Pensions have dominated the debate surrounding Royal Mail PLC (LON:RMG) for months and will do so again when the privatised postal service reports final results on Thursday.
The group is paying out £1.3bn a year to its pensioners currently against a contribution of £400mln, a shortfall it will have to make up once the surplus runs out in 2018.
Consequently, in April, it announced it was to close the scheme in 2018 as there was “no affordable solution” in its current form.
The Communication Workers Union (CWU) and Unite/CMA put forward an alternative hybrid pension plan but talks ended in March and market expectations are for industrial action to follow in due course if no compromise is reached.
Trading wise, expect a continuation of weak letter volumes, solid UK parcels and a good performance from overseas arm GLS.
Liberum forecasts profits of £529mln or £823mln on an underlying/EBITDA basis. The broker is a seller of the shares.
Vodafone to surprise
Vodafone PLC (LON:VOD) has picked up a bit of a tailwind since it bit the bullet on its trouble Indian arm and agreed to merge it with local firm Idea Cellular.
Alas, says Hargreaves Lansdown, despite the merger plan there may still some Indian pain to come especially as new entrant Jio has turned the Indian market on its head with free data.
Vodafone’s revenue growth from data browsing in India slowed from 16% in the second-quarter of 2016 to just 0.6% in the third because of the impact of Jio.
But, if nothing else, the Indian shake-up has pulled the market’s focus back towards Vodafone’s core European operations and Tuesday’s finals might bring some pleasant surprises here says Hargreaves Lansdown.
“The fixed line broadband roll-out continues, and organic service revenue is now positive in Germany, Italy and Spain.
“European Q4 numbers may not be glowing, but we’d expect to see some underlying growth.”
Easyjet’s first half revenues set to be boosted by increased passenger numbers
It’s not been an easy ride for airlines in Europe over the past year or so, with strikes, price wars, terrorism and bad weather blamed.
It’s been tougher still for the UK-based groups who derive earnings in sterling but have a lot of costs in dollars.
With Easyjet PLC (LON:EZJ) ticking both of those boxes, the shares are down almost 15% post-Brexit.
News has been better in recent weeks though, notably that passenger numbers have increased by 8% over the past 12 months.
The strengthening pound has also helped, although easyJet still reckons it is on course to take a £105mln profit hit this year as a result of the currency’s more general weakness.
First half revenues are always significantly lower than the final six months of its year as they don’t get a summer holiday boost. They came in at £1.77bn in 2016 but the solid growth in passengers and load factor could see that figure beaten slightly this time around.
As for things to look out for are any update on easyJet’s bids to secure an EU air operator certificate, which would allow it to fly throughout Europe once the UK has left the Union.
Revenue outlook for the rest of the year will also be at the top of the watch list, as will any news on its fleet and capex plans.
Politics to dominate SSE
SSE plc’s (LON:SSE) full year results on Wednesday will be dominated by potential impact of Theresa May’s proposal to put a cap on energy bills.
The Prime Minister has vowed to crack down on the six biggest energy suppliers if the Conservatives win the general election on 8 June.
Neil Wilson, senior market analyst at ETX Capital, said the move to cap energy bills would be a “massive hit” to the industry and that the Tories were “almost certain” to win a majority and carry out the pledge.
“With a cap it would be very hard for the Big Six to generate the kind of profits they have been able to,” he said.
SSE has raised prices for domestic customers from 1 April 2017 by 6.9% or £73 a year following on from price increases by other energy providers.
HSBC downgraded its rating on SSE to ‘hold’ from ‘buy’ in March, citing worries about its ability to raise prices in light of the proposed cap.
“Our major concern with recent developments is that the rating agencies will see any government intervention as an increase in the risk profile of the UK integrated electric utilities and increase the risk premium which may include higher key credit ratio requirements,” it said.
The bank thinks utilities could then face a cash constraint, which might impede their ability to grow dividends.
In a January trading update, SSE acknowledged the risks of political uncertainties and warned that a warmer than expected winter had led to reduced energy consumption in November and December.
However, the group said it was “well placed” to handle the issues and guided towards earnings per share of at least 120p and an increase in its dividend in line with retail price inflation.
Brexit to slow Mitchells and Butlers
Pub and restaurant owner Mitchells & Butler is expected to report a 5% decline in half-year pre-tax profit to £78mln on Wednesday, reflecting higher costs related to wage rises and a weaker pound.
The company has warned that profits this year would be hit by increase in costs following a slump in the pound after the Brexit vote last June and an increase in the minimum wage.
At its full year results in November, the group’s chief executive, Phil Urban, said: “We are working hard to mitigate these headwinds wherever possible, both through building on our sales momentum and active management of our cost base.”
Analysts forecast gross margins will drop 80 basis points in the half year due to a 3.5% increase in cost inflation. For the fiscal year 2017, total costs are expected to rise £56mln.
Mitchells, which owns Toby Carvery, Harvester and All Bar One, has also been battling increased competition in the restaurant sector following a wave of new openings in the UK. Last year the firm spent £167mln on opening eight sites and remodelling a further 252 pubs and restaurants.
Major announcements due
Monday 15
Interims: Telecom Egypt (LON:TEEG); Victrex PLC (LON:VCT); Diploma PLC (LON:DPLM); Lonmin PLC (LON:LMI)
Trading Statements: Dignity PLC (LON:DTY); Lonmin PLC (LON:LMI); National Express Group PLC (LON:NEX)
Tuesday 16
Interims: Avon Rubber PLC (LON:AVON); Zytronic PLC (LON:ZYT); Jackpotjoy PLC (LON:JPJ)
Finals: NewRiver Retail Ltd (LON:NRR); BTG PLC (LON:BTG); Premier Foods PLC (LON:PFD); Vodafone Group PLC (LON:VOD)
Trading Statement: ITE Group PLC (LON:ITE); EI Group Plc (LON:EIG); CYBG PLC (LON:CYBG); easyJet PLC (LON:EZJ)
Wednesday 17
Interims: Redx Pharma Plc (LON:REDX); Patisserie Holdings Plc (LON:CAKE); Brewin Dolphin Holdings PLC (LON:BRW); Countryside Properties PLC (LON:CSP); Mitchells & Butlers PLC (LON:MAB)
Finals: British Land Co PLC (LON:BLND); JZ Capital Partners Ltd (LON:JZCP); C&C Group PLC (LON:CCR); SSE PLC (LON:SSE)
AGM / EGM: BP PLC (LON:BP.); Foxtons Group PLC (LON:FOXT); Cenkos Securities PLC (LON:CNKS); esure Group plc (LON:ESUR)
Trading Statement: Coats Group PLC (LON:COA); Premier Oil PLC (LON:PMO);
Thursday 18
Interims: Euromoney Institutional Investor PLC (LON:ERM); Marston's PLC (LON:MARS); Thomas Cook Group PLC (LON:TCG); SSP Group Plc (LON:SSPG)
Finals: National Grid PLC (LON:NG.); Royal Mail PLC (RMG); Investec PLC (LON:INVP); Burberry Group PLC (LON:BRBY); Booker Group PLC (LON:BOK); Dairy Crest Group PLC (LON:DCG); Elektron PLC (LON:EKT); Bloomsbury Publishing PLC (LON:BMY); Land Securities Group Plc (LON:LAND)
AGM / EGM: Prudential PLC (LON:PRU)
Trading Statements: Balfour Beatty plc (LON:BBY); Rank Group (The) PLC (LON:RNK); Hargreaves Lansdown PLC (LON:HL.)
Friday 19 May
Interims: LightwaveRF Plc (LON:LWRF); Grainger PLC (LON:GRI); Future PLC (LON:FUTR)
Trading Statement: Hikma Pharmaceuticals PLC (LON:HIK)