LONDON/HONG KONG (Reuters Breakingviews) – Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
French President Emmanuel Macron holds a news conference at the end of a EU leaders summit, in Brussels, Belgium, December 11, 2020.
– Positive Macron
– Bullish WPP
– Roaring New Zealand
– Scors damp squib
KEY MAN RISK. Emmanuel Macron has tested positive for Covid-19, the French presidency announced on Thursday, offering a potent reminder that even as vaccines are rolled out, the virus is still virulent and has no political allegiance. The centrist politician joins other leaders as diverse as Brazils Jair Bolsonaro, U.S. President Donald Trump and British Prime Minister Boris Johnson among those to contract the disease.
Those leaders recovered, which bodes well for the relatively healthy and youthful Macron. Yet his condition could still have consequences. It comes just as the European Union is trying to finalise a trade deal with Britain. Though the European Commission is leading the talks, an active Macron may be needed to approve any last-minute compromise. Meanwhile, Frances infection rate has been falling in recent weeks, allowing the country to slowly emerge from its latest lockdown. Theres no better reminder for French citizens of the need to remain vigilant. (By Neil Unmack)
SALES POP-UP. The advertising industrys recovery may come sooner than expected. Thats the bullish message from WPP, which reckons it can resume share buybacks next year, pay a progressive dividend and ramp up spending by up to 500 million pounds per year to win new clients. Most importantly, the worlds biggest ad agency is aiming to get net sales back to 2019 levels by 2022, one year ahead of the previous schedule.
Chief Executive Mark Reads plans to juice up the companys margin caught the most attention. He intends to deliver an operating margin between 15.5% and 16% in 2023, a steep jump from the 11% analysts expect this year, according to Refinitiv. That could be delivered by 600 million pounds of cost savings and working with clients like LOreal and Ford Motor to move their marketing and sales online. Since companies slash advertising budgets when the going gets tough, WPPs success rests on a wider economic recovery. (By Aimee Donnellan)
ISLAND PARADISE. New Zealand is roaring back to business. After successfully containing Covid-19 cases, the countrys economy grew a record 14% quarter-on-quarter in the three months to September, beating the central banks own November forecast. Even more impressive, output actually expanded slightly compared to last year, pointing to a rebound back to pre-pandemic levels. Its as close as you can get to a true V-shaped recovery, Kiwibank Chief Economist Jarrod Kerr marvelled.
Strong domestic consumption likely pent-up demand from strict lockdown measures earlier this year seems to have offset the toll of closed borders and lost tourism. Fiscal and monetary stimulus also played a role, though house prices now risk overheating. Barring another outbreak, the momentum can be sustained by mass vaccine rollouts and a potential travel bubble with Australia next year. (By Robyn Mak)
PLUS ÇA CHANGE. The more things change, the more they stay the same at Paris-listed Scor. The 5.2 billion euro French insurer on Wednesday evening said it would separate the roles of chairman and chief executive as part of long-overdue governance reforms.
If that seems like a win for activist investor CIAM, which has campaigned for the roles to be divided, its not. Veteran boss Denis Kessler, who has occupied both positions since 2002, will stay on as chairman and only relinquish his CEO title in early 2022. His anointed successor, Benoit Ribadeau-Dumas, who has never worked in the insurance sector, will become Kesslers deputy in the interim.
Since rebuffing an 8.2 billion euro takeover bid by Covea in 2018, Scor shares have fallen by 22%, while peers Hannover Re and Munich Re have seen their stock rise. A governance reboot offered the prospect of meaningful change. Shareholders have been served dour continuity. (By Christopher Thompson)
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Breakingviews – Corona Capital: Macron, WPP, New Zealand, Scor – Reuters
