LONDON MARKET PRE-OPEN: Barclays, AstraZeneca post sharp profit rises

(Alliance News) - Stocks in London are set to end a broadly upbeat week, and month, on a sour note following some weak economic data for China.

In early UK company news, both Barclays and AstraZeneca reported significant jumps in profit for the first quarter of 2021, while Card Factory said it has agreed headline refinancing terms. Cybersecurity firm Darktrace starts conditional dealings in London with a GBP1.7 million valuation.

IG says futures indicate the FTSE 100 index of large-caps to open 12.28 points, or 0.2%, lower at 6,937.80 on Friday. The FTSE 100 closed down 2.19 points at 6,961.48 on Thursday, at this level up 0.3% since the week began and 3.7% higher since the start of April.

London's downbeat finish to the week comes despite stocks in the US closing higher on Thursday. The Dow Jones Industrial Average ended up 0.7%, the S&P 500 up 0.7%, and the Nasdaq Composite up 0.2%.

Amazon.com shares rose 2.4% after-hours. The online retailer said profit more than tripled in the first quarter of 2021, driven by double-digit growth in sales from all regions. Amazon posted net income of USD8.11 billion, up sharply from USD2.54 billion the prior year, while earnings per share also more than tripled to USD15.79 from USD5.0.

"Despite this decent finish for US stocks, today's European open looks set to be a negative one as we come to the end of the week and the month, as Asia markets slipped lower in the wake of some rather mixed Chinese PMI numbers, which saw manufacturing and services activity both weaken more than expected in April," said Michael Hewson, chief market analyst at CMC Markets.

Factory activity in China slowed in April as a global shortage of shipping containers hindered the movement of goods, official data showed Friday, but wider demand remained robust as the domestic economy rebounds from the coronavirus pandemic.

The purchasing managers' index, a key gauge of manufacturing activity, came in at 51.1 points this month, lower than in March but still above the 50-point mark separating growth from contraction, according to the National Bureau of Statistics.

But challenges remained, with some companies reporting problems "such as chip shortages, blockages in international logistics, a lack of containers, and rising freight rates", said NBS senior statistician Zhao Qinghe in a statement.

The non-manufacturing PMI fell to 54.9 points, down from 56.3 in March, with activity in the construction sector easing, although the service industry continued its recovery.

In China, the Shanghai Composite was down 0.9%, while the Hang Seng index in Hong Kong was down 1.7%.

The S&P/ASX 200 in Sydney ended down 0.8% on Friday, and the Japanese Nikkei 225 index closed down 0.8% as it reopened from Thursday's holiday.

Against the yen, the dollar fell to JPY108.76 on Friday versus JPY108.94 late Thursday. The au Jibun Bank Japan manufacturing purchasing managers' index rose to 53.6 points in April from 52.7 in March, supported by a solid expansion in production volumes.

In early UK company news, AstraZeneca retained its full-year guidance as profit grew in the first quarter, with the pharmaceutical firm expecting an "acceleration" in performance as the pandemic eases in the second half of this year.

Total revenue for the first three months of the year was up 15% year-on-year at USD7.32 billion, with Product Sales revenue rising 15% to make up the bulk of group revenue at USD7.26 billion, while Collaboration revenue rose 43% to GBP63 million.

Revenue from its beleaguered Covid-19 vaccine totalled USD275 million for the quarter. The jab's use has been restricted by age in many countries over links to rare blood clots - with this also listed as a side effect for the Johnson & Johnson Covid-19 vaccine - but regulatory agencies have stressed that the benefits outweigh the risks.

Pretax profit for the quarter jumped 72% to USD1.61 billion from USD935 million a year ago.

"We delivered solid progress in the first quarter of 2021 and continued to advance our portfolio of life-changing medicines. Oncology grew 16% and New CVRM grew 15%. New medicines contributed over half of revenue and all regions delivered encouraging growth. This performance ensured another quarter of strong revenue and earnings progression, continued profitability, and cash-flow generation, despite the pandemic's ongoing negative impact on the diagnosis and treatment of many conditions," said Chief Executive Pascal Soriot.

"Given the performance in the first quarter, in line with our expectations, we reiterate our full-year guidance. We expect the impact of Covid to reduce and anticipate a performance acceleration in the second half of 2021."

Barclays posted a record quarterly profit figure as credit impairment charges were reduced.

Pretax profit was a "record" GBP2.40 billion for the first quarter of 2021, up sharply from GBP913 million a year ago, even as total income fell 6% to GBP5.90 billion. Credit impairment charges were cut by 97% to GBP55 million from GBP2.12 billion.

"As was the case throughout 2020, within Barclays International, performance in the CIB was strong this quarter, achieving a [return on tangible equity] of 17.9% on income of GBP3.6bn, just 1% down from our Q1 income performance last year, which was a very strong comparative. It also partially offset challenges in our consumer businesses that have been impacted by lower spend and activity levels as a result of the pandemic," said Chief Executive Jes Staley.

For the year ahead, the firm said the outlook remains uncertain due to the pandemic but expects to deliver "meaningful" year-on-year improvement in RoTE in 2021. The full-year impairment charge is expected to be "materially below" than of 2020's due to an improved economic outlook in the latter part of the first quarter - and if this persists, Barclays would expect to reduce the impairment provision level.

"While evidence of recovery is encouraging, we have continued to take a cautious view of the impact of the pandemic on the business. We remain disciplined on costs, with a cost to income ratio of 61% this quarter. Our capital position remains well above target with a CET1 ratio of 14.6% and we completed our GBP700m buyback this month. We will give further guidance on distributions when appropriate," said Staley.

Hikma Pharmaceuticals said the year is off to a good start with its Injectables, Generics and Branded divisions performing well.

In Injectables, the firm said new product launches and demand for the broader portfolio in the US is partially offsetting reduced demand for Covid-19 related products, while Europe's strong performance has continued. The Branded business is performing well, Hikma added.

The Generics business has seen continued demand for Covid-19 related products, and a good performance from recent launches, which more than offset increased competition on certain products.

"We now expect our full year Generics revenue to be towards the top end of our guidance range of USD770 million to USD810 million and core operating margin to be around 20%," said Hikma.

It also said the US Food & Drug Administration has approved Kloxxado for treatment of opioid overdose in adults and children.

Darktrace said it expects to be worth GBP1.7 billion when it begins conditional trading in London on Friday.

The UK tech startup, founded in 2013, provides cybersecurity services to businesses using artificial intelligence.

Darktrace's initial public offering was priced at 250 pence per share, and the company will be hoping for a better debut than recently floated Deliveroo. At one point on Deliveroo's first day in London, shares fell more than 30%.

Darktrace Chief Executive Poppy Gustafsson said: "Our company is deeply rooted in the UK's tradition of scientific and mathematic research so we are especially proud to be listing on the London Stock Exchange."

With a market capitalisation of GBP1.7 billion, Darktrace would comfortably slip into the FTSE 250 in the next quarterly index review. Unconditional dealings begin on May 6.

On the London Stock Exchange, Darktrace joins fellow cybersecurity firm Avast, a FTSE 100 constituent with a GBP4.9 billion market cap.

Card Factory said it has agreed headline refinancing terms, as it reported a better-than-expected store reopening.

The greeting cards retailer said its performance since the reopening of stores in England and Wales on April 12 has exceeded its expectations, while shops in Scotland reopened at the beginning of the week and those in Northern Ireland open up on Friday.

The firm added that it has agreed headline terms for refinancing with its current syndicate of commercial lending banks and will issue a further update once terms are documented.

"Pending documentation of the revised facility terms, the banking syndicate has extended waivers in respect of anticipated covenant breaches to 31 May 2021, taking account of the company's cash flow projections, subject to certain conditions," said Card Factory.

The economic events calendar on Friday has eurozone economic growth figures at 1000 BST.

Sterling was quoted at USD1.3943 early Friday, soft on USD1.3950 at the London equities close on Thursday. The euro traded at USD1.2114 early Friday, easing from USD1.2120 late Thursday.

Gold was quoted at USD1,772.84 an ounce early Friday, slightly up on USD1,768.68 on Thursday. Brent oil was trading at USD68.25 a barrel, edging down from USD68.35 late Thursday.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.