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Update from holidays firm TUI unlikely to overshadow the latest UK inflation numbers

Day ahead includes trading updates from FTSE 100-listed holidays firm TUI and language support services group RWS Holdings, plus the latest UK inflation numbers
Analysts at French broker Kepler Cheuvreux think that TUI will indicate an improving underlying booking situation

After a mixed update last week from peer Thomas Cook Group PLC (LON:TCG), a first-quarter trading statement will be closely eyed from FTSE 100-listed holidays firm TUI AG (LON:TUI) on Tuesday, when it also holds its annual general meeting.

In a preview, analysts at French broker Kepler Cheuvreux said they think that TUI will indicate an improving underlying booking situation which, however, they believe has not translated into better earnings.

The analysts noted that last year, TUI had to bear some EUR20m in costs from the Air Berlin collapse, while in the current first quarter the firm again expected to incur costs of around EUR20m due to the integration of the previous Nikki airline planes into TUI Fly.

Additionally, the analysts said the group’s most recent acquisition in France, Transat, is included for the first winter quarter, when it generates losses, which is why despite expected operational improvements, they expect TUI’s underlying business to be rather flat.

Moravia and US tax the focus for RWS 

RWS Holdings PLC (LON:RWS), the AIM-listed language support services group, specialising in translation and intellectual property, will also give a trading update at its AGM on Tuesday.

With its finals on 6 December, RWS highlighted a strong start in the first two months of the year, in line with management expectations.

Analysts at Numis Securities said they think the early performance of acquisition of Czech firm Moravia, completed at the start of November, will be a particular focus in the latest update, in light of the slower growth in 2017 reported in a recent press release.

The analysts said they also expect an update on the likely impact of the US tax cuts which they think should be positive versus the consensus 24% tax figure, albeit with a weaker US dollar having an offsetting negative translational and transactional effects.

Inflation to be key

All eyes, however, will more likely be trained on January’s UK consumer prices index especially given worries that the pace of interest rate hikes could pick up in the face of inflation concerns.

The UK consumer price inflation fell to 3.0% in December from a five-year high of 3.1% in November but it remains well above the central bank’s 2.0% target.

Core inflation, which strips out volatile fuel and food price, was 2.5% in December, down from 2.7% the previous month.

The Bank of England has hinted that the pace of interest rate hikes could accelerate as it comes under pressure to tackle high inflation.

“Recent inflation rises have been primarily driven by currency effects, and with sterling on the up, the rate of inflation will continue its slowdown,” said Nancy Curtin, chief investment officer at Close Brothers Asset Management.

Stubbornly high inflation coupled with the BoE’s view that slack in the UK economy has reduced, led policymakers to say at their policy meeting last week that interest rates may need to rise sooner than expected.

Tuesday February 13:

Interims: A&J Mucklow Group PLC (LON:MKLW), Animalcare PLC (LON:ANCR), Hargreaves Services PLC (LON:HDP), Oncimmune Holdings PLC (LON:ONC), Pan-African Resources PLC (LON:PAF)

Trading update: TUI AG (Q1), RWS Holdings PLC (LON:RWS)

Economic data: UK CPI, RPI, PPI HPI inflation; UK construction output

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