After recent data showed the gap between wages and inflation widened in July, the latest UK consumer price index reading could provide further evidence that consumers should be seeing more money in their pockets.
Graham Spooner, investment research analyst at The Share Centre thinks that gap should widen further in August as the consensus view is that headline inflation growth slowed to 2.3% year-on-year last month, down from 2.5% to 2.3% in July.
However, the analyst thinks the month-on-month CPI figure is expected to show a 0.5% increase impacted by several factors
Spooner says that would include the extreme weather hitting the supply and lifting prices of farm produce, while the weakness of the pound on Brexit uncertainties and higher oil prices should all have increased the monthly inflation number.
Retail sales more normal in August
Meanwhile, the early summer weather helped drive positive retail sales figures from both the high street and on online shopping but the weather in August returned to some form of normality and the likelihood is that the sales of products that did well between May and July slowed down.
Spooner said; “There is, therefore, a high chance that the previous months 3.5% year-on-year growth came down during August.
But, he added, the better data showing wages outstripping inflation could give support to retailers although the ongoing theme will remain of a tough environment in general for the high street and how much retail activity is swinging towards online will still grab media attention.
Kingfisher’s French division in focus once again
The UK’s biggest DIY retailer Kingfisher PLC (LON:KGF) will update the market on Wednesday, but it has been its French business that has been under pressure for a while now, dragging on the decent performance of its Screwfix and B&Q divisions in the UK.
Back in the second quarter trading update, Kingfisher said it would give more details on measures it is putting in place across the Channel to try to support Castorama, which is getting a new boss in a couple of weeks.
A challenging DIY retail market has forced the group to discount some of its products in a bid to get people through the doors, meaning margins have come under pressure of late.
Chief executive Véronique Laury is halfway through her five-year turnaround plan, with little to show for it as yet. Investors will be hoping to see some improvement in France and continued steady trading in the UK in Wednesday’s second-quarter update.
Second-half pick-up at Ocado?
The costs of that, coupled with the severe weather earlier in the year, meant the company swung to a loss of £9mln in the first half of the year.
In Tuesday’s third-quarter trading update, investors will be looking if Ocado still expects underlying earnings to improve significantly, as it forecast back in July. Costs will be in focus, too.
On top of its traditional grocery delivery service, Ocado is also in the business of helping other retailers with their distribution networks.
Shares urged at the start of summer when it signed a deal with US supermarket giant Kroger, so any further details of that contract win will be keenly eyed.
Trading news see positive for Diageo
Analysts at UBS expect the year to have started well for the Johnnie Walker whisky to Guinness stout maker, predicting growth of 5% for the year-to-date, so comments about performance in key markets should be broadly positive.
Additionally the Swiss bank’s analysts believe Diageo’s management will reiterate mid-term guidance for top line growth and cumulative margin progression of +175 basis points by 2019, with UBS’s forecast for 200 basis points.
They added|; “In our opinion, margin target is likely to be beaten as we assume mix improvements to continue as well as good momentum in Emerging Markets. We also note ongoing support from Diageo's £2bn buyback.”
Dairy Crest to continue buttering up investors
In July, the FTSE 250 maker of Cathedral City cheese said its two key brands, Cathedral and Clover butter, had grown revenues by 10% over the first quarter.
Casting a wider net across its four key brands, Cathedral City, Clover, Frylight, and Country Life, the group saw sales rise 6% in the period.
Smiths Group strategy eyed after ICU deal abandoned
Following recent news that it had terminated discussions with US firm ICU Medical Inc.(NASDAQ:ICUI) regarding a potential combination with its Medical business have ended because the parties have been unable to agree the terms of a combination, Smiths Group PLC’s (LON:SMIN) full-year results on Friday will be eyed for any hints on the FTSE 100-listed firm’s future strategy for the business.
In a trading update in July, Smiths Group said its medical division was likely to post a 2% revenue decline due to some products losing certifications under a new regulation and the loss of two contracts in the US. The unit accounts for just under 30% of the group's revenues.
That expectation was echoed by analysts at Deutsche Bank, who cut their EBITDA estimates for the firm to -4% from -2% for 2018-2020 to reflect the below-expectation performance from the Medical division.
In a preview, Graham Spooner, investment analyst at The Share Centre, said, however, that Smiths Group shareholders will be expecting “good things” from the firm’s John Crane seals division, its piping and heating arm Flex-Tek, and the Detection and Interconnect divisions.
Saudi growth eyed for Lamprell
Arguably it is one of the less focused upon oil/offshore services stocks, so results from Lamprell PLC (LON:LAM) won’t have quite the same amount of attention on them as the likes of peers Petrofac PLC (LON:PFC and John Wood Group PLC (LON:WG.).
Indeed, it has been renewable energy contracts – namely the East Anglia One offshore wind project – that has troubled the UAE-based engineer in recent financial period as much as anecdotally weaker oil and gas business.
In July’s trading update, chief executive Christopher McDonald told investors that it had been “confronting and addressing the challenges of 2018”.
At that time, he added: “We are heavily focused on rebuilding the backlog and delivering a successful outcome for our client on the East Anglia One project.
“With the good bidding activity levels and our ability to nurture key relationships with our partners, I remain confident that Lamprell is well positioned for growth as the wider energy market recovers."
Naturally, investors will be keen to see improved financials (March’s full-year results showed losses) as well as confirmation of improved project delivery and, ideally, some positive commentary around the order-book and outlook for the remainder of the year.
Specifically, they will ideally hear more about Lamprell’s intended growth in Saudi Arabia where it has been working to qualify as a contractor to Aramco.
Outlook and debt level key for SIG
Profitability will, perhaps be the first focus for investors looking at SIG PLC’s (LON:SHI) half-year results on Friday – after that, attention will naturally turn to the second half outlook and deleveraging efforts. SIG has already flagged first-half revenue at £1.36bn, flat on a like for like basis.
In a preview note, analyst at UBS said: “We estimate Group H118 EBITA broadly flat y/y on an underlying basis (ex-property and VJ Technology) at £35mln at a margin of 2.5% (vs 2.7% in H117 and 3.1% in H217), driven by £10m in the UK at a margin of 1.6% (-130bps y/y) and £29m in Europe at a margin of 3.9% (+50bps y/y).”
“We estimate Net Debt of c£190mln (incl. the disposal of VJ by £30m) in H1 and a further reduction in H2 to c£170mln at 1.4x Net debt/EBITDA i.e. within the target range for 1.0-1.5x."
They added: “We expect unchanged guidance, in line with consensus for £82m PTP in FY18E. While this implies a substantial catch-up in H2, SIG expects substantial cost benefits to come through.”
Significant announcements expected week ending September 21:
Monday September 17:
Trading update: Dairy Crest PLC (LON:DCG)
Economic data: Empire State manufacturing survey
Tuesday September 18:
Finals: AEW UK Long Lease REIT PLC (LON:AEWL), Eagle Eye Solutions PLC (LON:EYE), GRC International Group PLC (LON:GRC), Green REIT PLC (LON:GRN), Haydale Graphene Industries PLC (LON:HAYD), Purecircle Limited (LON:PURE), Springfield Properties PLC (LON:SPR)
Interims: Augean PLC (LON:AUG), Bango plc (LON:BNG), Be Heard Group PLC (LON:BHRD), Cloudcall PLC (LON:CALL), DP Poland Plc (LON:DPP), Faroe Petoleum PLC (LON:FPM), Frontier Smart Technologies Group Limited (LON:FST), Hydrogen Group PLC (LON:HYDG), Judges Scientific PLC (LON:JDG), JTC PLC (LON:JTC), Keyword Studios PLC (LON:KWS), NAHL Group plc (LON:NAH), Personal Group Holdings plc (LON:PGH), Smart Metering Systems PLC (LON:SMS), VR Education Holdings Plc (LON:VRE)
Economic data: US housing market index
Wednesday September 19:
Finals: Kingfisher PLC (LON:KGF), Accesso Technology Group PLC (LON:ACSO), Alliance Pharma plc (LON:APH), Central Asia Metals PLC (LON:CAML), Cello Health plc (LON:CLL), Elektron Technology PLC (LON:EKT), Greencoat Renewables PLC (LON:GRP), Quixant PLC (LON:QXT), RA International Group PLC (LON:RAI), Randall & Quilter Investments Holdings PLC (LON:RQIH), Mission Marketing Group PLC (LON:TMMG), Yu Group PLC (LON:YU.)
Economic data: UK CPI, PPI, HPI inflation; US housing starts
Thursday September 20:
Interims: Lamprell PLC (LON:LAM), Summitt Therapeutics PLC (Q2) (LON:SUMM), The City Pub Group PLC (LON:CPC), hVivo PLC (LON:HVO), Modern Water PLC (LON:MWG), Safestyle UK PLC (LON:SFE), Science in Sport PLC (LON:SIS), Scisys Plc (LON:SYS), Venture Life Group PLC (LON:VLG)
Economic data: UK retail sales; US weekly jobless claims; US existing home sales; Philly Fed business outlook survey
Friday September 21:
Finals: Smiths Group PLC (LON:SMIN)
Interims: SIG PLC (LON:SHI)
Economic data: UK public sector finances; US composite PMI