Powerscourt

By Powerscourt on 14/01/2021

Powerscourt Coronavirus Briefing – 14 January 2021

ANALYSIS

Stories in The Daily Telegraph and The Times offer hope of  a way out of this pandemic. The Telegraph reports that an early study from healthcare provider Maccabi shows that Israeli people who have been given the first dose of the COVID vaccine are 60% less likely to contract the virus. Another preliminary study from another healthcare provider, Clalit, had reported a lower figure of 33% immunity, based on 200,000 Israelis who had been given the first jab.

The Israeli health minister said that when the two jabs have been administered they will show that the vaccine offers 95% protection. Israeli officials also said that the findings will raise hopes that vaccines not only offer protection, but also stop the spread of the disease.

The Times is reporting that the most comprehensive study yet shows that people who have already contracted the coronavirus had at least as good a defence against future reinfection as those who have been vaccinated. The study, which was carried out on 21,000 NHS frontline workers who had the virus, show that they had 85% protection against asymptomatic and symptomatic reinfection. In the small number of cases where there was a reinfection, the second bout was much milder than the first illness.

Separately, Kingston Mills, Professor of Experimental Immunology at Trinity College Dublin, has suggested that governments could improve the effectiveness of vaccination strategies by prioritising people who had not been infected. This report in The Times bolsters his claims that people who have already been infected are in a much lower risk category and could wait until the rest of the population had been given jabs before they were inoculated.

Elsewhere, there are reports of several new variants of COVID-19 emerging, including new strains in Brazil and the US. According to the Financial Times, researchers had found two new strains of the virus in Ohio, one of which took just three weeks to become the dominant source of infection in Columbus, the state capital. Early results of the study suggest that the virus could be mutating in a number of different ways throughout the US. Evidence shows that these new strains are much more transmissible, although there is no evidence yet that they lead to severe illnesses and will be resistant to vaccines.

The FT report concludes that the US health system is in danger of being overwhelmed until such time as the rate of vaccination surpasses the rate of infection.

Most governments are facing the same challenges to vaccine programmes as global production constraints are hampering the early rollout of vaccines, leading to mounting pressure at home.

According to Bloomberg, an early study of the Johnson & Johnson vaccine shows that it offers long lasting immunity against the virus. The company is expected to release the full results of its phase III trials in the next 10 days and then seek regulatory approval in the first week in February. This is good news as it means there is another vaccine available and given that it is a one dose jab that can be stored at room temperature, it speeds up the vaccination process. However, a separate report in the New York Times says Johnson & Johnson has fallen behind in its production schedule and it could be the second quarter of this year before it could start deliveries of its vaccine.

US treasuries continued to slide as reports suggest the new Biden Administration will unveil a $2 trillion fiscal stimulus package. Stocks continued their gains on the back of the news as expectations increase of a rebound in the global economy in the second half of the year.  

 

WHAT ARE COMPANIES SAYING?

Industrials & Transport 

Centrica
British utility Centrica’s closing net debt last year is expected to be about £2.8 billion, a reduction of more than 10% on the year, the company said in a trading update released this morning. The company sounded a note of caution on 2021 prospects, owing to the return of tighter coronavirus restrictions in Britain and Ireland and their effect on business energy demand. 

Honda
Production will stop for a further four days at Honda’s Swindon factory next week as car manufacturers grapple with a global shortage of semiconductors. The Japanese carmaker blamed its third factory shutdown in two months on “COVID-related global supply issues”. Honda employs about 3,000 people and makes up to 150,000 cars each year in the UK. Production will temporarily stop at the factory from Monday until at least Thursday, Honda said in a statement. 

John Wood Group
John Wood Group stated today that, due to the effect of the coronavirus pandemic, it expects a 20% fall in 2020 revenue and adjusted EBITDA will be down around 22%, both on a like-for-like basis. The London-listed energy-services group said it expects revenue of around $7.6 billion compared with $9.89 billion in 2019. Adjusted EBITDA will be in the $620 million to $640 million range, Wood Group said. 

Senior
British aircrafts supplier Senior plc forecasted annual loss to be slightly smaller than previous expectations, and added that it would close its Flexonics Upeca business in Malaysia as it cuts costs. The firm said it expects its biggest division, aerospace, to post a roughly 37% fall in sales for the year ended 31 December as it was hurt by COVID-19 disruptions to business as well as Boeing’s 737 MAX crisis. 

 

Consumer & Retail

Associated British Foods
Associated British Foods has announced that revenue for the first 16 weeks of fiscal 2021 declined, with clothing retailer Primark hit by the closure of stores. The FTSE 100 company said revenue for the 16 weeks ended 2 January 2021 fell to £4.08 billion, compared with £5.51 billion for the same period a year earlier. The British conglomerate said Primark sales were 30% lower than in fiscal 2020, adding that its full-year sales and adjusted operating profit are expected to be somewhat lower than last year. 

Bakkavor Group
Shares in Bakkavor Group rose today after the company said its sales recovery continued in the second half of 2020 and that adjusted earnings are expected to be broadly in line with the prior year. The UK-based provider of prepared food said its UK sales experienced a recovery after the first coronavirus lockdown was lifted and, while volumes were hurt in the final quarter due to new restrictions, sales volumes during the key Christmas period were stable compared with a year earlier. 

Boohoo Group
Retailer Boohoo raised its annual revenue target this morning after a strong Christmas holiday season, with the tightening of UK coronavirus curbs again pushing households to shop more online. The retailer also said it was investigating some suppliers, having banned a total of 64 so far. The British fashion group, home to brands including PrettyLittleThing, Nasty Gal and MissPap, expects revenue growth of 36% to 38% for the financial year ending 28 February, above the alread upgraded forecast of 28%-32%. 

Compass Group
Shareholders in Compass Group have called on the catering company to answer “critical questions” after its subsidiary was accused of providing inadequate food parcels to disadvantaged children across the UK. Chartwells, which is owned by the FTSE 100 food group, has faced a barrage of criticism this week as images of meagre rations sent to families to replace free school meals were circulated on social media by parents and campaigners, including Manchester United footballer Marcus Rashford. 

Debenhams
Debenhams has said it will permanently close six stores, including its flagship Oxford Street outlet and cut 320 jobs as its administrator continues to search for a white knight for some or all of the department store chain. The retailer launched a liquidation process in December but after the announcement of the third national lockdown, administrators at FRP Advisory said “a number of stores where we have been unable to agree lease extensions will be permanently closed”. 

Dunelm Group
Dunelm Group said today that revenue for the second quarter of fiscal 2021 rose 12% as gross margin improved, but that it is unable to provide guidance for the full year due to coronavirus restrictions. The UK homeware retailer said revenue for the quarter ended 28 December was £360.4 million, up from £322.4 million in the year-earlier period. It expects pretax profit to be around £112 million for the first half of fiscal 2021, including the repayment of £14.5 million in UK government coronavirus support it owed in the fourth quarter of fiscal 2020. 

Halfords
Bicycle and car products retailer Halfords Group posted an 11.5% jump in third-quarter sales on Thursday, boosted by a coronavirus-driven boom in cycling as more Britons avoided public transport. Like-for-like sales were up 11.7%, with a 35.4% surge in sales for cycling products and 21.1% rise in sales in its garage business, Autocentres, in the quarter ended 1 January, the company said. 

Hays
Recruitment agency Hays plc said this morning it was too early to quantify the impact of new lockdowns in the United Kingdom and Europe, after posting a steep drop in second-quarter net fees as COVID-19 restrictions stymied new hiring across the world. The staffing company, which operates in 33 countries, said overall net fees fell by 19% for the three months ended 31 December, compared with a 7% fall last year. 

Hilton Food Group
Hilton Food Group has surpassed expectations with a continuation of strong sales and volume growth, according to a trading update released today. The group’s success was driven by their own expansion as well as the shift to home consumption throughout the COVID-19 pandemic. Hilton made strong progress across several European markets, benefitting from people eating out less throughout 2020. 

Lidl
Pink prosecco and budget festive treats helped Lidl to toast a record Christmas despite the discounter still shunning online deliveries. The German supermarket said total sales in Britain grew by 17.9% compared with last year, which it said was higher than sales growth at Tesco, Sainsbury’s Asda, Morrisons and Aldi, according to industry figures by Kantar. Rival supermarkets have increased deliveries during the pandemic and the size of the online grocery market has doubled in the past year. However, Lidl has remained staunchly opposed to selling groceries online, putting it at odds with every other food retailer. 

PizzaExpress
PizzaExpress has revealed that it fell to a £350m loss even before pandemic restrictions hit the business as it battled to meet interest costs on its debt, which it has restructured through a debt-for-equity swap with bondholders. In its accounts for 2019, published on Wednesday, the casual dining chain also warned that the coronavirus crisis had “a significant impact on the liquidity of the group” and that it was “very challenging” to assess how curbs would affect the business. 

Tesco
Tesco has hailed a “record” Christmas on the back of booming online sales and customers treating themselves to festive fare, such as mince pies and fizz, from its upmarket Finest food range. The UK’s biggest supermarket said sales at stores open one year were up 8.1% over the key six-week Christmas trading period. That was a step up from its growth of 6.7% over the three months to 28 November. 

Whitbread
Whitbread warned of a “challenging” trading environment this morning after the latest round of lockdown restrictions caused accommodation sales to plummet by more than half. The blue chip leisure group, which owns Premier Inn, Beefeater and Brewers Fayre, among others, said like-for-like UK accommodation sales in the 13 weeks to 26 November were down 56%, with occupancy at 49.3%. Food and beverage sales were down 54.4%. 

Financial & Real Estate

City of London Corporation
The City of London wants to foster growth in sectors such as green finance, fintech and the creative industries, according to a post-pandemic recovery plan for the financial district. The City of London Corporation, which governs the area, is reviewing its long-term strategy, including planning policies to reflect flexible working practices. It will push for the adoption of new “smart city” technology and renewable energy networks. 

Just Group
Just Group announced today that retirement-income sales for 2020 increased, driven by a significant rise in defined derisking sales. The provider of retirement-income products and services said retirement-income sales rose to £2.15 billion from £1.92 billion a year earlier. The market for guaranteed income for life solutions continued to recover following the COVID-19-linked sales disruption in the first half of the year, Just Group added. Second half sales were similar to the ones recorded in the year-earlier period, it said. 

Savills
Savills announced this morning it expects underlying results for 2020 to be at the upper end of the board’s expectations despite challenges in its transactional advisory businesses across the world. The international real-estate advisor said that the cycle of coronavirus-driven lockdowns and other measures from the first quarter onwards significantly hit the ability and preparedness of clients to transact. Investment and leasing volumes contracted compared to 2019 as a result, offset by cost-cutting and operational initiatives. 

Taylor Wimpey
Taylor Wimpey announced this morning that trading in 2020 was in line with market expectations, despite the coronavirus pandemic driving down sales in the second quarter of the year. The UK home builder said total home completions fell by 39% to 9,609 but recovered strongly after the coronavirus-driven lockdown, with the overall average selling price increasing to £288,000 from £269,000 in 2019. 

 

TMT

Frontier Developments
A Cambridge software developer has blamed home working for delaying the release of its latest video games. Frontier Developments, which is behind the popular Elite Dangerous franchise, said yesterday that work for individual employees had not generally proved to be a problem but projects requiring teamwork had created “efficacy challenges”. Frontier made the transition to home working before the first national lockdown in March last year. 

 

Healthcare

Wockhardt
The manufacturer responsible for putting Britain’s COVID vaccines into vials has launched a hiring spree amid growing pressure on ministers to speed up the jab rollout. Wockhardt, which carries out “fill-and-finish” processing at a plant in Wrexham, has advertised for 61 new staff in the past month to move to 24-hour production. Government sources said that the recruitment drive would mean a substantial increase in the numbers working on the jab. 

 

IN THE NEWS

Parents forced to prioritise children over jobs as UK lockdown pressures bite – Financial Times

Pills could replace COVID jabs with British biotech breakthrough – The Daily Telegraph

Property funds lose £1.1bn despite COVID suspensions – The Times




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