By Powerscourt on 11/01/2021
Powerscourt Coronavirus Briefing – 11 January 2021
ANALYSIS
At the outset of the COVID-19 crisis in 2020, all governments faced the same challenges: how hard should they lock down their economies and the likely availability of a vaccine for the virus.
A battle waged for most of last year between lockdown sceptics and the (mostly) scientific community advocating a zero-COVID strategy. A year later and there is no doubt about who has emerged victorious. For most of 2020 lockdown sceptics cited Sweden as an example of how a country could live with the virus without shuttering the economy and imposing restrictions on society. According to media reports today, Sweden will introduce a series of forced lockdown measures in an effort to stem the rise in daily infections.
It isn’t just Sweden that is squeezing even harder. The Times and The Telegraph are both reporting that the UK government is poised to tighten restrictions further as Boris Johnson warns that the state of the NHS is “parlous and perilous.” Supermarkets will be legally required to enforce mask wearing and compliance with social distancing rules. Also, a ban on households mixing for outdoor exercises is being considered.
If lockdown strategies and the race for a vaccine were the dominant themes of last year, then two stories in The Financial Times highlight what will set the agenda for this year. So far the Pfizer/BioNTech and the Moderna vaccines have been given regulatory approval in the US, EU and the UK as well as other countries. Oxford AztraZeneca has been granted approval in the UK and India. Sputnik V, the Russian vaccine developed by the Gamaleya Institute has been given authorisation in Russia and emergency use in Belarus while a Chinese vaccine is being used in China. It is expected that two further vaccines will be authorised over the first quarter.
The focus will now shift to which of these vaccines can be best adapted to deal with the new strains of the virus that have caused infection rates to rocket over the past couple of months.
And whereas policy debates over lockdown strategies preoccupied governments last year, this year the focus will be on mass vaccination programmes. According to the FT, Whitehall sources suggest that the number of UK mega-vaccination centres will be increased sevenfold to roughly 50 throughout the country. Matt Hancock, the Health Secretary, has said that all adults will be given a jab by the autumn.
There is an interesting feature in the New York Times written by two of the paper’s reporters who visited an exhibition in a Wuhan museum that shows how the Chinese authorities triumphed over the coronavirus. No expense is spared to showcase the heroes that tamed the virus. However, there is no mention of Ai Fen, the first doctor to raise the alarm or Zhang Yongzhen, the Shangai doctor who shared the genome with the world against official orders.
“China has spent much of the past year trying to spin the narrative of the pandemic as an undisputed victory led by the ruling Communist Party,” says the NYT. “The state-run news media has largely ignored the government’s missteps and portrayed China’s response as proof of the superiority of its authoritarian system, especially compared to that of the United States and other democracies, which are still struggling to contain raging outbreaks.”
The dollar surged and stocks retreated marginally from record highs in overnight trading as investors weighed the expected unveiling of the Biden administration’s stimulus package with ongoing political instability in the US, including the possible impeachment of Donald Trump.
WHAT ARE COMPANIES SAYING?
Industrials & Transport
EasyJet
British airline easyJet boosted its liquidity through a new five-year loan facility of £1.39 billion, backed by a partial guarantee from Britain, and said it would repay some of its shorter term debt. EasyJet has said that the new loan was underwritten by a syndicate of banks and backed by guarantees provided by a scheme from Britain’s UK Export Finance. During the first three months of this year, the airline also said it would repay and cancel the full drawn revolving credit facility of $500 million and term loans of about £400 million.
Shell
Royal Dutch Shell has resumed shipping gas cargoes from the largest floating structure ever built following a year-long technical disruption that has damped industry appetite for floating LNG technology. The restart of the huge Prelude facility – which at 488 metres is longer than four football fields – is a welcome boost for Shell as it coincides with a record surge in LNG prices fuelled by a cold snap in Asia. But construction challenges, cost overruns and technical problems with Prelude, as well as challenging market conditions, have prompted Shell and other producers to cancel other FLNG projects.
Signature Aviation
London-listed Signature Aviation, the world’s top operator of private jet bases, has agreed to a $4.63bn offer from Global Infrastructure Partners, which raised its bid to see off a counter-offer from Bill Gates and Blackstone. The cash offer at $5.50 per share represents a 51% premium of Signature’s price at the close of the play the day before it first received a takeover offer. GIP said it believes “there are a number of features of the Signature business which make it attractive for an infrastructure investor with a strong and demonstrable operational capability”. Its bid, which has been back by Signature’s directors, is easily ahead of the $5.15 per share offered last week by Gates, its top shareholder, and private equity group Blackstone. Signature chair Sir Nigel Rudd said: We believe that the offer from GIP represents an attractive and certain value in cash today for Signature Shareholders, reflecting the high quality of the business and its network, its people and its future prospects.
Royal Mail
Royal Mail has said its current director and former Apple executive, Simon Thompson, will take over as chief executive officer of its UK business, while interim CEO Stuart Simpson will leave the company by the end of this month. Simpson had filled in for Rico Back, who stepped down in May last year after two years in the role during which the company faced issues with unions over a proposed 1.8 billion pound restructuring plan. Keith Williams, chairman of Royal Mail, said: “Simon… already has significant knowledge of the group and its operations. He also has a wealth of experience both in digital transformation and customer experience.”
Consumer & Retail
JD Sports
The FTSE 100 retailer has said it expects full-year profits to be “significantly ahead” of current market expectations after a strong recovery in demand over recent months. JD said demand had “remained robust” over the second half the year to the end of January, putting revenues for the 22 weeks to the of the year 5pc ahead of late 2019’s performance. It said headline profit before tax for the full year would come it at “at least £400m”, easily clear of market expectations at £295m. JD added that under “normal circumstances” it would anticipate the coming year to show a “strong improvement” in sales, but said the uncertain outlook caused by the pandemic meant its best estimate was for profit to grow 5pc to 10pc in the next 12 months.
Dr Martens
The British footwear and clothing brand is planning to float on the London Stock Exchange. In what is one of the first planned listings to be announced this year, the retailer said it is looking to trade on the main market of the London Stock Exchange. The company, which notched up revenues of £672 million in the year to March 2020, believes that it has a “significant opportunity” to expand in the £341 billion global footwear market. It sells in excess of 11 million pairs of footwear annually in more than 60 countries. The update comes around two months after it was reported that the retailer’s majority owner, Permira, had appointed Goldman Sachs and Morgan Stanley to act as global coordinators on an initial public offering. Paul Mason, chairman of Dr Martens, said: “We have made significant investment in the business over the last few years to strengthen the team, our operations and position ourselves for the next exciting stage of development, as a publicly listed company.”
Financial & Real Estate
Electra Private Equity
The Times reports that the private equity owner of TGI Fridays in Britain plans to put the bar and restaurant chain up for sale this year as it winds down its portfolio after succumbing to an attack by a corporate raider. Electra Private Equity, a London-listed investment vehicle, is also aiming to sell off its other assets before the year is out and return the proceeds to shareholders. Its other businesses include Hotter Shoes, the footwear retailer, and Sentinel, which makes flushing and cleaning products for residential heating and hot water systems.
British Land
British Land, one of the UK’s largest commercial landlords, has collected less than half the rent due from retailers on its estate, as tightened coronavirus restrictions force many businesses to close. The company, which owns the Broadgate estate and a section of Paddington in London, said on Monday it had received just 46 % of the rent owed by retailers for the three-month period from December 25. Almost three-quarters of British Land’s retail tenants were open in the four weeks leading up to Christmas, but restrictions to limit the spread of coronavirus since then have forced the majority to close.
Biomedical
Smith & Nephew
Medical technology company Smith & Nephew said on Monday that it expects to report a 7% decline in fourth-quarter underlying revenue and a 12% drop in full-year revenues, as more medical procedures are postponed due to rising numbers of coronavirus infections. The company, which makes hip and knee replacements, said sales were dented by increased rates of Covid-19 infections from mid-October onwards, particularly in the US and Europe, where more procedures were postponed following the reintroduction of restrictions.
IN THE NEWS
Boris Johnson under pressure from top Tories to take stronger stand against China – The Times
Insurance risks prompt UK care homes to reject hospital patients – Financial Times
Ministers considering tougher lockdown restrictions on exercise and face masks – The Telegraph
