By Powerscourt on 13/01/2021
There is a very sobering assessment of the current state of play from Cambridge-based Ewan Birney, the Deputy Director of the European Molecular Biology Laboratory, in a social media post. He said that B117 strain (or as Angela Merkel calls it, the ‘British virus’) is a gamechanger and effectively constitutes a ‘pandemic within a pandemic’. Its rate of transmission is so potent that once it establishes a presence in a country or region, then it will cause rampant rates of infection. If it isn’t in a country or region yet, then it is only a matter of time before it will be. He estimates that the B117 strain will double the rate of infection every week, which means that the overall rate will increase eight-fold over a month and sixty four-fold* over every two months, sweeping through the population and overwhelming the health service. Governments can impose stricter lockdown measures to slow the rate of transmission, but, according to Birney, ultimately the only effective measure against the spread of the disease is mass vaccination programs.
Governments across Europe and the US have been forced into stricter lockdown measures over the past month in an effort to slow the rate of infection. As always, every country will have lockdown sceptics who are determined to challenge the rules either through the courts or through public displays of defiance. Boris Johnson did his bit to add to the debate on Sunday by going for a cycle to the Olympic Village in London – a seven mile ride from home. Over the past few days his cabinet colleagues have been in contortions trying to persuade the public that seven miles chimed with the spirit of staying local. The Guardian asks whether the furore of the Prime Minister’s bike ride is a storm in a tea cup or whether it will erode public confidence.
There is good news on the vaccine rollout front. It is expected that the Oxford / AztraZeneca vaccine could be approved by the European Medicines Agency on January 29. Johnson & Johnson has said that it expects the results of its phase lll trials in the next week or so and should be in a position to seek regulatory approval in early February. The Johnson & Johnson vaccine, in particular, is seen as a gamechanger, as it is a single jab and it can be stored at room temperature, which will be crucial for mass inoculation.
Meanwhile, the Mexican government said it will make a decision this week whether to authorise Sputnik V, the Russian COVID-19 vaccine. Mexico has already licenced the Pfizer / BioNTech and AstraZeneca vaccines and is considering ordering 24 million doses of Sputnik V**.
The Financial Times is reporting that Professor Stephen Turner, the President of the Australian Immunology Society, wants the Australian government to pause the rollout of the Oxford / AztraZeneca vaccine. He is not disputing its safety record, but Professor Turner claims that, with a 62% efficacy rate, it is not enough to achieve herd immunity. He has called on Canberra to prioritise the Pfizer and Moderna vaccines. However, Paul Kelly, Australia’s Chief Medical Officer, has disputed Professor Turner’s claims and said he had no concerns over the Oxford / AztraZeneca vaccine.
The New York Times has a piece looking at what a post pandemic world might look like. Once a critical mass of the population has either been infected or vaccinated, then the coronavirus, while unlikely to disappear, will pose no greater threat than a common cold.
Asian stocks rose overnight, tracking modest gains made on Wall Street as investors take the view that vaccines will ultimately prevail in the battle against Covid, paving the way for an economic recovery in the second half of the year. Oil prices hit a one year high on the back of tightening oil supplies.
*While Dr Birney writes of “64 fold in two months”, Powerscourt thinks it might be 128 fold!
**Powerscourt is working with the Russia Direct Investment Fund which is leading the commercialisation of Sputnik V
WHAT ARE COMPANIES SAYING?
Industrials & Transport
Howden Joinery this morning lifted profits guidance after a better-than-expected performance in the final weeks of the year as locked down Britons spent more time improving their homes during the coronavirus pandemic. The company now expects 2020 pretax profit to be around £185m. A month ago, Howdens said annual pre-tax profit was set to be around 10% above the top end of analyst forecasts of between £123m – £152m.
Landscaping firm Marshalls this morning confirmed that it would reinstate its dividend after much improved trading in the second half. After sales fell sharply in the first half, the company said that figures from recent months were ahead of 2019. But group revenue fell from £542m to £469m for the full year on the back of the coronavirus pandemic. For its domestic market sector, Marshalls said that sales were up 9% for the second half. In the public and commercial division, sales over the same period were down 6%.
For a business in the thick of two of the most difficult global sectors – aircraft, both passenger and commercial, and cars – Melrose Industries seems to be holding its head high. The FTSE 100 conglomerate told shareholders in its most recent City update that it was trading at the top end of expectations. Given the global pandemic, these are unlikely to be lofty, but in spite of the substantial statutory pre-tax loss that Melrose reported at the half-year stage in September, it reckons that it can break even over the year and analysts are hopeful that it will turn in a small profit.
QinetiQ Group this morning said it continued to deliver strong performance through the third quarter. Further, the company stated that it is on-track for its fifth consecutive year of organic growth and continues to maintain its full-year guidance. QinetiQ added that it remains cautious and alert to the changing COVID-19 environment. The company’s EMEA Services continued to have good momentum in the third quarter with very limited impact from COVID-19, as the division benefits from long-term contracts and delivers work that is critical to sovereign defence capabilities.
Consumer & Retail
British online fashion retailer ASOS forecast a full-year profit at the top end of market forecasts after Christmas trading surpassed its expectations, helped by strong demand during COVID-19 pandemic lockdowns. Analysts have forecast a pretax profit of £115 million to £170 million, versus £142.1 million in 2019-20. ASOS, which sells fashion aimed at 20-somethings, said group retail sales rose 23% over the four months to 31 December year-on-year.
Sales at the supermarket group widely known as the “Waitrose of the North” rose strongly over the festive period. Booths said that its like-for-like sales had risen by 11.8% in the three weeks to January 2 compared with the previous year as shoppers treated themselves to English wine, cocktails and smaller turkeys, sales of which jumped up by 23%. Supermarket chains have come under pressure to return business rates relief provided by the government as part of emergency aid during the pandemic, however Booths said yesterday that it would “make the right decision at the right time, but we believe it is too soon to ‘close the books’ on COVID-19”.
Brompton Bicycle enjoyed strong trading in the run up to the COVID-19 crisis, with sales up 34% in the year to April 2020. The London-based, folding bike manufacturer recorded annual revenues of £57 million, accounts filed at Companies House show, up from £42.5 million in the previous 12 months. The business sold 59,052 of its distinctive folding bikes, up from 46,956. Exports accounts for 68% of turnover, down from 73% in 2019.
Edinburgh Woollen Mill
Almost 1,500 retail jobs have been saved after the sale of Edinburgh Woollen Mill to a consortium of international investors. The consortium is backing Pureplay Retail, a secured creditor to the business, which will operate 246 stores under the Edinburgh Woollen Mill and Ponden Home brands under licence and will buy all the remaining stock. Administrators from FRP said that 1,347 store staff would transfer to the new owners, along with 72 head-office employees and 34 distribution staff.
Hostelworld has announced a trading and financing update and confirmed it is in talks with lenders to secure a new €30 million debt facility as it reported that global travel demand had remained muted throughout Q4 2020 due to COVID-19 impacting demand. The company said the trading deterioration it experienced since the end of August continued throughout the fourth quarter with minimal booking demand and average booking value (ABV) contraction. Full-year 2020 net bookings were in the range of 20 to 22 per cent of FY19 as previously guided. “Covid-19 has had a prolonged and significant impact on our business and the entire global travel industry. We have taken swift action to protect the business and improve the core platform to position the business well for when demand returns.” said chief executive Gary Morrison.
The owner of online food delivery giant Just Eat has said UK orders jumped 58% in the final three months of 2020 as the pandemic sent demand surging. Just Eat notched up 35.5 million UK orders in the fourth quarter with deliveries rising nearly five-fold – up 387% – to 2.9 million. Just Eat Takeaway said it had put “tremendous effort” into improving its UK business, overhauling its marketing strategy, doubling its sales force and adding a raft of new restaurants, having signed up McDonald’s and Greggs to the platform last year.
Netflix has increased its original movie releases by nearly a fifth this year, dialling up the pressure on the pandemic-stricken cinema industry. The US streaming giant has unveiled a slate of 70 movies for 2021, marking a 17% jump on 2020 – and the previous three years – when it released an average of 60 original films. The sight of Hollywood talent – such as Leonardo Di Caprio, Meryl Streep, Ryan Reynolds and Dwayne Johnson – queuing up to star in or direct Netflix films only darkens the gloom over the cinema industry, which has been left paralysed by the COVID crisis.
PageGroup has said it continues to improve since the start of the coronavirus pandemic but fourth-quarter gross profit was still down by a fifth. In the three months to December 31 2020, the recruiter’s gross profit dropped by 20% to £165mln, from a 32% fall in the third quarter, with the exit rate last month down 18%. Japan was the only market that posted growth, with profits rising 18%, while all other regions stayed in the red. Permanent work accounted for 73% of the mix while temporary work made up the remaining 27%, with profit in both divisions shedding 19%.
Scottish broadcaster STV Group said this morning that operating profit for 2020 is expected to be ahead of market expectations, and that it has appointed Paul Reynolds as a non-executive director and chairman elect. The company said it expects full-year operating profit to be at least £18 million, which it said was comfortably ahead of market expectations. This was driven by stronger-than-expected regional and digital performance. STV Group confirmed TV production can continue during the current lockdown, resulting in little impact on STV Studios’ production schedule so far.
Gambling firm William Hill said net annual revenue fell 16% to £1.32bn, reflecting the impact of betting shop closures during the COVID-19 pandemic. The company, which is being taken over by US giant Caesars Entertainment in a £2.9bn deal, on Wednesday reported a 9% rise in fourth quarter net revenue. Sportsbook staking increased 16%, driven by enhanced products and geographical expansion, whilst gross win margins benefitted from favourable sporting results, driving Group sportsbook net revenue up 20% year-on-year.
Financial & Real Estate
The surge in London flotations gained further momentum yesterday when an asset manager focused on renewable energy confirmed that it would pursue a stock market listing that could value it at £500 million. Foresight Group said that it would push ahead with its plan to join the premium segment of the London Stock Exchange. The asset manager stated that its business had remained “resilient”, despite the turmoil caused by the pandemic, with revenues rising to £32.4 million in the six months to the end of September, from £28.2 million in the same period a year earlier.
House-builder Persimmon saw its revenues dented by less than 10% in 2020, despite the COVID-19 virus shutting down its sites for a month or more. In a trading update today ahead of publication of its annual results, Persimmon revealed that total group revenues for 2020 were £3.33bn, which is 8.7% down on 2019’s £3.65bn. The number of housing units completed during the year was down 14% to 13,575 but the average selling price improved to around £230,500. While the third national lockdown and recent spike in COVID cases were creating “increasing operational challenges”, the company is managing to keep build-rate on track.
IN THE NEWS
Commodity traders profit from blockbuster year of market chaos – Financial Times
Britain will break free from economic COVID long before Europe – The Daily Telegraph