribute 300 doses to developing countries, filling a gap left by western countries, which gap is also being addressed by Sputnik V, the Russian vaccine.

Markets reached record highs overnight as investors took the view that once political chaos in Washington has abated, the new White House would embark on a major fiscal stimulus programme that would lead to a strong rebound in the US economy in the second half of this year. 

 

WHAT ARE COMPANIES SAYING?

Industrials 

Essentra plc 
One of the leading global providers of essential components and solutions, Essentra, has today released a pre-close trading update communicating improved performance from Q2 through Q4 and an emphasis on prioritising employee safety and building for the future. Group Q4 revenue is -1.1% on the prior year, maintaining the trend of steady quarterly improvements following the nadir in Q2 of 9.8%. The Company expects to deliver FY20 operating profit in line with the consensus of analysts’ forecasts. The Company expects to close FY20 comfortably within its targeted gearing range of between 1x to 2x (net debt/EBITDA), providing the platform from which it can explore and drive further strategic opportunities.

Rentokil plc
The world’s leading pest control provider has today released a statement announcing the acquisition of Environmental Pest Service (‘EPS’), a full-service, commercial and residential pest control company based in Tampa, Florida. In addition to EPS, the company has acquired a further eight high-quality pest control companies in North America in Q4, with combined annualised revenues of c.$62m (c.£48m) in 2020. Trading across both hygiene and pest control categories continued to be strong in Q4 and the Company now expects final outcome for the year to be slightly above the top end of the range of current market expectations for Adjusted PBTA. The company is looking to the future with confidence, however they remain cautious given the uncertain financial outlook in the immediate future.

 

Consumer & Retail

Pets at Home Group Plc 
The UK’s leading pet care business has today provided a trading update for their third quarter which concluded on 31 December 2020. The group states that momentum accelerated throughout Q3, with “high-teens” like-for-like Group sales growth during December. While Covid-19 restrictions may hamper growth, the group remains optimistic, having been deemed an essential retailer and the group believes it will continue to post strong results, while taking all necessary precautions to stay safe. Full-year underlying pre-tax profit, including the previously announced repayment of business rates relief of £28.9m is now expected to be at least £77m2, ahead of previous guidance.

Marks and Spencer Group plc
The British multinational retailer has today released a Christmas 2021/21 trading statement for the 13 weeks to 26 December 2020. Steve Rowe, Chief Executive said: “Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period. More importantly, beneath the Covid clouds we saw a very strong performance from the Food business including Ocado Retail and a further acceleration of Clothing & Home online.” Total UK revenue was £2,529m, down -7.6% like-for-like.

 

Financials & Real Estate 

Barratt Developments plc
One of the largest residential property development companies in the UK has issued a trading update in respect of the half year ended 31 December 2020. The Company delivered an excellent first half performance, with strong consumer demand across the country for their new homes. While demand has moderated since the last trading update in October to a more normalised level, it is still up 11.6% year-on-year at 0.77 compared to 0.69 in 2019. Total average selling price (‘ASP’) increased by 1.1% to c. £283k (2019: £279.8k), with private ASP up 2.2% to c. £319k (2019: £312.0k), reflecting both a positive mix impact and underlying house price inflation. Despite the challenges, Barratt’s sites operated successfully across the country and under the latest regulations, they will be allowed to continue to do so and construct across Britain.

Clarkson plc
Ahead of the announcement of its results for the year to 31 December 2020, which will be released on 8 March 2021, the world’s leading provider of integrated services  and investment banking capabilities to the shipping and offshore markets, confirms that the full year underlying profit for 2020, subject to audit, is expected to be ahead of market consensus and in the range of £42m to £45m.

 

IN THE NEWS

Arthritis drug tocilizumab offers new hope for covid sufferers – The Times

Travellers to England face compulsory covid checks – Financial Times

Everyone in UK to be within ten miles of nearest vaccination centre, Boris Johnson pledges – The Telegraph




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