Amid the doom and gloom, some firms are quietly performing rather nicely
Thursday 14 May 2020 Author: Ian Conway

While no firm wants to be seen publicly to be ‘having a good crisis’, given the gravity of the threat to the economy and public health from coronavirus, the fact is some firms are doing rather well despite, or in some cases as a result of, the pandemic.

Some have been in the right place at the right time – think of healthcare, sanitation and hygiene firms – while others have been less obvious beneficiaries or have turned the situation to their advantage.

Shares spoke to a number of firms during April and there seem to be some areas of the economy which are still functioning reasonably well. That’s not to say every company in these sectors is benefiting, but some have managed the lockdown better than others.

ON THE FRONT LINE

Pharmaceutical company AstraZeneca (AZN) has had a good crisis, not least in terms of the share price which continues to hit new all-time highs. 

As well as seeing stockpiling of its drugs by distributors and releasing positive news from phase III trials of its lung cancer treatment Tagrisso, the firm delivered first quarter earnings which beat forecasts and said it saw no material delays to any of its drug programmes in 2020 or 2021 as a result of the pandemic.

Moreover, the day after the results it announced an agreement with Oxford University to develop and distribute globally a vaccine aimed at preventing the spread of coronavirus.

Shares in healthcare and hygiene goods firm Reckitt Benckiser (RB.) may not be at all-time highs but they are well above pre-crisis levels, thanks to a 13% jump in first quarter organic sales of hygiene products like Dettol and Lysol and a 33% jump in over-the-counter health products like Nurofen, Mucinex, vitamins and mineral supplements.

Infection prevention firm Byotrol (BYOT:AIM) raised its earnings guidance last month due to ‘exceptional demand’ for its hand sanitiser, lifting its shares and those of its licence partner Tristel (TSTL:AIM).

IN-HOME CONSUMPTION

The government-enforced shutdown of bars and restaurants has meant that more food than ever is being consumed at home. Researchers at Kantar estimate that the number of extra home-prepared meals could increase by as much as 500m per week.

That means an extra £670m of spending on groceries, which the supermarkets are only too happy to cater for. Sainsbury’s (SBRY) reported a 12% increase in grocery sales in the seven weeks to 25 April and is forecasting high single-digit growth through the lockdown period, with a ‘return to normal’ from October.

To replace the dining out experience, we’re ordering more deliveries from Just Eat Takeaway (JET) and treating ourselves to a tipple courtesy of Naked Wines (WINE:AIM), which has seen higher levels of demand from both new and repeat customers.

As we’re spending more time at home, we’re also spending more on our furry friends, with Pets At Home (PETS) reporting ‘exceptional levels of demand’ for its products and services both in-store and online.

We’re spending more on fridges, freezers, TVs and laptops as well, according to Argos and Dixons Carphone (DC.), the latter having seen a 166% increase in UK online electrical orders in the five weeks to 25 April.

And after weeks of staring at the walls we’ve succumbed to buying soft furnishings online from Dunelm (DNLM), which reported ‘significantly higher’ order levels last month, and learning to play ‘Smoke on the Water’ after buying a guitar from internet retailer Gear4Music (G4M:AIM).

BACK IN BUSINESS

Although they had to close their sales sites and many of their construction sites in March, most of the housebuilders have already restarted operations and many have seen steady growth in reservations even during lockdown.

Builders merchant Travis Perkins (TPK) and equipment rental firm Speedy Hire (SDY) saw some impact on their operations, but both highlighted the fact that many customer projects were continuing and that they were ready to bounce back as soon as restrictions are lifted.

Other business services firms like advisory group Begbies Traynor (BEG:AIM), litigation funders Manolete (MANO:AIM), Litigation Capital Management (LIT:AIM), and law firm RBG (RBGP:AIM) have all seen an increase in demand for professional advice during the crisis. This trend looks set to continue as the wider economy plumbs new depths in the  second quarter.

Finally, a small cadre of financial firms also seems to be doing well. London Stock Exchange (LSE) has benefited from the sharp increase in trading volumes across its many platforms, while IG (IGG) and Plus500 (PLUS) have seen a leap in revenue linked to the spike in market volatility which has encouraged more punters to trade.

Asset management group Liontrust (LIO) has been in demand with investors, capturing net inflows just shy of £500m in the first quarter, while car insurer Admiral (ADM) has seen a substantial drop in accident claims and is even refunding customers some of their premiums.

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