Unusually, Bunzl’s first-quarter trading statement in April did not please everyone and the shares in the FTSE 100-listed support services group took a pasting with the result that they have gone nowhere fast.
The group does not normally discuss profits in its trading statements, leaving that to the actual interims, which usually come out in August.
However, just in case it does, analysts will be looking at two things from Wednesday’s second quarter update from the firm - operating margin and its US performance.
In a preview, AJ Bell’s Russ Mould pointed out: “Bunzl’s return on sales has been pretty stable around the 6.5% to 7.0% level for the last decade or so, on an adjusted basis, as we can see here, although the stated number has been more volatile, owing to restructuring costs related to the companies purchased.”
He added: “The USA was the source of that Q1 disappointment. Bunzl flagged lower sales in grocery and retail in particular, thanks to a lack of volume growth and the absence of price increases. Do note that Bunzl won some additional grocery business in the USA in Q2 last year so the base for comparison is tougher.”
Stagecoach lawsuit to overshadow results
But since then, the transport operator has been disqualified from the tender process for the West Coast, East Midlands and South Eastern franchises due to concerns over future pension funding.
Stagecoach has launched legal action against the Department for Transport after being barred from bidding for the West Coast and East Midlands franchises and is also considering suing the government department over South Eastern.
The row is likely to overshadow the company’s results for the year ended April 27 with the focus on how the loss of the franchises will impact future earnings.
Liberum Capital expects Stagecoach to post pre-tax profit of £143.5mln for the 2019 financial year, compared to £95.3mln last year.
The City broker predicts pre-tax profit will fall to £101.9mln in 2020 and to £89.5mln in 2021.
Stagecoach’s East Midlands contract expires in August, while its South Eastern franchise is due to end in November, and the West Coast franchise finishes in March 2020.
Production news key for Tullow Oil
Tullow - shares in which are little changed from where they were four years ago - in April trimmed its total production guidance to 90,000-98,000 barrels of oil per day, but has high expectations for its “exciting” exploration campaign in Guyana and also has ambitions of making a final investment decision (FID) on another potentially sizeable project in Kenya this year.
Investors will be expecting an update on these first three Guyanese exploration wells, though drilling results are not expected in July and a Guyana FID in the second half of the year is pending a final tax decision from the country’s government.
“An oil price of around US$60 a barrel may not be as high as Tullow would have hoped for, but given the increased level of production should still see the group generate a healthy slug of cash this year,” said analyst Nicholas Hyett at Hargreaves Lansdown, eyeing the company’s plans to reduce debt and pay a sustainable dividend.
Order book progress wanted from Wood Group
Oil services firm Wood Group PLC LON:WG.) is also due to post a trading update on Wednesday.
It’s shares have almost halved since last September as the group continues with restructuring since its merger with while Amec Foster Wheeler, not helped by last month’s admission that trading was only “slightly ahead” of last year and that the full year result would be more than usually reliant on an improvement in the second half of the year.
The FTSE 250-listed group has been hit particularly by lower oil prices along with tension in the Middle East which has the potential to impacts its contracts, analysts at the Share Centre said in a preview, and they are looking for any increases in the order book from US$10bn to “help allay some of these concerns”.
Ahead of interims in mid-August, analysts at UBS said they expected Wood’s latest update to cover “deleveraging and potentially progress on disposals for which Wood has guided to US$200-300mln. We will also be looking for commentary on synergies, cash flow and dividend.”
How are BCA’s takeover talks coming along?
WeBuyAnyCar owner BCA Marketplace PLC (LON:BCA) confirmed recently that Wednesday’s full-year results will be in line with expectations, despite the “continuing macro, UK-specific economic and political challenges” that many companies have moaned about in recent months.
BCA bosses also told investors that this year’s final dividend will be bumped up to 6.65p a share, compared with 5.95p last time around.
None of that is much of a concern at the moment, though, given that in the same announcement, BCA revealed it was in “advanced” talks with private equity firm TDR Capital over a potential £2bn sale.
TDR, which owns David Lloyd Leisure, has proposed an offer of 243p per share in cash. That is only a proposal at the moment, and TDR has to confirm its intention to make a formal offer by 18 July.
BCA investors will be hoping to hear of more progress with talks between the two parties, as well as why bosses think a sale might be the best option for the business.
Significant announcements expected for Wednesday June 26:
Interims: Autins Group PLC (LON:AUTG)
Economic data: US durable goods