Powerscourt

By Powerscourt on 27/01/2021

Powerscourt Coronavirus Briefing – 27 January 2021

ANALYSIS

Pascal Soriot, the chief executive of AstraZeneca, finally broke his silence on Tuesday night in an attempt to provide some context to the spat with the EU that has put his company in the spotlight for the past few days for all the wrong reasons.

Soriot, speaking to La Republica (Italy) and Die Welt (Germany), said the shortfall in supply to the EU can be blamed on teething problems at its plants in Belgium and Holland. The UK signed a contract three months before the EU and therefore the company was able to resolve all technical glitches before the British regulator authorised its vaccine. That is why it has been able to meet the UK supply from its UK plants, he added. Moreover, there was no legal contract in place to deliver 80 million doses to the EU, instead the agreement was based on “best effort”. As it stands the company’s best effort is 30 million jabs over the first quarter. Soriot said he understood why EU leaders were so “emotional” and “aggravated” over the supply shortfall and added that the company was doing everything it could to plug the gap. He rejected allegations that vaccines manufactured in the EU were exported to third countries, including the UK.

The EU does not publish contracts it has signed for the supply of vaccines but, based on what Soriot said, Brussels has no recourse to legal action against the Anglo-Swedish company. However, the AstraZeneca chief executive’s defence of his company is unlikely to soothe growing anger in Brussels. The obvious question is why if the company was aware of teething problems in its UK operations did it not put contingency plans in place to avoid a similar fate in the EU. Moreover, the communications strategy has been an abject failure. Central to the EU’s strategy of inoculating 70% of its adult population by the summer was the successful rollout of the Oxford/AstraZeneca vaccine. Just a week before the European Medicines Agency was set to authorise the vaccine, the company announced that it would undershoot its supply target by 60%, which effectively derails the EU’s strategy by between one-to-three months. In the circumstances EU leaders are well justified to be “emotional and aggravated”.

The wider vaccine rollout across the EU has been a disaster so far, which inevitably is causing tempers to fray among member states. Valdis Dombrovskis, the EU trade commissioner, has called for a transparency clause that would enable the commission to have visibility on what was being manufactured in the bloc and what was being exported. Jens Spahn, the German Health Minister, went one step further and called for the EU to block vaccine exports from the region unless supplies to member states have been met. The Financial Times has an editorial this morning calling on the EU to resile from any protectionist measures as they will inevitably backfire.

There was some respite for AstraZeneca yesterday, however. The German government contradicted reports in the Handelsblatt newspaper that the Oxford vaccine only had an efficacy rate of 8% among over-65s and that the EMA would not authorise the use of the vaccine for this age cohort.

The Biden Administration announced that it would acquire an additional 200 million doses over the summer from Pfizer/BioNTech and Moderna with the aim of inoculating 300 million Americans by September.

Ongoing Brexit-related tensions between the UK and the EU had been escalating over recent days amid the AstraZeneca row. However, the British government’s focus yesterday was on the grim milestone that the country’s death rate had surpassed 100,000 – the highest per capita in the world.

Shares slipped further in overnight trading on fears that the global economy is losing momentum and the rate of infections is accelerating. 

 

WHAT ARE COMPANIES SAYING?

Industrials 

Diversified Gas & Oil plc
The gas and oil production company this morning issues an operations and trading update confirming 2020 results are in line with market expectations. DGO achieved record consolidated net production of 100 Mboepd (599 MMcfepd, or million cubic feet equivalent per day) for the twelve months ended 31 December 2020, representing an 18% year-over-year increase. CEO Rusty Hutson, Jr. said: “The unprecedented events of 2020 have underscored the inherent resilience of our business model. We’ve built our business to operate in any natural gas price environment, and the strength of that model was evident throughout the significant volatility of 2020. Not only did our business model perform well, but the resolve of our employees was outstanding.”

 

Financials & Real Estate 

Brewin Dolphin Holdings PLC
One of the largest British investment management and financial planning firms this morning announces a trading update for the three months ended 31 December 2020. The Company reports that total funds grew to £51.4bn, higher than pre-COVID levels, driving strong income growth of 7% in the quarter.  Robin Beer, Chief Executive said: “We had a strong start to our financial year and saw growth across both our direct and indirect business… With a Brexit trade deal behind us and the rollout of vaccinations in the UK, market sentiment is starting to improve, and we look forward to benefiting from this recovery over the coming year.”

3i Infrastructure PLC
The investment company whose purpose is to deliver a long-term sustainable return to shareholders from investing in infrastructure today issues a Q3 performance update relating to the period from 1 October 2020 to 31 December 2020. It reports that the Company portfolio continues to be resilient through the ongoing Covid-19 pandemic, meeting expectations. Total income and non-income cash was £24 million for the Period and the Company is on track to meet its dividend target for the year ending 31 March 2021 of 9.8 pence per share, a year-on-year increase of 6.5%. Phil White, Managing Partner and Head of Infrastructure, 3i Investments plc, Investment Manager of the Company, commented: “Our markets remain very competitive despite the uncertainties caused by the pandemic, but we are maintaining our investment discipline and continue to focus on investments that we believe will enhance the Company’s portfolio.”

Henderson Smaller Cos Inv Tst PLC
The investment trust today issues its unaudited results for the half-year ended 30 November 2020. The Company announced that it has outperformed its AIC sector peer group average by 6.3% (on a NAV total return basis) and is maintaining its interim dividend of 7.0 pence per share. Chairman Jamie Cayzer-Calvin said: “Looking forward into 2021, I think there are many reasons to be optimistic about the prospects for UK smaller companies. The roll out of the Covid-19 vaccines may result in a return to some sort of normality and the Brexit free trade deal means that business can continue with Europe, albeit with an increase in paperwork.”

 

TMT

Microsoft Corporation
The American multinational technology company yesterday announced its results for the quarter ended December 31, 2020, as compared to the corresponding period of last fiscal year. A boom in PC sales, surging demand for video gaming and increased usage of Microsoft’s cloud services combined to produce a 17 per cent surge in revenue, to $43.1bn. Satya Nadella, chief executive officer of Microsoft, commented: “What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry. Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

Apple Inc
The American multinational technology company is expected to post $102.6bn in its fourth quarter earnings later today, a jump from $91.8bn a year ago, according to Visible Alpha. Net profit is projected to climb by 6.3 per cent to $23.6bn — the biggest quarterly profit ever for a private-sector corporation. The figures are based on the assumption that iPhone sales will grow 6 per cent from a year ago — a depressed expectation owing to the coronavirus-induced, multi-week delay of the iPhone 12. Apple, whose shares traded at a record high on Monday, had already demonstrated this ability in the fiscal year to September, in which it managed to increase revenue in an off-year for the iPhone. Last year was the first year ever that iPhone sales fell — from $142bn in 2019 to $138bn in 2020 — but overall revenues still climbed.

FDM Group (Holdings) plc
The global professional services provider with a focus on Information Technology, today provides a trading update for the year to 31 December 2020. FDM reports that it delivered a solid performance in the second half of the year and the Board expects the Group’s results for the year to 31 December 2020 to be in line with its expectations. Revenue is expected to be £268 million (2019: £272 million) and adjusted profit before tax is expected to be £42.0 million (2019: £54.5 million), subject to audit. Rod Flavell, Group CEO, commented: “FDM has delivered a solid performance for 2020. Although we are alert to the possible impact on client activity of further lockdowns, our agile and robust business model has allowed us to respond rapidly and effectively to the exceptional challenges the COVID-19 pandemic has brought.”

 

IN THE NEWS

How the UK reached 100,000 Covid deaths – The Times

Vaccine export rules: what is the EU proposing? – Financial Times

UK ‘head start’ on EU means over-50s will be vaccinated by March, AstraZeneca chief says – The Telegraph




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