Today's markets: AstraZeneca revises vaccine data as UK/EU try to calm tensions

AstraZeneca vaccine data changes 

AstraZeneca’s (AZN) has revised its Covid-19 vaccine efficacy rate to 76 per cent from 79 per cent in its US trials, following concerns that the data in its initial report earlier this week was potentially misleading. Another blow to the pharma giant, while it is locked in a row with the EU over accusations that it has failed to meet its supply targets. But the shares seem largely unbothered, flat in early morning trading. 

But tension over vaccine supply is still bubbling - prompting the trade bloc and the UK to issue a joint statement last night saying that they are both in discussions to develop a “reciprocally beneficial relationship” to deal with the pandemic. Both sides committed to moving towards a “ win-win situation and expand vaccine supply for all our citizens”.

Astra is caught in the middle. Can it cope with being a victim of vaccine nationalism? 

On a brighter note - the vaccine rollout in the UK is still progressing well, with 28.7m having received their first dose, and 2.5m fully inoculated. That soon may also be a requirement to visit the pub, says Boris Johnson. The Prime Minister told the Liaison Committee yesterday that landlords may be given the power to bar anyone without a coronavirus jab. There has already been some backlash from Tory backbenchers - but it highlights the tricky road ahead that the retail and hospitality industries will have to navigate as lockdowns lift, and a chunk of the population wanders around unvaccinated.

Read our analysis on whether pubs can fight back after the pandemic 

Remind yourself of how the path out of lockdown could affect your investments. 

Pubs are not the only spaces that will be empty for a while yet. This morning Nationwide told its 13,000 office staff that they could choose to work anywhere they like in a new flexibility scheme. The bank will close three of its offices near its headquarters in Swindon, but chief executive Joe Garner has emphasised that cost-cutting was not the driving factor behind the change.  

Flexible office space might be the key to the new way of working. Emma Powell considers a potential winner here. 

Can JD Sports survive the threat of direct-to-consumer shopping?

Nike (NYSE:NKE) and Adidas (GER:ADS), the world’s two biggest sportswear companies, have accelerated their shift towards direct-to-consumer sales. This effectively means cutting out some of the middlemen, or third-party retailers, in their networks. 

Such a transition has clear benefits, but it also holds implications for both brands’ distribution partners - including FTSE 100 group JD Sports (JD.). Read Harriet Clarfelt’s full story here.

Companies round up: Cineworld, Boohoo, Compass, Deliveroo, SIG

Cineworld losses mount, cash call coming

Cineworld (CINE) swung to a record loss of $2.3bn, as it asked shareholders for permission to raise even more debt. Revenues in the year to  dropped 80 per cent, to $852m, as its cinemas across the world were closed and new movie releases were postponed. 

The odds are stacked against the cinema group, which is currently London’s sixth most shorted share. But everyone likes an underdog story. Investors recently voted through a new long-term incentive plan for the cinema group: do they think management can turn its fortunes around? Read Paul Jackson's take on Cineworld in his recent No Free Lunch column, The phantom of the cinema.

Unsurprisingly, according to our Ideas Farm dataset, Cineworld is one of London's most shorted shares at the moment. 

Boohoo comes clean?

Boohoo (BOO) has published a full list of its UK suppliers, after slashing 64 organisations from its supply chain following allegations of dire working conditions in some of its factories last year. The publicity around questionable practices in Boohoo's supply chain raised concerns about its ESG credentials - read Oliver Telling's recent feature on ESG's dirty secret. 

The fast-fashion retailer’s share price has still not fully recovered from the scandal in July. But that hasn’t stopped it from going on an acquisition spree, as the company continued to be a big hit with consumers during lockdown.

Compass bosses looking on the bright side

Bosses at Compass Group (CPG) said they’re excited by the “significant structural market opportunity globally”, though you might be less enthused if you restricted your terms of reference to the group’s pre-close trading update.

Organic revenues for the contract caterer have been edging up since midway through last year and were 34 per cent down on a comparative basis through Q1 of 2021 -– in the final quarter of 2020, the shortfall stood at 34.1 per cent.

Operating margins were also improving as economies of scale kick-in - up by an expected 130 basis points to circa 4.0 per cent in Q2. The collapse in market activity has been most noticeable in the Sports & Leisure sector, and prospects here – both short- and medium-term – remain far from clear despite the vaccination programmes worldwide. MR

Management at Compass were buying shares in the company in December - read more. 

Deliveroo doubts

Deliveroo is facing a bumpier road ahead of its IPO. Aviva and Aberdeen Standard won’t be taking part, citing concerns about riders’ rights, as well as the investment thesis. Growth has been exceptional – thank the pandemic – but it couldn’t serve up a profit despite last year’s 50 per cent rise in revenues. It probably won’t be profitable for a while yet. Competition is pretty intense, particularly in the key London market. It hasn’t even reached Zone 9 yet out here in the sticks. Recent stock market debutant Trustpilot (TRST) is offering clues. Yesterday shares fell below the IPO price; will Shu be sweating? I doubt it, but investors should always be careful about richly priced tech platform IPOs, particularly if they look like pricing at the top of the range because there is a lot of primary demand. That doesn’t leave a lot of headroom. Shares in Trustpilot rose by 14 per cent in its stock market debut on Tuesday. The company priced the IPO at 265p per share, giving it a market capitalisation of £1.1bn, and shares climbed as much as 16 per cent from this level. But on Wednesday the stock was lower  

DoorDash could be another useful case study, especially since it’s in the same game of delivering food at a loss. Shares in DoorDash closed at $189.51 on debut in December, 86 per cent above the IPO price, a sign of strong demand for shares. But the performance since has been weak: after hitting a high in February the stock currently trades about a third below its first day closing price at $125. 

Read Michael Taylor's column this week on how day traders can make the most of IPO excitement. 

Neil Wilson is chief markets analyst at markets.com

CVS is purring

Veterinary group CVS (CVSG) reported that profit before tax almost doubled year-on-year in the six months to December, reaching £14.8m. The company, like others in the animal sector, has benefitted as Brits rushed to buy puppies and other new companions for the coronavirus lockdown. But can the listed animal sector continue to roar post-pandemic? OT

SIG’s statutory losses widen in 2020

Amid the pandemic disruption to construction activity, building materials distributor SIG (SHI) saw its like-for-like sales drop by 13 per cent in 2020, to £1.87bn. While like-for-like sales collapsed by a third in the second quarter, the group recovered to 4 per cent growth in the final quarter thanks to strong demand from ‘repair, maintenance and improvement’ (RMI) customers.

The overall drop in revenue translated to an underlying operating loss of £53m, versus a £43m profit a year earlier, although that is slightly better than the £57m-61m loss the group had guided to in January. On a statutory basis, SIG’s operating loss almost doubled to £168m, weighed down by hefty impairment charges and onerous contract costs.

SIG believes it will return to an underlying operating profit in the second half of this year, although it has warned of rising input prices and potential materials shortages. Broker Jefferies is forecasting a £3m underlying operating profit in 2021, rising to £39m in 2022. NK

Read Nilushi Karunaratne’s full analysis here.

Sir Martin Sorrell sticks to bullish view on 2021 and 2022

S4 Capital (SFOR) made a £8.1m operating profit in 2020, compared to a £3.8m loss a year earlier. The advertising giant, which Sir Martin Sorrell joined shortly after his acrimonious departure from rival WPP (WPP), has been largely sheltered from the disruption in the marketing industry, thanks to its digital focus. The group described gross profit in January as “well ahead of budget”, supporting Sorrell’s view that 2021 and 2022 “will be very strong years economically, as the world rebounds from the pandemic and spends and invests the huge pandemic-driven fiscal and monetary stimulus.” 

Is there any hope for traditional advertisers in the new digital age? Lauren Almeida reports

United Utilities’ revenue to drop in line with expectations

United Utilities (UU.) says that current trading for the year to 31 March is in line with its expectations. Revenue is guided to dip by around 3 per cent, reflecting a reduction in allowed regulatory revenue and lower water consumption by businesses during the pandemic.

Household consumption has increased, largely offsetting the lower commercial demand, and cash collection from these customers has remained strong despite the leaner economic times.

Net debt is set to increase from £7.4bn at the half-year stage as the group continues to invest in its asset base. The shares are flat today at 913p. NK

Mixed bag at LTG 

Shares in Learning Technologies Group (LTG) slumped 8 per cent this morning, after it revealed that operating profit had fallen to £14.9m in 2020, compared to £16.4m the year prior. Unsurprisingly, its remote learning software and platform products performed well, with sales growing 13 per cent to £100m.

But the bugbear was its content and services business, which is responsible for around a quarter of the overall topline: its sales dropped 22 per cent as corporate clients pushed back big projects. Management anticipates that the division will rebound to pre-pandemic levels this year - a confidence reflected in an unmoved final dividend of 0.5p per share.