The Week UK 21.03.2020

CITY 47

21 March 2020 THE WEEK

Marketsremainedinfreefallasthe

coronaviruscontinuedtobatterthe

worldeconomy–despiteinterventions.

TheUSFedmadeasecondemergency

ratecut:cuttingratesby1%tocloseto

zero.Aspanicsellingaccelerated,airline

andtransportstockswerebadlyhitby

theimpositionoftravelbans,whichalso

drovethepriceofoilstilllower:

benchmarkBrentcrudefelltobelow

$28/barrel.Thepoundcrashedtoits

lowestlevelsincethe1980s,fallingto

$1.188againstthedollar.

WallStreet’s“feargauge”,the“Vix”

volatilityindex,whichoftenspikes

duringmarketcrashes,surpassedthe

levelofthe 2008 financialcrisis,jumping

by43%onMondayamidgrowingfears

ofafinancialcrunch.ThePhilippines

becamethefirstcountrytocloseits

stockmarketsamidspeculationthat

othercountriesmayfollow.

The holiday companyTuisuspended

all its package travel, cruises and hotel

operations “until further notice”.

Primarkclosedafifthof its shops, after

France, Spain, Italy and Austria placed

restrictions on non-essential stores.

Laura Ashleywent into administration;

Dixons Carphonesaid it would close all

its Carphone Warehouse stores in the

UK, with the loss of 2,900 jobs.Tesco,

Sainsbury’sandWaitroseenforced

new rules to stop panic buying. In a

rare piece of “normal” news,Applewas

hit byarecorde1.2bn fine for breaking

French competition law by preventing

resellers from discounting its gadgets.

Netflix:goldendawn?
Asbunkermentalitytakeshold,TwitterhasbeenfullofmemesabouthowNetflix,the
world’sbiggestvideostreamer,mustbelaughingallthewaytothebank.Intheirquest
forstocksthatcouldweatherthestorm,sometradersseemtoagree,saidLizzyGurdus
onCNBC.“It’salwaysdarkestbeforetheDAWN,”quipsMarkTepperofStrategic
WealthPartners,quoting“WallStreet’sneweststockacronym”.Tepper’splanisto
majoronDforDomino’sPizza;AforActivisionvideogames;WforWalmart,where
yougetyourtoiletpaper;andNforNetflix.Hesuggestssteeringclearofotherhome-
bodytechstocks,suchasFacebookandGoogle–because“smallbusinesses”arelikely
“tostartcuttingbackonadvertisingspendingontheirplatforms”.Netflixiscertainlyin
tunewiththezeitgeist,saidJamesTitcombinTheSundayTelegraph.Thereleaseofa
documentarytitledPandemicinJanuarylooks“prescient”.But,actually,its“diagnosis”
islessclearthanthebullsmakeout.True,Netflixshareshaveheld“steady”,buteven
170 millionsubscriberswon’tfinance“itsownbinge”.Forecasttospend$ 17 bnthisyear
oncontent,ithasbeenborrowingaggressively.“Theprospectofashocktothejunk
bondmarketsthatNetflixreliesonmayhaveknock-oneffectsforthecompanyitself.”

Deliveroo/Just Eat:nobean feast
“Mypriorityisthesafetyofcustomers,ridersandrestaurants,nomatterwhathappens,”
wroteDeliverooCEOWillShuinamessagetocustomerslastweek.And,indeed,food
deliveryapps like Deliveroo have beenquicktoimplement “nocontact” drop-offsto
reducetherisk ofcontagion,saidShonaGhoshon BusinessInsider.Thestrategyseems
to beworking:“datashowsdownloads offooddeliveryapps havespikedaround the
world aspeoplechoosetostayathome andorderin”.Itsoundslike ano-brainer,
saidLex intheFT.Butthe problem isthat“demand isonlyhalf the picture”–these
companiesareequallyrelianton food suppliersandrestaurantswhicharerapidly
“pullingdown the shutters”.What’smore, “contactlessdelivery”won’t“assuage
concernsover thespreadofthedisease from thosepreparingthemeals”.Inthisregard,
“China’sexperience isinstructive”.Sharesin one ofitsprominenttakeawaydeliverers,
Meituan-Dianping,aredown byafifthsincethestart ofJanuary,morethanHong
Kong’sbenchmarkHangSengindex itself.Thewider pointisthatbeingat homedoes
nothave tomeanorderingin.Manypeoplejust“rolluptheirsleeves andgetcooking”.

LVMH/Europeandistillers: that’s thespirit!
Theysayin Paristhatallroads lead toBernardArnault–including,itseems, the route
to cleanerhands.The boss oftheworld’slargest luxurygoodsgroup,LVMH,hassaid
it willrepurposeallofitsmanyperfumeandcosmeticsbrands’productionfacilitiesto
producehydro-alcoholichandsanitiser,saidSabrina BarrinTheIndependent.The
gel “willbedelivered freeofchargetotheFrenchhealthauthoritiesfor aslongas
necessary”.Distillersarealsogettinginon the act, notedthe FT.Withstocksof
isopropylalcohol–avitalingredientfor hand gelsandanti-bacterial wipes–nowin
shortsupply,“spirits-makersfromFrance’sPernodRicardto smallcraft-gindistilleriesin
theUK”havepledgedtosupply 9 6-proof alcohol, the base fordrinkssuchasvodka and
gin, eitherdirectlyasliquidsprays orto production partnersmakinghandsanitisers.

Corona casualties: companies in crisis

Another day, another set of gruesome

announcements from companies holed by

the coronavirus. Chancellor Rishi Sunak’s

£12bn “budget bazooka” soon began to look

likeapeashooter”, said Patrick Hosking in

The Times. The virus has put unprecedented

pressure on small businesses:areport last

week by business loans provider Market

Finance found that 69% of small companies

were facing “significant” financial pressure,

even before “the real pinch” of containment

measures, said Peter Evans in The Sunday

Times. No wonder there was such pressure

on Sunak to go further. France’s President

Macron upped the ante with ae300bn guarantee that no French

company will go bust asaresultofsocial distancing. Sunak has

now followed suit witha£350bn “whatever it takes” package.

It still looksatall order, said Cat Rutter Pooley in the FT.

“Assistance might be easier to get for some industries (airlines,

restaurants) than others.” Betting groups,

for instance, were some of the worst hit,

even “before the cancellation of the Grand

National”. In truth, there are some big names

in jeopardy across sectors.

Topping the list is Finablr, the “embattled”

owner of forex provider Travelex, which

had already been suffering liquidity

problems before the chaos wrought by

Covid-19, said Kalyeena Makortoff in The

Guardian. The discovery of some $100m

in “undisclosed cheques” could prove fatal.

Property firm Intu–the owner of several

shopping malls–has also warned of collapse, said The Observer.

Meanwhile, Britain’s largest listed cinema chain, Cineworld,

whose shares have crashed precipitously, facesareal zombie

horror show.Agraphic reminder, said The Sunday Telegraph,

that the “coronavirus may be as dangerous for debt-fuelled

companies as it is for people”.

Cineworld: shares have crashed

Seven days in the

Square Mile

CITY

Companies in the news

...and how they were assessed