After a busy few weeks, the UK corporate earnings diary slows down considerably in the coming week, particularly given the late May Bank Holiday fore-shortened week.
The main blue-chip focus will be on Royal Bank of Scotland Group PLC‘s (LON:RBS) annual general meeting on Wednesday, with the bank likely to face questions over the timing of resuming dividend payments
The state-owned lender is reportedly considering asking for permission to restart dividends after making progress in resolving legacy issues and returning to an annual profit for the first time in a decade.
The dividends could be as generous as that paid by Lloyds Banking Group PLC (LON:LLOY), a source told The Times. The group has been banned from paying dividends since its £45.5bn taxpayer bailout 10 years ago during the financial crisis.
Past misconduct has weighed on the bank’s shares and earnings, preventing RBS from resuming dividends. But in May the group made headway in putting its legacy issues behind it after agreeing a US$4.9bn settlement with the US Department of Justice to end an investigation into the sale of mortgage-backed securities.
RBS has also made progress in its turnaround plan, swinging to a profit of £752mln in 2017 after nine years of losses.
Meanwhile, there are reports that its balance sheet could receive a boost from a proposed merger between HSBC Holdings PLC (LON:HSBA) affiliate Saudi British Bank (SABB) and RBS-backed Alawwal Bank.
The deal would allow RBS to wind down its holding in the Saudi Arabian bank and would cut risk-weighted assets, paving the way for the government to sell down its 71% stake.
Chancellor Philip Hammond has suggested he is waiting for the bank to resume dividends and for its share price to rise before selling the government’s shares.
Batteries now included for Johnson Matthey
The only set of blue-chip results due in the week will come from platinum refiner Johnson Matthey PLC (LON:JMAT) on Thursday, with its full-year numbers likely to be boosted by a windfall non-cash bonus of around £30mln from US corporate tax rate changes.
The company, best known for its leading position in emission control systems – catalytic converters et al – is making a concerted, if belated, effort to move into high energy battery materials for commercial heavy duty applications.
At the end of January, it announced a collaboration with NYSE-listed Cummins that will see them work on “the development of new products with enhanced performance characteristics for commercial applications”.
Liberum Capital Markets thinks that at this stage the collaboration may mean nothing more than Cummins becoming the eighth original equipment manufacturer trialling Johnson Matthey’s eLNO high-energy battery materials technology.
The broker reckons trading in the second half of the financial year just ended will have been in line with company guidance but there might have been higher central charges and interest costs.
Analysts are expecting profit before tax of £455mln and earnings per share of 204.93p. The dividend is expected to rise to 78.21p from 75p the year before.
Bid rejection focus for FirstGroup
Among the mid-caps, full-year results from bus and trains group FirstGroup PLC (LON:FGP) on Thursday might offer a clue as to why the board rejected the recent bid approach.
Of course, we do not know the terms that were proposed by Apollo Global Management but we do know that FirstGroup was quick to say they undervalued the group, which puts a bit of pressure on the transport operator’s management team that it could do without, given it has been struggling with adverse weather conditions and tough competition.
Competition from airlines affected the performance of its Greyhound business services while snowstorms in January and driver shortages dragged on its school bus unit.
The dividend was binned back in 2013 at the time of its £615mln rights issue but with the group having recently refinanced its debt and saved around £14mlns a year in interest payments and bearing in mind that one bid approach leads to another, the directors might dangle the prospect of a return to paying dividends in the near-terms, rather than in the medium-term, as has been the pledge in the past.
“The approach ought to act as a catalyst for more urgent action by the board to crystallise value and/or for more credit for the potential value of the group being reflected in the share price,” suggested Liberum Capital Markets, when the bid approach was made by Apollo last month.
S'no fun for B&M European Value Retail
FTSE 250 discount retailer B&M European Value Retail SA (LON:BME) will release its full-year results on Wednesday 30 May.
City analysts are predicting that the stores group will report a strong year, albeit with some potentially slower like-for-like growth in the fourth quarter due to severe weather conditions in the UK.
Analysts at Deutsche Bank commented: “After a strong performance through the Q3 peak and good momentum in January and February, we expect that the snow somewhat impacted performance in the final month of the company's year.”
They added: “We assume a 300bps drag to Q4 LFLs from the weak month, and as a result cut our FY Mar-18 forecasts by c.2% (though leave Mar-19 and Mar-20 forecasts unchanged). For Q4 we model B&M UK LFLs +2.3% and for FY Mar-18 we forecast Adj EBITDA £280mln, Adj PBT £215mln and Adj dil EPS 17.1p.”
In a trading update for the 13 week period between 24 September to 23 December 2017 in January, B&M reported a solid Christmas period, with group sales revenue growing 22.7% at constant currency to £969.8mln, up from £789.1mln for the same period the year before, with "continued strong sales and operational performance" during its peak trading period.
Strategy news the bait for Fishing Republic
Full-year results from fellow AIM-listed retailer Fishing Republic PLC (LON:FISH) on Thursday will be watched for any updates on the tackle seller’s strategic review.
That was commissioned by the company in November last year after a sharp downturn in trading in October sparked a shock profit warning.
At the time, the company said: “unless market conditions change, the trading performance for the year to 31 December 2017 will not meet market expectations and will result in an overall loss.”
The warning was accompanied by a wholesale shakeup of the company board, which saw chief executive Steve Gross, operations director Zoe Gross, and IT director Paul Hagerty all step down.
US jobs in focus again
As always, the first Friday of the new month – and in this case the first day of June – will see the release of the latest US jobs report, the main economic focus for the week.
In April, US jobs growth was slower than expected, with non-farm payrolls up 164,000, against forecasts for 190,000, although the unemployment rate still fell to 3.9%, the first time it has dipped below 4% since 2000.
The US has added an average of roughly 190,000 jobs per month over the past year and about 208,000 per month in the past three months, and economists are expecting that rate to have continued in May.
However, whatever the number, it is unlikely to put the Federal Reserve off from hiking US interest rates once again, with a June move expected following the recent publication of minutes from the central bank policy committee’s last meeting.
Significant events expected:
Monday May 28:
UK and US Bank Holidays
Tuesday May 29:
Finals: Renold plc (LON:RNO), Kainos Group PLC (LON:KNOS)
Economic data: Nationwide UK house price index; US consumer confidence; US Case-Shiller house price index
Wednesday May 30:
AGM: Royal Bank of Scotland Group PLC (LON:RBS)
Finals: B&M European Retail PLC (LON:BME), De La Rue plc (LON:DLAR), Fishing Republic PLC (LON:FISH), LondonMetric Property PLC (LON:LMP), Telford Homes plc (LON:TEF), Trans-Siberian Gold PLC (LON:TSG)
Interims: Nexus Infrastructure PLC (LON:NEXS), Oxford Metrics PLC (LON:OMG)
Economic data: US Q1 GDP second reading; US ADP employment report; US international trade on goods; US Federal Reserve Beige Book
Thursday May 31:
Finals: Firstgroup PLC (LON:FGP), Johnson Matthey PLC (LON:JMAT), 7Digital Group PLC (LON:7DIG), Air Partner PLC (LON:AIR), Caffyns PLC (LON:CFYN), TR Property Investment Trust plc (LON:TRY)
Trading update: Card Factory PLC (LON:CARD)
Ex-dividends: To knock 6.05 points off FTSE 100 index - Marks & Spencer Group PLC (LON:MKS), National Grid PLC (LON:NG.), Taylor Wimpey PLC (LON:TW.)
Economic data: US weekly jobless claims; US personal income and outlays; US Chicago PMI
Friday June 1:
Finals: System1 Group PLC (LON:SYS1)
Economic data: UK manufacturing PMI index; US non-farm payrolls, US consumer spending; US manufacturing index