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Retailers and recruiters in focus as Tesco, ASOS, Hays and PageGroup report

The week ahead includes full-year results from Tesco and Saga, interims from ASOS, WH Smith and McCarthy & Stone, and trading updates from Robert Walters, Hays and PageGroup
Tesco reports its full year earnings on Wednesday

In light of the struggles facing the high street and the UK jobs market, updates from retailers and recruiters will be closely followed in the week ahead.

Among the retailers reporting, Tesco PLC (LON:TSCO) posts its full year results, ASOS publishes a trading update and WH Smith PLC (LON:SMWH) reports its interims. 

Tesco is one of the UK’s so-called ‘big four’ supermarkets, which have had to step up their game recently after losing market share to discounters Lidl and Aldi.  

On top of that, higher inflation has prompted consumers to cut back on spending. A slowdown in consumer spending has also hit non-food retailers, particularly those on the high street as the trend towards online shopping continues to grow.

The shift towards online has been a boost to sales at fashion retailer ASOS but not so much for stationery company WH Smith. 

In the recruitment sector, Robert Walters PLC (LON:RWA), PageGroup PLC (LON:PAGE) and Hays plc (LON: PLC (LON:HAS) will issue trading updates with the focus on how well the companies weathered difficult conditions in the UK.

Business confidence has taken a hit since the UK voted to leave the European Union, leading firms to take a more cautious approach to hiring.

Tesco posts first annual earnings since Booker takeover

Full-year results from retail giant Tesco on Wednesday should include the first end of year dividend since its annus horribilus in 2014, according to Nicholas Hyatt, equity analyst at Hargreaves Lansdown.

The analyst thinks the 2017/18 results - the first numbers since the acquisition of wholesaler Booker - will likely mark a year of underlying progress for Tesco, with profitability rising.

He added that with wage growth catching up with inflation investors will be hoping the supermarkets group not only confirms a strong end to the year, but delivers a more positive outlook as well.

Comments around the Booker integration, including on the £200mln of revenue and cost synergies that were targeted at the time of the original announcement, will also be closely scrutinised.

Berenberg has upgraded its rating for Tesco to ‘buy’ from ‘hold’ due to sector conditions improving, inflation headwinds easing and competitive pressures sUBSiding, and they see the results as a “positive catalyst”.

Investment continuing at ASOS

Elsewhere in the retail sector, online fashion giant ASOS will also deliver an update on Wednesday with strong sales growth expected to continue.

The AIM-listed firm’s UK retail sales jumped 23% in the four months to the end of December, while international posted an even punchier 32% growth.

Historically the group has suffered from growing pains, as increasing sales have outstripped its ability to fulfil them, and as a result, investment in infrastructure has stepped up – expected to be at the upper end of the £200mln-£220mln range this year.

That investment could hold back profits this year, but in the longer term, building scale is key to driving profitability.

Travel outlets support WH Smith amid high street slump

The story at newsagents at WH Smith has long been one of increased emphasis on outlets in travel hUBS.

The Travel business now accounts for almost two thirds of the group's annual profit so the focus in Thursday's interims will likely be on that side of the retail estate, especially with the retailer having already reported on the Christmas trading season.

In the first 20 weeks of the current financial year, sales were flat year-on-year with like-for-like (LFL) sales down 1%.

The snowfall that hit parts of the UK in the first quarter is likely to have flattened those figures some more, but offsetting that is increased international opportunities for the Travel business.

“The international travel division accounted for 17% of Travel revenues and 9% of profit in the last full financial year and posted LFL growth of 6%,.

“Sales are flying in travel, but a few seasonal challenges in high street,” was the telegram-like assessment of Barclays after January's trading update.

“The main downside risks are a downturn in passenger travel or that High Street cost and gross margin opportunities are insufficient to offset weakness in the printed news categories,” Barclays suggested.

Robert Walters bucks the trend

Robert Walters is the first recruiter to update the market with its first quarter trading statement due on Tuesday.

In the fourth quarter, the company delivered 22% growth in net fee income across all its markets, including the UK.

The group specialises in recruitment for financial services, IT, legal and engineering sectors, which continued to experience demand in the UK despite a weak jobs market.

Investors will be looking to see if the company was able to continue to prove resilient against a challenging UK environment in the first quarter.

International jobs markets drive growth at PageGroup

Unlike Robert Walters, the tough UK labour market has weighed on sector peer PageGroup.

PageGroup reported a 3.8% drop in UK net fee income in 2017 and acknowledged that the market would continue to face challenges in 2018.

However, growth in its overseas businesses helped the group deliver a 9.8% increase in total gross profit last year.

Analysts at Kepler Cheuvreux said the company remains its favourite stock in the sector and expects first quarter like-for-like net fee income growth of 13.8%. It sees a robust performance across international markets mitigating an expected 2.8% decline in the UK in the quarter.

“Due to its superior margin and cash return profile, we believe this stock should trade at a premium to peers,” Kepler said, reiterating a ‘buy’ rating on the stock.

Hays set to see slowdown in third quarter

Growth in international markets has also helped Hays to contend with a slowdown in UK hiring.

The firm posted a 16% increase in first half operating profit and a 13% rise in net fee income as growth in overseas markets offset a subdued performance in the UK.

The recruiter reports a third quarter trading update on Thursday and UBS expects growth in like-for-like net fees to slow to 9% from 13% in the second quarter. 

The company’s performance is once again likely to be led by international markets with UBS predicting a 13% increase in like-for-like net fees for Continental Europe and the rest of the world, boosted by strong momentum in Germany.

UBS also sees double-digit growth in the Asia Pacific region, driven by Australia.

In the UK, UBS estimates like-for-like net fees will be flat, compared to a 1% increase in the second quarter.

“We expect the results should underpin consensus EBITA forecasts at £238mln,” UBS said.

Saga ongoing

Full year results from under-pressure over 50’s travel and insurance provider Saga PLC (LON:SAGA) on Thursday are expected to show underlying profit before tax growth of between 1% and 2%.

That’s well behind last year’s 5.6% growth, reflecting tougher conditions in motor insurance broking, and the impact of the collapse of Monarch airlines which has cost Saga’s Travel business £2mln.

Short-term headwinds aside, the bigger concern is that Saga has struggled to keep customer numbers growing lately.

Management are forking out an extra £10mln a year on customer acquisition to try and reverse that trend from this year onwards and any signs of early progress will be closely watched.

McCarthy & Stone to deliver measly revenue growth

Retirement homes builder McCarthy & Stone PLC (LON:MCS) issues half-year results to the end of February, having already received many of the key metrics.

Forward sales, including legal completions, in the first half of the current financial year, were up around 16% year-on-year at £487mln.

Half-year revenue is expected to clock in at around £240mln, which is a measly increase of just £2mln considering the average selling price was up 14% year-on-year to £296,000 from £260,000.


Significant events expected:

Monday April 9:

Finals: Frenkel Topping Group PLC (LON:FEN), Northbridge Industrial Services Plc (LON:NBI)

Tuesday April 10:

Trading update: Robert Walters PLC (LON:RWA)

Finals: Belvoir Lettings PLC (LON:BLV), Card Factory PLC (LON:CARD), Eddie Stobart Logistics PLC (LON:ESL), Hostelworld Group PLC (LON:HSW), Hydrogen Group PLC (LON:HYDG), LiDCO Group plc (LON:LID), MP Evans Group PLC (LON:MPE), Serica Energy PLC (LON:SQZ), Mission Marketing Group PLC (LON:TMMG), Property Franchise Group PLC (LON:TPFG) 

Interims: Nanoco Group PLC (LON:NANO)

Economic data: US forward PPI

Wednesday April 11:

Trading update: PageGroup PLC (LON:PAGE)

Interims: ASOS plc (LON:ASC), McCarthy & Stone PLC (LON:MCS)

Finals: Tesco PLC (LON:TSCO), Epwin Group PLC (LON:EPWIN), Ergomed Plc (LON:ERGO), Shield Therapeutics PLC (LON:STX), Summit Therapeutics PLC (LON:SUM)

Economic data: UK trade; UK construction output; US CPI; US FOMC minutes; US Treasury Budget

Thursday April 12:

Trading update: Hays plc (LON:HAS)

Interims: WH Smith Plc (LON:SMWH)

Finals: Central Asia Metals PLC (LON:CAML), Destiny Pharma plc (LON:DEST), Saga PLC (LON:SAGA)

Ex-dividends: To knock 4.27 points off FTSE 100 index - ITV plc (LON:ITV), Paddy Power Betfair plc (LON:PPB), Reckitt Benckiser PLC (LON:RB.), Rentokil Initial PLC (LON:RTO), Smurfit Kappa Group PLC (LON:SKG)

Economic data: US weekly jobless claims; US import, export prices

Friday April 13:

AGM: Low & Bonar PLC (LON:LWB)

Economic data: US consumer sentiment; US JOLTS jobs

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