Anglo-Dutch consumer goods producer Unilever plc (LON:ULVR) will be a focus on Thursday, with the FTSE 100-listed firm looking to have a bit more vim about it since it escaped the clutches of US giant Kraft-Heinz Co (NYSE:KHC) earlier this year.
Unilever is still moving at pace a bit like an arthritic maiden aunt easing herself into a hot bath, but the publication of a strategic review in April of this year was clearly meant to give the impression of a company determined to keep the shareholders happy.
The Marmite, Flora, Lynx, Persil and Bertolli brands owner announced a €5bn share buy-back programme, a 12% dividend hike and decided to put the spreads business up for sale.
The board also announced plans to accelerate its “Connected 4 Growth” programme and is now targeting a 20% underlying operating margin (before restructuring) by 2020, so Thursday’s third quarter operating update will be a chance to inform shareholders how that ambition is progressing.
Dutch banking giant ABN Amro reckons Unilever has set the bar high with this target, and a “quarterly miss” could have a material share price impact.
Since 17 August, Kraft-Heinz has been free to approach Unilever again, but so far as we know has to us far not done so.
“Unilever’s valuation reflects scenarios of a break-up or a return of Kraft-Heinz with a new bid. We deem both scenarios unlikely,” ABN Amro said.
“Unilever’s new strategy is highly influenced by third parties, and we see operational and financial risks in its execution, hence our recommendation is ‘sell’.”
New management under the microscope at Travis Perkins
A second quarter update from building materials supplier Travis Perkins PLC (LON:TPK) in early August was a damp squib, thanks to problems in the plumbing division.
Shareholders will be hoping for some signs of improvement under the new management team installed in the first half of the year, though there is a limit to how much “self-help” the company can perform given the division’s reliance on the social housing sector, which is declining.
The division’s margins have come under pressure in recent years from “the significant expansion of online and fixed price multi-channel operators and strong local and regional independents”, the group said in its August update.
The Consumer division, which included DIY specialist Wickes, has been hanging tough, growing revenue in a competitive market.
“Despite continuing to invest in value to maintain price leadership in both Wickes and Toolstation, gross margin was unchanged in the period,” the company said in its second quarter update, and it will be interesting to learn whether that was still the case in the third quarter.
On the data front, after strong UK inflation and lagging wages data over the past few days, investors will be keen to see whether retailers were able to once again rise above sector challenges when the ONS publishes September retail sales figures..
Despite the consumer squeeze, UK retail sales rose 1% August, compared to analysts’ forecasts of 0.2% and economists are hoping for a similar rise again..
Significant events expected Thursday October 19:
Trading updates: Travis Perkins PLC (LON:TPK), Unilever PLC (LON:ULVR)
Finals: Tristel Plc (LON:TSTL)
Interims: Stobart Group Ltd. (LON:STOB)
FTSE 100 ex-dividends (-1.55 points): BAE Systems PLC (LON:BA.), Smiths Group PLC (LON:SMIN)