Join our community of smart investors

Seven Days: 27 November 2020

A round-up of the biggest business stories of the past week
Seven Days: 27 November 2020

The next new vaccine

AstraZeneca emerges 

A third vaccine candidate emerged at the start of the week, this time from AstraZeneca (AZN) and the University of Oxford. Phase III clinical trial results suggest that a two-dose method could be effective in preventing 90 per cent of people from falling ill from Covid-19. The storage and transportation of the drug requires normal refrigerated conditions (2-8°C) for at least six months. This means it has a significant logistical advantage over Pfizer (US:PFE) and BioNTech’s (US:BNTX) candidate, which needs to be stored and shipped at -70°C.

 

The public debt nightmare 

New spending review

Chancellor Rishi Sunak said that the government is set to borrow £394bn this year, almost a fifth of national income and at the highest level ever in peacetime. Meanwhile, unemployment is expected to almost double to 7.5 per cent next year.  Mr Sunak said that forecasts pointed towards borrowing sitting at over 4 per cent of national income by 2024, which he described as “unsustainable”. Yet both the chancellor and the prime minister Boris Johnson have insisted that there will not be a return to austerity – suggesting that there will be tax rises rather than spending cuts. 

 

ShadowFall attacks Blue Prism

Shares drop

ShadowFall has raised the same concerns previously expressed by Investors Chronicle regarding Blue Prism (PRSM), the robotics processing automation company. The short-seller highlighted alarmingly feeble spending on research and development, compared with outlays on sales and marketing. The note also pointed to a slowdown in new customer wins, with 490 new clients in the 2020 financial year compared with 685 net new customers in 2019. The firm has not been alone in building a short position in Blue Prism: short interest in the shares has risen from 1 per cent at the end of 2019 to 2.2 per cent at the last count.

 

AA agrees sale 

Private equity swoops in

After a number of extensions to the offer timetable, motorway emergency service AA (AA.) has finally received a 35p a share offer from private equity groups Warburg Pincus and TowerBrook Capital. The bid values AA’s share capital at £219m, or around a 40 per cent premium to the closing price of 25p on 3 August, the last business day before the offer period began. The offer has already received approval from shareholders that hold around 15.5 per cent of the stock, although it will still need support from the majority of its other shareholders. 

 

Fraud at Lookers 

Profits overstated 

The UK car dealership Lookers (LOOK) finally released its delayed annual results for 2019 following a fraud investigation that started in March. The company made £25.5m-worth of adjustments to correct the overstatement of profits over several years, and has set aside £10.4m for potential charges from the Financial Conduct Authority (FCA). In 2019, the group fell to a pre-tax loss of £45.5m compared with profits of £41.9 in the previous year. Management said that it intends to report its delayed half-year results from this year in December and then expects to apply to re-list its shares. 

 

DMGT profit plunge 

Digital grows 

Daily Mail & General Trust (DMGT) saw its adjusted pre-tax profits fall back by half in 2020 to £72m, as the pandemic blew a hole in the publisher’s advertising sales. At its eponymous Daily Mail and Mail on Sunday titles, revenue fell by more than a tenth to £356m and overall circulation for all of its print papers dropped 7 per cent. Meanwhile, digital service MailOnline managed to post revenue growth of 3 per cent to £144m, with the online audience up by almost two-fifths to 17.3m daily global unique browsers. 

 

New charity bond 

5% coupon

Retail Charity Bonds (RCB) will issue bonds for the care charity Greensleeves Homes Trust, which will be available to retail investors at a fixed interest rate of 5 per cent a year until 17 December 2030. The bonds will have a minimum initial subscription amount of £500, and are then available in multiples of £100. Greensleeves Homes Trust, which provides care for older people, previously raised £50m through bonds issued by RCB in 2017. Chief executive Paul Newman said that the trust has ambitions to scale its offering and modernise care. 

 

Logistics stocks have been rising in the run-up to Christmas – but will they be able to keep up with the extra seasonal demand this year? Read our analysis here.