Chancellor Philip Hammond is expected to keep austerity alive in the government’s Spring Statement on Tuesday amid an uncertain economic outlook.
The Spring statement takes the place of the UK Budget, which has been moved to autumn under changes made by Hammond in 2016.
The statement is expected to reveal a brighter short-term outlook from the Office for Budget Responsibility (OBR) and an improvement in public finances.
An aide to Hammond said he is unlikely to announce any plans for a big increase in spending despite calls for more money for health and other services.
Kwasi Kwarteng, a lawmaker who is Hammond’s parliamentary private secretary, said at panel discussion held by the Resolution Foundatoin think-tank that the Treasury isn’t assuming any revision to its spending figures.
“I don’t think that has been factored in by the Treasury and certainly not by the chancellor,” Kwarteng said.
“There is no sense that we are complacently spending billions.
“So that means that the deficit reduction plan is very much on course.”
The budget will include £410mln of the £1bn package negotiated by Northern Ireland's Democratic Unionist Party in return for backing the Conservatives in the last general election.
Hammond is aiming to eliminate the budget deficit by the mid-2020s. The OBR estimated in November that public sector net borrowing would rise by £4.2bn year-on-year to £49.9bn in the 2017/18 financial year. But the Resolution Foundation said the deficit for 2017/18 is expected to be £7bn to £11bn lower than the OBR’s estimate.
Away from the budget, investors are awaiting another wave of corporate earnings for the week.
Morrisons back on track
Wm Morrison Supermarkets PLC (LON:MRW) had a strong finish to 2017 and it came out on top alongside market leader Tesco PLC (LON:TSCO) in the latest industry sales figures.
The supermarket reports its full year results on Wednesday and analysts at Jefferies predict sales rising by 4% to £16.3bn and pre-tax profit climbing by 8% to £366mln.
Jefferies upgraded the stock to ‘buy’ from ‘hold’ and lifted its target price to 265p from 225.50p, saying it is best placed to benefit from an expected easing of inflation and a more supportive consumer outlook.
Like the rest of the big four supermarkets, Morrisons has suffered through higher cost inflation and weaker consumer confidence after Brexit, as well as tough competition from discounters Aldi and Lidl.
In a January trading update, Morrisons reported 2.8% like-for-like sales growth for the 10 weeks to January 7 on the back of efforts to improve its customer service and offer competitive prices.
The company also started supplying McColl's stores earlier than initially planned under an agreement announced in August, which has supported wholesale sales.
Kantar Worldpanel’s latest figures revealed Tesco and Morrisons were the best performers of the UK’s big four supermarket with sales rising 2.7% year-on-year in the 12 weeks to February 25. That compared to 1.1% growth for J Sainsbury plc (LON:SBRY) and a 2.3% increase for Asda.
Asia continues to drive growth at Prudential
The focus of insurance giant Prudential PLC (LON:PRU) increasingly seems to be on Asia, where it is busy selling its products to the new middle class.
The first half of 2017, according to Mike Wells, group chief executive, saw growth across all of the main performance measures “led by double-digit growth in our Asian business”.
“We have achieved our objective of generating over £10 billion of group cumulative free surplus between 1 January 2014 and 31 December 2017 six months early and we remain on track to achieve the remaining Asia-focused objectives by the end of this year,” Wells said.
In the UK the group has merged its M&G and Prudential UK & Europe asset management businesses to form M&G Prudential, and management will be expected to give an update on how this marriage is faring.
Recent reports suggest the company is close to offloading its UK annuities, which would free up millions of pounds in capital that the Pru has set aside, as per the European Union’s Solvency II regulations.
Morgan Stanley is predicting full-year core pre-tax profits of £6.74bn, up from £5.81bn in 2016.
It has pencilled in a figure of 11.32p for core earnings per share, up from 9.72p the year before, while the full-year dividend pay-out is seen rising to 3p from 2.85p.
Cairn Energy - Kraken and Catcher start-ups key to production growth
Like Premier Oil this week, the market's attention will be on new field start-up and cash flow growth when Cairn Energy PLC (LON:CNE) reports on Tuesday.
Premier reassured on the jointly owned Catcher field - Cairn owns 20% of the field, which is expected to be produce some 60,000 boepd gross by April - now, the focus will be on Kraken.
The heavy oil field is Cairn’s other flagship field development, though it had experienced teething problems so investors will be keen to see positive production stats and operational commentary.
Deutsche Bank analyst David Mirzai, in a note last month, highlighted that Kraken “appears set to reach its revised production targets”.
“Despite start-up issues, the Kraken field appears set to reach its revised production targets, which added to the Catcher field ramp-up should help Cairn to generate >$250m of operating cash flow in 2018,” Mirzai added.
Any update on the large-scale SNE development in Senegal will also be welcomed, as this project represents the most sUBStantial potential catalyst.
In terms of the financial results, UBS analyst Amy Wong expects earnings (EBITDAX) of US$10mln, an operating loss of US$127mln and a net loss of US$90mln.
Cineworld - Eyes on Regal Integration
Investors will naturally have a keen interest in the ongoing integration of the recently acquired Regal Entertainment business, though, according to Deutsche Bank analyst James Wheatcroft, Thursday’s financial results statement will be too soon for a “meaningful” update.
Wheatcroft, in a preview note, highlighted that investors in the cinema group will also have a significant interest in the US box-office trends which he believes are “encouraging”.
“We think performance in the 'old' CINE estate is likely to remain backstage simply due to the likely solid performance and greater interest in the better understanding Regal,” the analyst said.
Given the group’s current post-acquisition situation financial comparators will likely be tenuous, but, of course, not irrelevant.
Strong results in UK and Asia boost Savills
Property services provider Savills PLC (LON:SVS) boasted in January of a stronger-than-anticipated finish to 2017 so shareholders will be keen to see whether the momentum has been maintained when the group publishes its full-year results on Thursday.
“In the UK, we saw increased market share in commercial transactions, primarily as a result of relatively robust occupier demand and continued strong investment interest from the Asia Pacific region. Our Less Transactional businesses, both in the UK and globally, performed in line with our expectations,” the company said, as it raised market expectations for the year just ended.
Numis Securities responded by cranking up its profit before tax forecast for 2017 by 5% to £140mln on sales of £1.5bn. It predicts Savills will have had net cash at the end of 2017 of around £100mln.
A strong performance in the UK and Asia more than offset a decline in profits from the US, where the company is investing to build the business.
“We expect US profits to fall fairly sUBStantially in the current year despite broadly flat revenue, predominantly reflecting the cost of the new New York Capital Markets team (c.US$10mln), but also subdued occupier demand particularly in Government related transactions, where Studley is a major player. Given that the new team will prove less of a headwind through 2018 and the pipeline of activity has improved, we forecast a bounce-back in 2018,” Numis said.
Balfour Beatty hit by Carillion collapse
With the collapse of joint venture partner Carillion PLC (CLLN) and the disposal of its stake in Connect Plus, it’s fair to say Balfour Beatty plc (LON:BBY) has had an eventful few months.
Balfour, which reports its full-year results on Wednesday, had been working with Carillion on three UK road projects.
The demise of Carillion is expected to cost Balfour between £35mln and £45mln.
On the subject of roads, Balfour announced in February that it had sold a further 5% stake in Connect Plus, the operator of the M25 orbital motorway in London, bringing its holding down to 15%. It followed the disposal of a 20% stake in the business in December.
Balfour is also set to benefit from Donald Trump’s tax cuts in the US, which comes at a good time for the group with its with 30%-owned LAX Integrated Express Solutions joint venture being awarded a US$1.95bn contract to develop an ‘automated people mover’ at Los Angeles International Airport.
UBS predicts full year sales, including joint ventures, of £8.35bn and profit from operations (PFO) of £198mln, including a £85mln gain from the sale of investments.It expects a final dividend of 2.4p each.
“While the group remains in recovery mode, we expect confidence about improved earnings to strengthen and therefore we anticipate a positive outlook for 2018 and 2019,” UBS said.
Wetherspoon set to unveil robust first half
Pub chain JD Wetherspoon (LON:JDW) is set to reveal it had a solid first half when it publishes its interim results on Friday.
In a trading update in January, the company said like-for-like sales rose by 6% and total sales increased 4.3% in the first six months of the year.
Thanks to the robust sales growth, Wetherspoon said the year-to-date underlying profit before tax was "slightly ahead" of its expectations.
At the time, chairman Tim Martin once again ranted about how great Brexit will be for the chain, saying he expects prices to fall by an average of 3.5p per meal and 0.5p per drink.
The interims come in the wake of Wetherspoon’s meat supplier Russell Hume entering administration in February after production was suspended following an investigation into its food hygiene standards.
Fevertree revenues to fizz higher
Fevertree Drinks PLC (LON:FEVR) will issue its annual results on Tuesday.
In a trading update in January, the AIM-listed firm said it enjoyed another year of strong revenue growth, with sales for the 12 months to December 31 expected to be around £169mln – 66% higher than the £102.2mln it generated in 2016.
The UK was once again the star performer, with sales in the company’s home market doubling over the year. Meanwhile European sales were not quite as strong but still rose 42% year-on-year, while sales in the rest of world arm are expected to be 57% higher and US sales are projected to be up 39%.
The tonic water supplier said strong festive period means full-year results will be "comfortably above" even those loftier expectations.
Significant events expected:
Monday March 12:
Finals: Clarkson PLC (LON:CKN), Eve Sleep Plc (LON:EVE), Global Ports Holdings PLC (LON:GPH), Hutchison China Meditech Ltd (LON:HCM), Medica Group PLC (LON:MGP), Pennant International Group PLC (LON:PRN), Polymetal International PLC (LON:POLY)
Interims: Diurnal Group PLC (LON:DNL), Seeing Machines Ltd (LON:SEE)
Tuesday March 13:
UK Spring Statement (Budget)
Finals: Antofagasta PLC (LON:ANTO), Applegreen PLC (LON:APGM), Bango plc (LON:BGO), Brady Plc (LON:BRY), Cairn Energy PLC (LON:CNE), Computacenter PLC (LON:CCC), Crossrider Plc (LON:CROS), French Connection Group PLC (LON:FCCN), Fevertree Drinks PLC (LON:FEVR), Gresham Technologies PLC (LON:GHT), Glenveagh Properties PLC (LON:GLV), Goals Soccer Centres PLC (LON:GOAL), H&T GROUP PLC (LON:HAT), LMS Capital PLC (LON:LMS), Midwich Group Plc (LON:MIDW), John Menzies PLC (LON:MNZS), Restore Plc (LON:RST), Stadium Group plc (LON:SDM), Smart Metering Services PLC (LON:SMS), Surgical Innovations PLC (SUN), TP ICAP PLC (LON:TCAP), XLMedia PLC (LON:XLM), Zotefoams Plc (LON:ZTF)
Interims: Close Brothers Group PLC (LON:CBG), Eagle Eye Solutions Group PLC
Economic data: US consumer price index
Wednesday March 14:
Finals: W, Morrison Supermarkets PLC (LON:MRW), Prudential PLC (LON:PRU), Advanced Medical Solutions Group (LON:AMS), Balfour Beatty plc (LON:BBY), Burford Capital PLC (LON:BUR), Charles Taylor PLC (LON:CTR), Dignity PLC (LON:DTY), EKF Diagnostics Holdings PLC (LON:EKF), EMIS Group PLC (LON:EMIS), Empressaria Group PLC (LON:EMT), Forterra PLC (LON:FORT), Futura Medical PLC (LON:FUM), Hikma Pharmaceuticals PLC (LON:HIK), Marshall Motor Holdings PLC (LON:MMH), SafeCharge International Group Limited (LON:SCH), StatPro Group PLC (LON:SOG), Somero Enterprises Inc (LON:SOM)
Interims: Brooks Macdonald Group plc (LON:BRK), Northamber PLC (LON:NAR)
Economic data: UK trade in goods; US retail sales; US forward PPI
Thursday March 15:
Finals: Old Mutual PLC (LON:OML), Cineworld PLC (LON:CINE), Curtis Banks Group PLC (LON:CBP), Forbidden Technologies plc (LON:FBT), Just Group PLC (LON:JUST), Kier Group PLC (LON:KIE), Manx Telecom PLC (LON:MANX), Oakley Capital Investments Ltd (LON:OCI), OneSavings Bank PLC LON:OSB), Phoenix Group Holdings PLC (LON:PHNX), Portmeirion Group PLC (LON:PMP), Savills PLC (LON:SCS), Spirax-Sarco Engineering PLC (LON:SPX), TMT Investments PLC (LON:TMT)
Trading update: Amryt Pharma PLC (LON:AMYT)
Ex-dividends: To knock 1.4 points off FTSE 100 index - Anglo American PLC (LON:AAL), Hammerson PLC (LON:HMSO)
Economic data: US weekly jobless claims; Philly Fed business outlook; Empire State manufacturing
Friday March 16:
Interims: JD Wetherspoon PLC (LON:JDW)
Trading update: Berkeley Group PLC (LON:BKL), Mitie PLC (LON:MTO), Investec PLC (LON:INVP) SThree PLC (LON:STHR)
Finals: Capital Drilling Ltd (LON:CAPD), Cloudbuy PLC (LON:CBUY)
Economic data: BoE Financial Policy Committee meeting statement; Eu inflation; US housing starts; US industrial production; University of Michigan consumer sentiment