By Powerscourt on 04/02/2021
Powerscourt Coronavirus Briefing – 04 February 2021
ANALYSIS
‘Grim milestone’ is a term that has been trotted out with depressing regularity recently to describe records set by the Covid crisis. Maybe we will be looking at different markers from here on. For the first time since the coronavirus started spreading through the world a year ago, another much more welcome milestone has been reached. Two months ago, the first vaccine was administered in the UK and since then roughly 105 million people have been inoculated globally. For the first time, the level of immunisation has exceeded the overall level of infection – estimated at 103.5 million cases around the world.
But there is a long and rocky road back to normality. The Oxford/AstraZeneca jab has enabled the UK to race ahead of most other countries in the vaccination race. The government’s long interval between injections was initially criticised but vindicated in a study published on Monday. The Jenner Institute in Oxford is now working to have a second generation vaccine in place by Autumn to deal with the new strains of the virus that are proving more resistant to immunisation.
However, criticisms over Oxford/AstraZeneca’s phase III trial results and the way the data was collated continues to rumble on. Switzerland’s medical regulator has said it cannot authorise the vaccine based on the available trial data. Ireland has become the latest country, along with France, Germany, Italy, Sweden and Poland, to advise against using it for over 65 year olds because of lack of data on its efficacy for that age cohort.
The EU’s stuttering vaccine rollout program is causing political tensions in the bloc’s biggest member state. Angela Merkel, the German chancellor, gave her first public interview yesterday since last June. She acknowledged the growing frustration caused by the slow rate of vaccination. She said that the German government would be open to using Sputnik V, the Russian vaccine, in the fight against Covid.
“We have received good data today from the Russian vaccine,” Merkel said in an interview with public broadcaster ARD. “Every vaccine is welcome in the EU, but only after it has been approved by EMA.” Russia’s Sputnik V vaccine is highly effective and safe according to a peer-reviewed study published in the Lancet, the prestigious medical journal.
The Social Democrats, the junior partner in the German coalition, have pinned the blame of the country’s sluggish vaccine rollout on its senior partner in government and, in particular, Jens Spahn, the health minister. The Financial Times is reporting on mounting speculation the government could fall before planned elections later this year.
Denmark has announced plans for a vaccine passport aimed at getting business travel off the ground. It will take two-to-three months to develop a digital passport to show if somebody has been vaccinated.
The euro has retreated from recent gains that saw the single currency surge to its highest level since 2018 on fears that the EU economy will suffer tens of billions in losses because of the slow rate of its vaccine rollout program compared to the UK and the US. Stocks dipped in overnight trading as a spike in short-term Chinese interest rates fanned worries about policy tightening in the world’s second-largest economy, although improving corporate earnings and easing market volatility helped stem losses.
WHAT ARE COMPANIES SAYING?
Industrials
Renishaw
Renishaw said today that pretax profit jumped in the first half of fiscal 2021, thanks to a fair-value gain on financial instruments, and that it is reinstating dividend payments. The London-listed engineering company said that for the six months ended 31 December, pretax profit rose £63.9 million from £9.9 million for the first half of fiscal 2020. The company said this included a £20.5 million fair-value gain, which was mostly related to proportions of forward contracts that failed hedge-effectiveness testing in fiscal 2020 after global macroeconomic uncertainty resulted in reductions to the highly profitable forecasts of the hedged item.
Royal Dutch Shell
Royal Dutch Shell’s 2020 profit dropped to its lowest in at least two decades as the pandemic hit energy consumption but the company boosted its dividend again in a sign of confidence. Shell’s annual adjusted earnings dropped to $4.8 billion, down 71% from a year earlier. Its fourth-quarter profit was down 87% from a year earlier and below expectations, dragged down by continued weak energy consumption due to the pandemic. Shell said it expected to raise its first-quarter dividend by 4% from the previous quarter.
Consumer & Retail
Compass Group
Catering giant Compass Group announced this morning it would cover the cost of providing breakfast and lunch parcels to school children through the February half-term break after its unit Chartwells faced criticism for low standards. The UK-based company also reported a one-third fall in organic revenue for the December quarter, while operating margin improved to 2.7% from 0.6% in the preceding quarter, after a tumultuous 2020 that was marred by school and office closures due to COVID-19 restrictions.
Cranswick
On the back of strong revenue and earnings momentum, the pork and poultry producer Cranswick has said the “outlook for the current financial year is now expected to be ahead of the board’s previous expectations” as more people bought its products during the stay-at-home, festive Christmas period. The company said it expects robust demand for its products to continue for the rest of the year as people consumer more at home.
JD Sports
JD Sports plans to raise almost £500m in a share issue “to capitalise on acquisition opportunities” as the UK retailer pushes on with global expansion amid the pandemic. It said the cash call would raise “around 6%” of the existing issued share capital. Based on a market capitalisation of £7.95bn at Wednesday’s close, that implies gross proceeds of £477m. Although the coronavirus pandemic has pushed retailers like Debenhams and Arcadia into insolvency, those that have prospered have attracted investors through fresh equity.
Stock Spirits
Stock Spirits said today it is on track to meet expectations for fiscal 2021 as strong sales outside of bars, pubs and restaurants mitigated the impact of the coronavirus pandemic. The leading owner and producer of branded spirits and liqueurs principally sold in Central and Eastern Europe and Italy said its performance in the on-trade channel was largely offset by a strong off-trade performance. The company is forecast to generate full-year sales of €337.9 million, according to consensus expectations.
Unilever
Unilever reported today a fall in net profit for 2020, missing market expectations for the year, but said it has begun 2021 in good shape and is confident it can adapt to a rapidly changing COVID-19 and Brexit environment. The multisector retailer, which owns consumer brands such as Ben & Jerry’s and Dove soap, posted a net profit of €5.58 billion compared with €5.63 billion for 2019. Net profit was expected to rise to €7.01 billion, according to the company’s compilation of consensus.
Watches of Switzerland
UK online sales at Watches of Switzerland more than doubled in the third quarter, the retailer said today as it cautioned that stores here are unlikely to reopen until at least late March. The firm, the UK’s biggest Rolex seller, said group sales in the 13 weeks to January 24 rose 6.6%, at constant currency levels, to £272.6 million. Growth came despite the retailer’s stores in the UK being closed for most of the period due to lockdown rules.
Financials & Real Estate
Barratt Developments
A national housebuilder has seen double digit growth in revenue despite the disruption caused by the pandemic. Barratt Developments has reported a revenue increase of 10.2% in the six months ending 31 December, with profit before tax rising 1.7% to £430.2m. The company also saw a ‘record’ number of property completions – 9,077 – compared with 8,314 in the same period of 2019.
KPMG
KPMG partners in Britain will suffer an 11% cut to their pay as the Big Four accounting firm reduces costs during the pandemic. Underlying profit fell by 6% to £288 million in the year to the end of September 2020 as a result of the impact of COVID-19, it revealed yesterday. Average profit for its 582 partners fell from £640,000 to £572,000 as the firm prioritised protecting jobs. It did not furlough any of its 15,600 employees and has not accessed any government COVID-19 loans.
TMT
BT Group
BT Group said today that third-quarter adjusted earnings and revenue both fell but came in slightly ahead of consensus expectations and reiterated its earnings guidance for the full year. The UK telecommunications company said adjusted EBITDA for the quarter to December 31 were £1.88 billion, compared with £1.98 billion for the same period last year. Adjusted revenue was £5.48 billion, down 5.2& on year.
Spotify
Widespread uncertainty about the duration of the coronavirus pandemic forced Spotify to warn of a likely slowdown in its growth this year. Shares in the audio streaming service dropped by 8.1%, or $27.80, to close at $317.25 in New York last night, valuing it at about $60 billion, despite a strong performance in 2020. The company attracted millions of new listeners in the final quarter of last year as COVID-19 boosted its audience of paying subscribers.
IN THE NEWS
Infrastructure projects keep builders busy – The Times
Fix gaps in furlough for self-employed workers, government urged – The Guardian
Emergency loans threat to small business owners – The Times
Services sector feels the chill of lockdown – The Times
