Christmas is definitely coming, but the corporate diary is far from looking fat in the first week of December with the main interest likely to be on updates from blue-chip housebuilder Berkeley Group PLC (LON:BKG) and mid-cap fashion firm Ted Baker PLC (LON:TED).
The economic calendar is similarly thin at the start of a new month, until the always important US jobs data is released at the end of the week, although US/China trade war issues will remain key after the latest G20 meeting, as will Brexit factors in the lead-up to the crucial House of Commons vote on Theresa May’s controversial EU deal on December 11.
Economists expect the US jobs market to have continued to remain robust in November, with unemployment staying at a very low 3.7% as another 208,000 non-farm payrolls are expected to have been created, keeping in-line with recent trends, and average hourly earnings are also forecast to at least beat last month’s numbers.
If the overall jobs numbers come in as expected then, along with other economic data pointing towards a robust US economy, commentators think it is certain that the US Federal Reserve will lift interest rates at its 19 December meeting to between 2.25%-2.50%.
Challenging retail market to limit sales growth for Ted Baker
Ahead of its third quarter trading update on Thursday, Ted Baker has already said it expects a tough second half amid a high street downturn.
Bricks and mortar retailers have had a rough year due to subdued consumer spending and online competition, leading to the demise of Coast. Maplin, Toys R Us and House of Fraser.
In the first half, Ted Baker took a hit from the collapse of House of Fraser, which was rescued by Sports Direct International PLC (LON:SPD) in August. Ted Baker has concessions in House of Fraser, which is closing number of stores across the UK.
As a result, Ted Baker’s pre-tax profit dipped 3.2% to £24.5mln in the six months to August 11, down from £25.3mln last year.
The fashion retailer said it believed that the second half of the year “will remain challenging” due to external factors.
Jefferies expects that challenging market will limit third quarter sales growth for the company.
“After a subdued 1H19 performance we do not expect much relief in 3Q19E given unseasonally warm temperatures across the UK and Europe for some of the autumn,” its analysts said in a recent note.
“Consumer confidence has also dipped across the UK (-10 in October) and the Eurozone (-2.7 in October), affecting 67% of group sales. By contrast, confidence in the US has been strong, reaching a new high of 38 (30% of group).“
Jefferies estimates Ted Baker’s group sales to rise 2.9% to £136mln on a reported basis in the quarter, a 5% increase at constant exchange rates, with similar trends in retail and wholesale.
It forecasts e-commerce sales to rise 20% and store sales to fall by “mid-single digits”.
Joules continues to buck the trend
Another British fashion retailer, Joules Ltd (LON:JOUL) is expected to deliver further growth in 2019 after bucking the market trend last year with solid earnings.
Despite a tough retail market, the firm’s pre-tax profit rose 28.5% to £13.0mln and revenue increased 18.4% to £185.9mln in the year to May 27 with higher sales in both retail and wholesale.
AIM-listed Joules is due to report a pre-close trading update, which covers the 26 weeks to November 25, on Wednesday.
Analysts at Liberum said there are many strategic reasons that provide Joules with more protection than other peers in a difficult market.
“This comes down to a merchandising, pricing and overall retail strategy that is highly adaptable,” the analyst said.
Unlike other high street retailers that have struggled against online competition, Joules excels in e-commerce.
The e-commerce and wholesale businesses drove 70% of sales growth in fiscal years 2016 to 2018. Liberum expects the two divisions to account for 80% of growth in 2020 to 2021.
Meanwhile, Joules recently switched a wholesale agreement to sell through John Lewis over to a concession arrangement with the department store chain. Liberum thinks this should allow for improved sell-through rates in fiscal 2019 due to better merchandising, availability and overall improved retailing.
The broker expects Joules to post revenue of £215mln and pre-tax profit of £14.8mln in 2019.
London outlook cloudy for Berkeley Group
Away from the fashion world, FTSE 100-listed housebuilder Berkley Group confirmed back with full-year results in June that its pre-tax profits for the five years to 2021 are due to meet targets totalling £3.4bn, so more reassurance will be eyed with Friday’s interims.
However, Berkeley also said the London and South East property market ‘lacks urgency’, which as a London-focused builder is crucial for its growth.
In a preview, Hargreaves Lansdown equity analyst George Salmon said: “To its credit, Berkeley has always managed the housing cycle pretty well. Forward sales remain high, and the balance sheet looks robust too.
“Those factors have so far enabled the group to keep shareholder returns ticking over. We’ll be watching out for details on what other returns can be expected next year.”
US focus key for Ferguson
Blue-chip plumbing and heating products distributor Ferguson Plc (LON:FERG) makes most of its money in the US, rather than UK, so while investors will keep an eye out for the state of its UK order book and restructuring plans, the main focus of a trading update on Tuesday will be across the pond.
In a preview, Hargreaves Lansdown’s Salmon said; “The wider economy looks to be strengthening, but worries are gathering that the American housing market is stalling.
“Perhaps with that in mind, the shares have dropped recently. These results give Ferguson an opportunity to ease worries and restore confidence.”
He added: “We’d like to see the recent trend for like-for-like sales increases of 7%-8% to continue. We’re also yet to hear if the group’s planning further returns to shareholders – it returned $2bn last year, through a mix of special dividends and share buybacks.”
DS Smith to deliver in-line numbers
The FTSE 100 group makes recycled packaging for some of the world’s largest consumer goods companies such as Procter & Gamble, Kraft and Danone.
At the start of November, management said it expects adjusted operating profit to be “materially ahead” after it put up prices to offset rising input costs.
In early June, DS Smith unveiled the €1.9bn acquisition of Spanish rival Europac to strengthen its position in western Europe’s fast-growing packaging market.
That deal has received approval from European regulators and is due to complete before the end of the year, so any guidance on that will be keenly eyed.
McColl’s putting P&H collapse behind it
McColl’s Retail Group PLC (LON:MCLS) investors will be looking for evidence that the fallout from the collapse of wholesaler Palmer & Harvey is now behind it when the convenience store chain issues a full-year update on Tuesday.
Palmer & Harvey, which delivered goods to 90,000 grocery and convenience stores, including 700 of McColl’s stores, fell into administration this time last year with debts of more than £700mln.
The supplier’s collapse led to McColl’s issuing two profit warnings this year as it struggled to fill its shelves and was forced to put in place contingency arrangements.
If any good has come out of it, it has sped up the transition to a supply deal with WM Morrison Supermarkets PLC (LON:MRW) which has so far gone smoothly.
McColls’ like-for-like sales, although still down on last year, have been slowly recovering, a trend the market will want to see continue.
Strong cash flow a focus for Victrex
Full-year results from specialty chemicals mid-cap Victrex PLC (LON:VCT) are expected to reflect the fact that more than two-thirds of the group’s revenues come from end-markets with above-average sensitivity to the macroeconomic cycle.
Liberum Capital analysts said in a preview that that they think Victrex’s sales volume and revenues declined by 10% and 9% respectively year-on-year in the fourth quarter, impacted by a lack of resin shipments for Apple Inc (NASDAQ:AAPL) versus 100 tonnes the year earlier when the tech giant was preparing to launch its new handsets.
However, the analysts added, Victrex’s cash flow was likely very strong in the second half, with year-end net cash forecast to far exceed the £85mln trigger point for a special dividend.
And, they added, there has also been some encouraging new business development particularly in its Home Appliance business with Dyson.
Tasty special dividend expected from Greencore
Investors in Irish convenience food firm Greencore Group PLC (LON:GNC) will be eyeing any information on a special dividend on Tuesday as the firm reports its full-year results following the sale of its US business to snacks giant Hearthside Food.
The FTSE 250 firm agreed the sale in October for US$1bn in a move to double down on its “dynamic” home UK market.
The bulk of the cash – around £509mln – will be returned to shareholders in the form of a special dividend. A further £293mln will be used to beef up the balance sheet by paying down debts.
However, despite the tasty prospect of the dividend, shareholders may continue to voice their displeasure around the group’s move out of the US market which resulted in a 9% share drop the day it was announced.
Stock Spirits to toast lower net debt, strong full-year numbers
Central and Eastern Europe-focused spirits producer Stock Spirits Group PLC (LON:STCK) will be looking to toast the fruits of lower net debt and strong performance in its core markets when it reports in full-year results on Wednesday.
In a pre-close trading update in October, Stock said for the nine months to 30 September had been in line with expectations, adding that its Polish and Czech markets, which account for three-quarters of revenues, had shown strong growth in both volume and value terms.
The firm also said during the period net debt had fallen to €32mln from €53mln in December 2017 due to “strong” group cash flow.
Significant announcements expected week ending Dec 7:
Monday December 3:
Finals: McColl’s Retail Group PLC (LON:MCLS), Schroder European Real Estate Investment Trust PLC (LON:SERE)
Economic data: UK manufacturing PMI; US ISM manufacturing; US manufacturing PMI
Tuesday December 4:
Interims: DiscoverIE Group PLC (LON:DSCV), Collagen Solutions PLC (LON:COS), Consort Medical PLC (LON:CSRT), Mind Gym PLC (LON:MIND), Park Group PLC (LON:PKG), Tekmar Group PLC (Q2) (LON:TGP), Vianet Group PLC (LON:VNET), WYG PLC (LON:WYG)
Traffic numbers: Wizz Air PLC (LON:WIZZ)
AGMs: Greatland Gold PLC (LON:CCP)
Economic data: UK construction PMI
Wednesday December 5:
US Markets closed for President Geroge HW Bush's funeral
Economic data: UK services PMI; US ISM non-manufacturing; US services PMI; Fed Beige Book
Thursday December 6:
Trading update: Ted Baker
Economic data: US weekly jobless claims; US Challenger job cuts; US factory orders; US balance of trade
Friday December 7:
Interims: Berkeley Group PLC (LON:BKL)
Economic data: US non-farm payrolls; US average hourly earnings; US wholesale inventories; University of Michigan consumer sentiment index