(Alliance News) - Stock prices in London are seen opening slightly lower on Thursday as the EU looks for ways to end its vaccination struggles at a virtual summit that takes place amid tensions with the UK over supply of jabs.
In early company news, contract caterer Compass Group said it expects to report a big fall in operating revenue due to Covid-19 restrictions. Movie theatre operator Cineworld Group swung to an annual loss due to virus-related closures. Water company United Utilities said current trading is in line with expectations.
IG futures indicate the FTSE 100 index is to open 12.79 points lower at 6,700.10. The blue-chip index closed up 13.70 points, or 0.2%, at 6,712.89 Wednesday.
Compass Group said it expects organic revenue to be almost a third lower as coronavirus restrictions hindered the caterer's operations.
Compass said it expects organic revenue for the three months to March 31 to be down 28% and organic revenue for the 6 months to March 31 to be down 31%.
The Chertsey-based firm said it has been operating at 71% of 2019 revenue in the interim period. Its operating margin is expected to increase by around 130 basis points to 4.0% in the second quarter from 2.7% in the first quarter.
Looking ahead, Compass said although Covid-19 vaccination efforts around the globe are advancing, the pace of volume recovery remains uncertain. However, it noted that the pipeline of new business and client retention continue to be strong.
"We are controlling the controllable by managing our costs, adapting our operations and resizing our business. We remain confident in our ability to rebuild our group underlying margin above 7%, before we return to pre-COVID volumes," the company said.
"Looking further ahead, we are excited about the significant structural market opportunity globally, organic revenue growth, continued margin improvement and returns to shareholders over time," Compass added.
Cineworld said the global pandemic has severely hurt the industry and its annual results, with all sites across the company being temporarily closed from mid-March last year.
For 2020, Cineworld swung to a pretax loss of USD3.01 billion from a USD212.3 million profit in 2019 on revenue of USD852.3 million, down 81% from USD4.37 billion.
Cineworld said it looks forward to reopening cinemas worldwide, with the anticipated cinema re-opening from April 2 in the US, May 17 in the UK and also in May in the rest of the world where the company has operations, such as Ireland and Central Europe. It highlighted its prospects remain supported by a strong pipeline of new movies and the current indication that government restrictions will be lifted.
Cineworld shares are 11% lower this week amid concerns movie studios would continue to release films simultaneously to cinemas and online streaming platforms, as has been happening during the pandemic.
"There can be no certainty as to the future impact of Covid-19 on the group. Governments strengthening of restrictions on social gathering may lead to closure of cinemas or studios delaying movie releases. This would have a negative impact on the group's financial performance and likely require the need to raise additional liquidity. The material uncertainties, as well as some one-off cash flow impacts on the group are highlighted within the going concern statement in these results," Cineworld said.
Water works United Utilities said it has continued to perform strongly during the Covid-19 pandemic and expects to deliver an "excellent operational performance" ahead of its annual results in May.
United Utilities said current trading is in line with the group's expectations for the year to March 31.
It said revenue is expected to be lower than last year, mainly reflecting the reduction in allowed regulatory revenue, with lower consumption from businesses as a result of Covid-19 largely offset by higher consumption from households. Overall, the net reduction in revenue is expected to be around 3.0%, the company said.
In addition, United Utilities said underlying operating profit for financial 2021 is expected to be lower than the previous year, largely reflecting lower revenue and higher infrastructure renewals expenditure.
"We are on track to record our lowest ever level of leakage and the interruptions to water supply our customers experience has more than halved in the last 12 months. Our performance in relation to serious pollution incidents is the best in the sector with zero incidents for two consecutive years and we are on track to achieve the industry leading four star rating with the Environment Agency in its annual assessment for 2020," United Utilities said.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.1%. In China, the Shanghai Composite ended 0.1% lower, while the Hang Seng index in Hong Kong was up 0.1%.
In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down marginally, 3.09 points, the S&P 500 down 0.6% and the Nasdaq Composite 2.0% lower.
EU leaders will meet via videoconference on Thursday to discuss AstraZeneca supplies, as well as new vaccine export rules that will weigh how needy countries are in terms of infection rates, how many jabs they have, and how readily they export doses to the bloc.
The European Union on Wednesday tightened vaccine export controls in a bid to ramp up its stuttering inoculation campaign. Under the EU's new rules, the bloc's European Commission executive will weigh how needy countries are as well as how readily they export doses to the EU before approving shipments.
The move comes amid a dispute between the UK and EU over coronavirus vaccines, with AstraZeneca's jab at the centre of the EU's woes.
The pharmaceutical firm has delivered the EU only 19 million of the 30 million it had promised in the first quarter – and that pledge was itself a dramatic reduction from the 120 million it contracted for.
UK Prime Minister Boris Johnson has insisted that the UK contract with AstraZeneca must be honoured, but he is worried that Brussels could use the toughened export mechanism to cut Britain off from other EU-made vaccines.
AstraZeneca on Wednesday revised down by three percentage points the effectiveness of its Covid vaccine after American authorities raised concerns that results reported from its US trial were outdated. The company now says its vaccine is 76% rather than 79% effective at preventing any kind of symptomatic Covid.
"Tensions between the EU and UK still remain fairly elevated, despite efforts to cool the narrative, while the recent comments from Thierry Breton, the EU's internal market commissioner accusing the UK of vaccine nationalism still suggest the potential for a misstep, as feelings continue to run high, particularly on the EU side, where the sense of grievance remains especially elevated," said CMC Markets analyst Michael Hewson. "Weakness in US markets looks set to translate into a similarly softer open in Europe."
Meanwhile, a vote on extending coronavirus laws in Britain for a further six months will come to the Commons.
On Thursday, members of Parliament will be asked to approve the regulations for the route out of lockdown and keep some of the emergency powers in the Coronavirus Act in place until September.
It comes as UK Health Secretary Matt Hancock said he could see an "end" to the pandemic that would involve managing coronavirus "more like flu" with repeated and updated vaccinations.
UK Prime Minister Boris Johnson also suggested to the Commons Liaison Committee that it could be up to landlords to decide if coronavirus certificates are required for pubgoers.
Trade body UKHospitality criticised the prospect of pubs and restaurants being subject to vaccine certificates as "simply unworkable" and said it could cause conflict between staff and customers.
The pound was quoted at USD1.3674 early Thursday, down from USD1.3728 at the London equities close Wednesday.
The euro was priced at USD1.1812, down from USD1.1834. Against the yen, the dollar was trading at JPY108.97, up from JPY108.77.
Brent oil was quoted at USD63.68 a barrel Thursday morning, down from USD63.98 at the London equities close Wednesday. Gold was quoted at USD1,733.78 an ounce, lower against USD1,736.33.
The economic calendar on Thursday has US GDP at 1230 GMT with initial jobless claims due at the same time.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Compass Group (CPG)
United Utilities (UU.)