Coronavirus - Trojan Horse

Russia approved a controversial Covid-19 vaccine for use, after less than two months of human testing.

A number of vaccines across the globe have been shown to provoke an immune response, so why the delay? One major reason is antibody-dependent enhancement (ADE), a phenomenon well-known to virologists, where an individual is exposed to a closely related virus and antibodies produced, but – far from being protected against other versions – they become sicker when infected a second time, as the antibodies produced allow the infection to ‘hitchhike’ into the body. Phase 3 trials are needed to show this; Russia has chosen to skip this step.


• UK GDP falls 20.4% in Q2 compared to Q1, rises 8.7% in June compared to May

• Aberdeen’s lockdown extended

• Barcelona FC, Valencia and Atletico Madrid have confirmed cases before Champions League games

Company news


 M&G Group – “I expect further volatility in markets while the Covid-19 virus remains a threat. It is too early to say we are through the worst, despite the rally in the second quarter. Against this backdrop, we remain committed to our dividend policy of stable or increasing pay-outs. We will continue to monitor developments carefully and we do not expect to increase the dividend while the threat of Covid-19 remains.

Despite the difficult market conditions, I remain optimistic about the outlook for M&G plc. In the short term, as a leading savings and investment business, we are well-placed to be the partner of choice for households looking for better returns on the large cash savings they have accumulated during the pandemic.

Longer term, we will continue to position the business for sustainable growth, building on our first-half actions to revitalise our UK retail franchise, deepen our presence in Europe, and expand our international and institutional businesses.”


 Spirax-Sarco – “Despite the extreme impacts of the Covid-19 pandemic on the global economy and significant disruption in many of our markets, trading performance held up well during the six months to 30 June 2020. With over 50% of group sales destined to critical sectors on the front line of the global pandemic, such as Hospitals & Healthcare, Pharmaceutical & Biotechnology, Food & Beverage, Power Generation and Water Treatment, and

approximately 85% of group revenue generated from customers’ operational budgets, we have seen a good level of demand resilience during this challenging period. As a result, group revenue contracted at a lower rate than the decline in industrial production. Strong cost containment measures, including the restriction of non-essential spending, a reduction in temporary staff as well as salary reductions for senior management and targeted areas of the group, served to reduce the impact on adjusted operating profit. As a result, the adjusted operating profit margin remained above 20% at 20.9% (2019: 21.9%) in the first half of the year. The relatively strong performance of the business in the first half of the year and the outlook for the second half have allowed us to lift some temporary cost containment measures earlier than anticipated, such as a number of the voluntary salary reductions put in place in April, which will cease in August.


With 85% of our demand coming from customers’ operating rather than capital budgets and a high proportion of our revenues from sectors less impacted by Covid-19 such as Food & Beverage, Pharmaceutical & Biotechnology, Healthcare, Medical Devices, Power Generation and Water Treatment, we remain confident of our ability to progress in these unprecedented times.

Foreign currency exchange rates provided a small headwind in the first half of the year. If July’s month-end exchange rates were to prevail for the remainder of the year there would be a 2% headwind on the translation of sales for the full year and a 4% impact on operating profit.

Sales performance for the group in the second quarter was in line with our expectations at the time of our AGM Statement in May, with adjusted operating profit ahead due to stronger than anticipated cost containment and efficiency improvement initiatives. As hopes of a V-shaped recovery recede, we now anticipate a lower rate of economic activity in the fourth quarter. As a result, we believe that organic revenue growth in the second half of the year will be lower than we anticipated in May. However, due to the operating profit being stronger than forecasted in the first half, our expectations for the full year adjusted operating profit remain unchanged.”


 Hostelworld – “In recent weeks we have seen an increase in demand as travel restrictions have eased, and we are tracking slightly ahead of our Base Case scenario. This recovery started with very modest growth in domestic bookings in June, and more recently has progressed to very modest growth in domestic and short-haul bookings into Europe. Overall, we expect the pace of recovery to mirror changes in travel guidance in individual markets over the coming months, both positive and negative. Elsewhere, source markets in the Americas, Asia and Oceania continue to remain very depressed.

As the recovery has progressed, we have seen a steady reduction in cancellation rates, and an increase in conversion rates as consumers certainty with respect to their travel plans has improved, compared to significantly stressed levels during Q2. This has led to higher marketing costs as a percentage of net revenue in the near term, which we expect to gradually normalise as normal travel patterns resume.

On the supply side, despite significantly depressed demand during Q2, we have seen only a modest reduction in the number of hostels on our platform compared to year end 2019 levels. We are also working with the hostelling industry to ensure we display details of the additional Covid-19 policies at each hostel in a consistent manner. Overall, we are encouraged that our travellers are continuing to book Dorms in the majority of cases - with only a slight shift to date in accommodation mix towards Private rooms versus Dorm accommodation across markets.

Overall while bookings continue to trend well below normalised patterns, and assuming a gradual improvement in the macro travel environment, we expect the recovery to improve further in Q3 and Q4 2020, albeit net bookings will remain at significantly reduced levels when compared to 2019. Whilst this recovery is likely to take some time and the consumer environment will continue to be uncertain and challenging, the board remains confident in the resilience and flexibility of our business model, and that we are well positioned to execute on our strategy and build market share as demand recovers. In parallel, the board will continue to evaluate internal and external opportunities that will deliver value for shareholders, in particular the significant potential to enhance future growth primarily through building out a broader catalogue of experiential travel products beyond hostel accommodation.

In light of continued market uncertainty, the group is not in a position to provide full year guidance until such time as the overall impact of Covid-19 on the group becomes clearer.”

Real Estate

 Capital & Counties – “Since March 2020, four new brands have been signed. Jewellery brand Vashi signed on James Street for a new London flagship store. In the Market Building, Belgian chocolatier Neuhaus has agreed terms for its first London store as well as the signing of Bubblewrap. Al fresco Garden bar NaNas has opened from the Market Building and is operating on the East Piazza. Luxury retail operator Bucherer has proceeded with plans for expansion in the Royal Opera House Arcade and its opening is expected later this year. Ganni has opened its new flagship on Floral Street and will be joined by American Vintage later in the year. Fitness technology company Peloton continues the fit out of its European flagship training studio and retail store over four floors, and will live-stream classes to members worldwide.

Structural retail trends may be accelerated as a result of Covid-19, therefore high-quality global locations remain key to retailers and F&B concepts when choosing locations around the world. Capco has transformed Covent Garden into a global destination having curated one of the strongest retail and dining line ups in the world in a heritage setting, positioning Covent Garden competitively as a global brand.

In the first half 22 leasing transactions completed, with a rental value of £2.7m (H1 2019: £13.0m). Underlying net rental income was £25.3m for the first half of the year, down 22% (like-for-like) compared to June 2019.

During this challenging period a small number of tenants have entered into administration representing £3.0m of passing rent. EPRA vacancy has increased by 0.9 percentage points to 4.1% (Dec 2019: 3.2%). Approximately 12% of ERV is in or is held for development or refurbishment (Dec 2019: 8%).

Overall 71% of rent has been collected in the first six months of the year compared to 99% for the equivalent period in 2019. 98% of Q1 2020 rents were collected. Rent collection for the March (Q2) and June (Q3) quarter rent dates has been significantly lower than normal levels with 44% collected for the second quarter and 30% to date for the third quarter.

The valuation of the estate decreased by 17% like-for-like to £2.2bn. Substantially all of the valuation movement relates to the retail, leisure and F&B portfolio which represents 75% of total property value. The main contributors were a 12% (like-for-like) decline in ERV to £95.5m, yield expansion of 17 basis points to 3.82% (equivalent basis) and the valuer’s assumption on loss of near-term income (£31m).

Capco remains confident in its tenant mix, continuing to focus on concepts with strong financial covenants, differentiated offerings, successful multi-channel programmes, close customer relationships and brands that recognise the value of high-profile locations with a complementary leisure and dining offering.”

 CLS Holdings – “There has been, and will continue to be, much written about the impacts of the Covid-19 pandemic on current and established ways of living and working. As a provider of office space, we are constantly exploring how modern workplaces will evolve and below we outline our view as to how this might happen in the coming months and years in response to considerations from the pandemic.

The pandemic, and the associated mass experience of working from home, has accelerated many of the recent office trends. There will be changes to the office environment, new preferred locations, and some winners and some losers; as is the case in any structural disruption whether it is driven by technological, political, environmental or other global changes. Whilst it is too early to draw definitive conclusions, we believe that offices will retain their significant role in society and the real estate market.

We recognise the benefits of home working, such as avoiding a long commute or balancing the responsibilities of home life. It is also clear that there are certain types of roles that can be done successfully remotely. However, the impact of the current situation has shown us that working from home has, for many, reinforced the benefits of the office whereas others have potentially forgotten important aspects. Face to face interaction cannot be underestimated for driving collaboration, creativity and business innovation as well as providing motivation and support networks. Many aspects of employee development, networking and training are easier in an office environment as well as hiring and managing employee well-being. These factors come together to provide a clear division between work and home-life, which provides routine, structure, purpose and fulfilment.

There are clear benefits of a centrally managed office infrastructure, such as cyber security. Even greater benefits are derived from embedding and embodying an organisation’s culture and a sense of belonging. Companies who have well defined goals and values often deliver superior performance, and offices play a fundamental role in linking this to our human nature to be social and part of a successful team. It is important to remember that the office also provides many of us with a crucial part of our social life. This combination will continue to be hugely important to attract, motivate and retain the best talent and this is especially true for younger employees.

For many companies as well as individuals, we expect the new norm will be a hybrid of working part of the time from home and part of the time in the office to give the best of both worlds. There may be companies who embrace working from home as a cost cutting measure or others who decide they no longer need disaster recovery sites. However, we also expect lower workplace densities and less hot-desking which may increase requirements. Whatever the exact balance, we believe that with our tenant-focussed, in-house management teams, there will be opportunities for CLS to benefit from our non-prime office locations.

CLS offices tend to be relatively low rise, reducing the need for tightly-packed lifts, with more car parking and electric charging points, on-site secure bike storage and shower facilities, and good rail and road transport links, which we believe will be even more favoured in future. In larger cities or regions, we also expect to see a growth in demand for satellite or hub offices and believe CLS is well positioned by offering affordable, high quality office space outside of the prime city centre locations.

We have set out below some facts to illustrate the ongoing attractions of our portfolio:

• the typical CLS office property has on average 5 floors of office occupation and over 80% of our office properties have between 2 and 7 floors;

• there are on average 119 car parking spaces per property giving a high parking ratio of 1 parking space per 54 sqm (1 per 578 sq. ft), which is in addition to offering cycle spaces at 78% of our properties. Through our on-going investment programme, we intend to increase this to 100%;

• 82% of all our properties have access to windows that can be opened for natural ventilation and air circulation and circa 70% of all buildings have access to private outdoor space or roof terraces; and

• the average occupancy density is 17 sqm (178 sq. ft) per person based on net lettable area compared to an average of 10-12 sqm per person in the countries in which we operate. On current occupation, this gives each tenant ample space per employee both for wellbeing initiatives as well as the required social distancing.

The office will continue to evolve. However, the pandemic has sped up this evolution, not just in terms of what we have seen regarding employee amenities like breakout/leisure areas or quiet spaces. They will also need to be cleaner, healthier and well managed. Ultimately these changes have reinforced the importance of our core value - our tenants, our focus.


While 2020 will be a challenging year for many businesses and economies, the last six months have both reinforced the merits of focusing upon, and the diversity benefits of being in, the three largest economies in Europe. At CLS, we will continue to offer our tenants flexibility in both leases and space configuration as part of providing sustainable, modern spaces that help businesses to grow.

The development and response to the pandemic and the underlying structure of the economies in each of our three countries have meant that we are not seeing a unified picture, with Germany showing an impressive resilience while France and the UK are displaying slightly more uncertain economic indicators, the latter also exacerbated by the uncertainty surrounding the Brexit negotiations. However, we are long-term investors and although the countries have different characteristics, we believe strongly in the long-term prospects of all three economies.

With the gradual easing of lockdown restrictions, the priority for the second half of the year is the conversion of our leasing enquiry pipeline to drive occupancy while continuing to maintain a high level of cash collection from the portfolio. Initial indications are that leasing enquiries are picking-up in lockstep with general economic activity and we are encouraged by recent increases in leasing activity.”


 ASOS – “Today we are announcing that sales and profit for the full year are expected to be significantly ahead of market expectations. Revenue growth is now expected to be between 17% and 19% with PBT in the region of £130m-£150m. The improvement in expectations is supported by stronger than anticipated underlying demand and the continuation of the beneficial returns profile highlighted in our last trading statement.

We had expected to see underlying returns normalise once lockdown measures eased and customers were both able to ship returns and felt more comfortable doing so. However, in recent weeks, we have gained better visibility on this pattern in customer behaviour as we have progressed through the returns cycle and it has become evident that returns are not increasing at the rate we originally anticipated.

As a result, we have seen a significant and sustained reduction in returns rates since April. In part this reflects customer demand for ‘lockdown’ categories, such as activewear and face + body. However, rates have been further suppressed below estimated levels by a prolonged shift in customer behaviour towards more deliberate purchasing across all product categories, even when sales momentum has improved.


Looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist. We are providing updated expectations for the current year reflective of this uncertainty. The recent trading dynamics will deliver FY20 sales and PBT ahead of market expectations and further support strong underlying cash generation this year. However, the extent of this outperformance and any impact beyond this financial year will be driven by how customer shopping behaviour normalises.”

Support Services

 Balfour Beatty – “In the first six months of the year, the group reported an underlying loss from operations of £14m (2019: £72m profit). Covid-19 had a material impact on the financial performance of Construction Services in the first half of 2020, particularly in the UK.

Through this period, the group worked hard to minimise the impact on operations as the majority of Balfour Beatty’s projects remained operational. In April, 78% of the group’s sites, across the UK and US were open, which increased to 83% in May. By the end of June, 95% of sites were open with the most notable exceptions being hospitality projects in Florida and aviation projects in the UK. In Hong Kong, there were minimal site closures.

Site closures combined with a reduction in productivity and the cost of implementing new operating procedures led to a material reduction in margin in the first half of the year. In addition, Covid-19 has led to lengthened site programmes triggering a reassessment of the group’s contract end forecast positions which has also contributed to the decrease in margins in the half year.”

 Empresaria – “With Covid-19 becoming the dominant factor in the global economy during the first half of 2020, the results of the group are best analysed as two quarters - the first, which was substantially unimpacted by Covid-19, and the second which was fully impacted.

The group had a strong start to 2020. While net fee income was down 5%, with the majority of this decrease coming in March when Covid-19 started to have an effect, the group delivered year on year growth in profits in each month from January to March as the operational initiatives put in place last year started to bear fruit.

The second quarter results were dominated by the impact of Covid-19 and the group’s response to this. Covid-19 has had a very significant impact on the staffing industry as clients look to manage the impact on their own businesses through reductions in external staffing spend and hiring freezes. As a result, the group’s net fee income fell by 39% in the quarter compared to 2019. However, as a result of the swift and decisive cost actions taken across the group, combined with our diversity both by sector and geography, the group remained profitable in the quarter at an adjusted profit before tax level.

The overall results for the first half of 2020 reflect the above. Net fee income was £28.2m, 22% lower than 2019 while adjusted operating profit of £3.0m was 30% lower than 2019. Adjusted profit before tax was £2.4m (2019: £3.7m).

We remain cautious on the speed of recovery as the Covid-19 pandemic continues to impact the global economy, making it difficult to provide meaningful guidance at this time. Although we see signs of increases in economic activity in those markets where cases are falling and local restrictions are being eased, it is too early to assess the quality or pace of this and the impact that it will have on the staffing sector.

The diversity of the group across geographies and sectors will continue to be beneficial as we move through the rest of 2020. Different markets and sectors will recover at different paces, and with the ongoing risk of second waves and localised responses across the globe, this diversity helps reduce the risk and impact of localised issues on the wider group.”


 Avast – “The initial phase of the Covid-19 pandemic resulted in a sharp increase in normal online activity. The spike in demand for cybersecurity products was closely correlated with the imposition of lockdowns, both in terms of timing and intensity. As communities emerge from lockdown, Avast’s install and conversion trends in most countries have largely returned to their pre-Covid-19 levels. Therefore, our current assessment is that the pronounced uplift experienced in the first half was temporary. The duration of the Covid-19 crisis is unpredictable and it is difficult to quantify the economic impact in the months ahead. In light of these considerations, we maintain our previous FY 2020 guidance for the group of organic mid-single digit revenue growth, albeit at the upper end of the range. We raise our organic billings growth expectation from in-line to be slightly in excess of organic revenue growth, with higher growth now in H1 versus H2 due to the Covid-19-related benefit we experienced in H1. We maintain our FY 2020 adjusted group EBITDA margin guidance at broadly flat year-on-year.

While we do not anticipate the strongly elevated performance levels of the second quarter to be sustained, we are confident that Avast is able to capture material benefits from the most recent period beyond the short term. Firstly, we are optimistic that the increased user activity seeded during this period will translate over time into durable demand for our products. Secondly, we believe that the stronger digitisation trends brought about by the pandemic are likely to persist in some measure and the resultant value of cybersecurity and privacy products will be felt more than ever. Thirdly, we look forward to realising the full potential of our expanding product portfolio.”

 Checkit – “The impact of Covid-19 continues to evolve and remains highly uncertain but has undoubtedly delayed sales progress in the six months ended 31 July 2020. As indicated within the previous update, which was released on 26 May 2020, the Board is continuing to rely on its recurring revenue as its base case for internal planning purposes. Recurring revenues have been resilient through the first half of the current financial year, whilst the non-recurring installation and project based revenues have seen a significant fall of approximately 30% in the second quarter compared to the first quarter of the current year.”

 Just Eat – “Is in the fortunate position to benefit from continuing tailwinds. The United Kingdom, Germany, Canada, the Netherlands, Australia, and Brazil are performing particularly strongly. Our businesses have healthy gross margins, and all our segments are adjusted EBITDA positive. On the back of the current momentum, we started an aggressive investment programme, which we believe will further strengthen our market positions. We are convinced that our order growth will remain strong for the remainder of the year.

The most important drivers of the network effects supporting the business model improved significantly. In the last twelve months, Just Eat added a record number of new restaurants and Active Consumers. At the same time the number of Orders per Returning Active Consumer and the churn also improved, leading to a significant acceleration of top-line growth.

Just Eat processed 257m orders in the first six months of 2020, representing a 32% increase compared with the first half of 2019, driven by strong accelerated order growth in the second quarter of 2020 compared with the first quarter of 2020.”


 Cathay Pacific – “Passenger revenue decreased by 72.2% to HK$10,396m in the first half of 2020. RPK traffic decreased by 72.6%. This loss of revenue reflects the precipitous drop in passenger demand resulting from the extensive travel restrictions, border controls and quarantine arrangements which were implemented around the world in response to the Covid-19 pandemic. In total, we carried 4.4m passengers in the first six months of the year, 76.0% fewer than in 2019. The load factor also dropped significantly, to 67.3% from 84.2% in the first half of 2019. In April and May we were carrying an average of only around 500 passengers a day.

We introduced substantial ASK capacity reductions in the first six months of 2020, amounting to 29% in February, 73% in March, and 97% in April and May. In June, we began to add capacity back as Covid-19 in Hong Kong stabilised and restrictions on transit traffic were relaxed from the beginning of the month. Overall, capacity was down 65.7% for the first six months of 2020 compared to the same period in 2019.

Cargo yield increased by 44.1% to HK$2.71 in the first six months of the year. There was an imbalance between capacity and demand in the cargo market, which led to higher cargo revenues compared to the first half of 2019. Cargo revenue in the first half of 2020 was HK$11,177m, an increase of 8.8% compared to the same period in 2019. AFTK capacity decreased by 31.0%, reflecting the considerable loss of available capacity as a result of the extensive cuts to our passenger schedule. Typically, approximately half of our cargo is carried in the bellies of our passenger aircraft. As a result, overall tonnage carried decreased by 31.9% to 667 thousand tonnes. The load factor increased 5.9 percentage points to 69.3%.

The Cathay Pacific Group’s attributable loss was HK$9,865m in the first half of 2020 (2019 first half: profit of HK$1,347m). Cathay Pacific and Cathay Dragon reported a loss after tax of HK$7,361m in the first half of 2020 (2019 first half: profit of HK$675m), and the share of losses from subsidiaries andassociates was HK$2,504m (2019 first half: profit of HK$672m).

The loss for the first half of 2020 is net of the receipt of HK$1,060m of Covid-19 related government grants globally and includes impairment and related charges of HK$2,465m relating to 16 aircraft that are unlikely to re-enter meaningful economic service again before they retire or are returned to lessors, and to certain airline service subsidiaries’ assets.”


• The UK has fallen into recession for the first time in 11 years. The economy contracted by a record 20.4% between April and June, the Office for National Statistics said. Officials said the economy bounced back in June, as government restrictions on movement started to ease.

• Coronavirus infections have risen markedly in Spain, France, Germany and other European countries, sparking warnings from officials.

• France is among the European countries reporting a recent spike in cases. “The epidemiological situation, which we are following very closely, is deteriorating: 2,000 new cases per day compared to 1,000 three weeks ago,” said French Prime Minister Jean Castex.

• The Paris marathon has been cancelled as Covid-19 cases pick up in France. The marathon was originally due to take place on 5 April, but had been postponed to 15 November.

• From today, wearing a facemask became compulsory in all public places in Brussels.

• Norway is re-imposing quarantine on more travellers from foreign countries, the government has said, and reiterated its advice that Norwegians should avoid travelling abroad, amid a jump in the number of new coronavirus cases.

• NatWest is cutting at least 500 jobs across its retail business and closing one of its remaining offices in London. The state-backed bank is finalising a voluntary redundancy round targeting cutting 550 full-time equivalent roles across its branches and ‘premier banking’ premium service.

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