Powerscourt

By Powerscourt on 15/01/2021

Powerscourt Coronavirus Briefing – 15 January 2021

ANALYSIS

Mixed news today for the aviation sector. A raft of countries, including the UK, have announced further travel restrictions as they tighten lockdown measures in efforts to contain new variants of the coronavirus, which are much more transmissible than the original strain and are wreaking havoc across health services.

While the aviation sector has effectively been put into abeyance since the first outbreak of the virus almost a year ago, a story in The Times outlines a pathway to how the sector can get back to a sustainable footing. The European Union is drawing up plans for vaccine passports that would enable people who have been inoculated to avoid travel without restrictions when they go on holiday. The plan would facilitate the free movement of people across the 27 member states. However, British vaccination certificates would not automatically be accepted by the EU, and Britons’ holiday plans could be delayed until European travel plans have been agreed.

The Biden Administration has unveiled a $1.9 trillion (£1.4 trillion) stimulus package. The main focus of the package will be restoring economic growth, but $400 billion has been earmarked to directly combat the pandemic, including resources for speeding up vaccine deployment and reopening schools.

The third wave of the pandemic has forced the US, the UK and most EU countries to shutter large parts of their economies. The key challenge over the next few months will be getting the timing right in reopening these economies. Many businesses are teetering on the brink and their viability hinges trading again at the earliest possible opportunity, but just as importantly, that on this occasion their doors remain open.

Small businesses in the UK will be awaiting anxiously for a decision from the Supreme Court today on whether insurance companies have to pay out an estimated £1.2 billion in business disruption policies. Small business representatives have said the outcome is a ‘life or death’ decision for many of their members.

The cover story in the latest edition of The Economist has a very optimistic take on what the next decade has in store. Its argument is that the past ten years were characterised by underwhelming levels of innovation while productivity growth remained lacklustre. However, a dawn of technological optimism is breaking, spurred on the speed at which vaccines have been developed around the world over the past year.  Prominent breakthroughs, a tech investment boom and the adoption of digital technologies during the pandemic are combining to raise hopes of a new era of progress: optimists giddily predict a “roaring Twenties”, the magazine said.

Shares stumbled from record highs overnight. Buoyed by the announcement of Biden’s €1.9 trillion package, investors took fright at rising rates of the virus in China, which reinforced concerns about the prospect of a global economic recovery. 

 

WHAT ARE COMPANIES SAYING?

Industrials & Transport 

Aveva Group
In early company news, industrial software company Aveva Group said it saw a positive performance for the three months ended 31 December. Organic constant currency revenue growth in the period was over 26%, driven by a significant number of scheduled subscription renewals, including a large three-year contract renewal in the Food sector. Notwithstanding the disruption to the trading environment in 2020, Aveva predicts the trend towards the digitalisation of the industrial world remain strong. 

Babcock International Group
Aerospace and defence company Babcock International Group has announced that for the nine months year to date period, underlying revenue was £3.40 billion, down 3% on last year excluding disposals and FX. Underlying operating profit was £202 million, down 34% excluding disposals and FX. The company said the trading in the third quarter continued to reflect the challenges of the first half, with weakness in civil aviation businesses and a negative impact from COVID-19. 

Consumer & Retail

Card Factory
Card Factory warned yesterday that it would fall into the red after it was forced to close shops over Christmas. Sales for the 11 months to the end of December fell to £281.4 million from £424.5 million in the comparable period the year before, it said in a trading update. The greetings card retailer expects to make a loss before tax of about £10 million and an underlying loss of £5 million. 

The Gym Group
The national gym operator has announced that its revenue for the past year has dropped by nearly 50%. The Gym Group, which operates 184 venues across the UK, saw total revenue drop £72.6m from £153.1m to £80.5m, with 45% of trading days lost due to government restrictions. Despite the lowered figures, the company has said that it is planning to continue with its expansion, opening three new sites “once there is greater visibility about a reopening date for gyms”. 

 

Financial & Real Estate

LSL Property Services
LSL Property Services said this morning that its full-year underlying operating profit is expected to rise significantly year-on-year after strong trading in December, though revenue is expected to slip by 15%. Revenue is expected to fall to £266 million from £311.1 million a year prior, which the company attributed to coronavirus disruption, the tenant fee ban and the reshaping of its brands Your Move and Reeds Rains. 

Segro
Segro, the FTSE 100 property trust, said it was paid almost all rents in 2020. Advanced payments at 14 January for the first quarter of 2021 were also 88% of the amount due, which is higher than the corresponding times in each of the previous three years, Segro added. The group specialises in industrial property and warehouses, both of which have been in strong demand as e-commerce has taken off during the coronavirus lockdowns. 

 

TMT

Blue Prism
The developer of automation software lost nearly a fifth of its value yesterday after signalling that growth would be weaker than hoped this year. Blue Prism, whose technology undertakes repetitive tasks such as form-filling, said that some customers had delayed signing contracts last year because of the COVID-19 pandemic. Demand had picked up in the second half, but the size of deals “remained lower than the prior year”, it said. 

 

Healthcare

Indivior
Indivior announced today that it now expects to report adjusted pretax profit for 2020 ahead of its previous guidance, as net revenue will be higher than anticipated and operating expenses will be lower. The UK pharmaceutical company said net revenue is now expected to be between $645 million and $650 million, which compares with its previous guidance of between $595 million and $620 million. 

 

IN THE NEWS

How COVID-19 rebooted retirement – Financial Times

Could the ‘fear factor’ hold back a post-COVID boom? – The Daily Telegraph




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