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As more news trickles in of companies finding ways to start re-opening, allowing for social distancing as required, vehicle traffic flow ticks up and RNS releases start to firmly emphasise companies support for stakeholders. Clear demonstrations are now appearing of a company’s “licence to operate” post this crisis and shows that ESG considerations, far from being dropped down the list, are actually at the forefront of management thinking.
Persimmon has announced a phased restart to work on site but with a clear commitment to “the Group’s top priority is the health and safety of the public, and its customers, colleagues, sub-contractors and suppliers, and Persimmon continues to closely follow Public Health England’s guidance including instituting and maintaining social distancing practices.”
Pearson, although impacted by closures of schools and testing centres has nevertheless chosen not to furlough staff and has announced new initiatives – “ the upcoming launch of ‘UK Learns’ – an online portal which contains free, digital, skills-based courses to help re-skill and broaden employability prospects for employees who have been impacted by COVID-19.”
Burberry’s announcement is titled – Protecting our People and Communities – and focuses on continuing to pay all staff, not utilising government schemes, management taking pay cuts and reconfiguring a coat factory to manufacture PPE for the NHS ““Since the outbreak of COVID-19, our priority has been the safety and wellbeing of our employees, our customers and our communities. While we continue to take mitigating actions to contain our costs and protect our financial position, we are also committed to safeguarding jobs and supporting the relief efforts during this global health emergency.”
Nestle (listed in Switzerland) begins their Q1 sales update with their response to Covid 19 “In these difficult times, many of our business partners are facing serious challenges, which create enormous uncertainty for their employees and families. We will continue to be a dependable business partner and make every possible effort to adapt to the evolving situation.” And an emphatic comment on their position “Since the beginning of this pandemic, we have engaged in numerous projects around the world as a reliable employer and business partner as well as a trusted neighbour and citizen in the 187 countries where we operate. Our commitment is certain and unwavering.”
First Group provides a third update on trading since 23 March, with commentary on their people and communities given significant importance in the announcement alongside the financial trading update. And a further short addition of interest – Whitbread have confirmed a delay to FY20 results originally planned for end April, but not given a specific new date – just indicated end of May or start of June.
Views from the investment community
- Market – Record-breaking crash, rapid rebound – is this a recovery or “dead cat bounce”?
Schroders: We have analysed Dow Jones index data on US stocks stretching back to the year 1885…In 11 of the 13 previous historic episodes since 1885 where the Dow has fallen by at least 25%, there has been a rebound of at least 10% somewhere on the way to the bottom – a false dawn, also known less in less feline-friendly language as a “dead cat bounce”.
Usually there has been more than one; the average number in any big down-market has been around three. There were four in each of the global financial crisis and the dotcom crash…
Given the record-breaking pace of the crash in the first quarter, a huge amount of pessimism was priced in. From that starting point, things didn’t have to get better for there to be a rebound. They just had to become “less bad”. A slowdown in case numbers in continental Europe has provided that welcome relief, also giving a roadmap for how things may develop elsewhere.
And, of course, economies and financial markets have received unprecedented levels of support from central banks and governments around the world. A day of reckoning will come when the consequences of this will need to be resolved, but that is a problem for another day.
So, a case can be made for things being a lot worse than they were at the start of the year but not as bad as might have been feared in early March. Will we see the market hit new lows? History would suggest that there is a good possibility that we will. False dawns are a common occurrence and there remains a lot that could go wrong. We may not be out of the woods yet.
- Market – COVID-19: Looking Through The Pandemic
Newton Investment Manager: In terms of corporate earnings, the fourth quarter of 2019 should be the yardstick for underlying purposes, with perhaps the final calendar quarter of this year being the first meaningful comparator to come. However, it may be unrealistic to expect earnings to bounce back to previous levels: they had already been sluggish over the course of 2019 as we saw most markets globally rerate on very little earnings growth.
Having said this, markets could trend higher with the colossal amount of liquidity sloshing around. This could lead to higher valuations, but may be supported by reflation resulting from the intersection of recent and continuing fiscal policy, and the monetary policy support which has been used since the global financial crisis more than a decade ago. Getting there may not be via a straight line however.
It is possible that both Europe and Japan could benefit from an uptick in global inflation as they have struggled to generate any for so long. They are also more accustomed to state intervention than the US or the UK, for example. In the near term, however, having so far had what could be viewed as a reasonably contained coronavirus crisis after acting early, Japan appears to be succumbing once again, having apparently lifted social restrictions too soon, and this most demographically challenged of nations is suffering something of a crisis in its health-care system.
Regulation and Corporate Governance
Please find the latest updates on UK regulation below:
- 24/04/2020: EBA (European Banking Authority) release draft regulatory technical standards on ESG disclosures.
“These Joint Committee draft Regulatory Technical Standards (RTS) on ESG disclosures have been developed by the three European Supervisory Authorities (EBA, EIOPA and ESMA) under the EU Regulation on sustainability-related disclosures in the financial services sector Regulation (SFDR), which aims to strengthen protection for end-investors and improve the disclosures that they receive from a broad range of financial market participants and financial advisers, as well as regarding financial products.”
- 24/04/2020: FCA confirm support for motor finance and high-cost credit customers
“The targeted temporary measures being implemented are a 3 month payment freeze for motor finance, buy-now pay-later (BNPL), rent-to-own (RTO) and pawnbroking agreements. For high-cost short term credit (including payday loans) payments will be frozen for one month with no additional interest to be charged.”
- 24/04/2020: PRA announce extension of the Contingent Term Repo Facility (CTRF)
“The Bank of England is today announcing that it will continue to offer 3-month and 1-month term Contingent Term Repo Facility (CTRF) operations on a weekly basis through May 2020, with the final operation scheduled on 29 May.”