It is getting to the scrag-end of the current reporting season, so there will be little meat on the corporate diary in the coming week.
The main focus is likely to be on a trading update on Wednesday from WH Smith Plc (LON:SMWH) – recently voted the UK’s worst High Street retailer by Which? Readers – with analysts thinking its dominant travel stores business might offset such disappointing news.
In the survey carried out in January, Which? readers complained about the books and stationery retailer’s customer service and labelled it a “horrid shop”.
However, Nicholas Hyett, equity analyst at Hargreaves Lansdown, thinks it’s the travel business that will be the key to WH Smith’s future, accounting for 54% of its sales.
He said: “The focus on high footfall transport hubs saw travel revenue rise 7% during the first half, and the company is aiming to win more retail space at airports and stations in the UK and abroad.”
Hyett added:” The entry into the US market, through a joint venture with Duty Free Americas, should provide long-term growth potential.”
“The question for next week’s third quarter results is the same as always, has the travel business done enough to offset what are likely to be unpleasant results from the UK high street?” he concluded.
AO World on track to meet the targets
Moving to the world of digital retailers, online electricals store AO World PLC (LON:AO.) will announce its final results on Tuesday with the company having seen its European business reaching an inflection point.
In a statement released in April, the company said its sales in Europe rose by 55% and that it remained on track to meet the targets set for 2021.
The group added then that annual results will be the middle of market forecasts after good sales in the UK over the second half.
AO said it has been investing heavily to set up a European operation, which will mean another full-year loss for the year to 31 March 2017, although this will be in the middle of the expected range.
CMC to show strength in face of regulatory clamp-down
Away from retailers, full-year numbers on Thursday from CFDs and spread betting firm CMC Markets Plc (LON:CMC) should show record profits growth despite the worries over a regulatory clamp-down.
Peel Hunt expects the FTSE SmallCap firm’s full-year net operating income to be 15% ahead of the previous year at a new record level of around £185mln.
Overall, the City broker expects CMC’s pre-tax profit to jump by 22%, also record profitability.
Peel Hunt said, of interest, will be a management update on the potential impact of new EU and UK regulations that come into effect this summer.
It said its current valuation for CMC already assumes a pessimistic view from impending regulatory changes - with the assumption of a 19% drop in UK/EU revenue, which is greater than the around 10% fall rival IG Group PLC (LON:IGG) is guiding for, and that is before mitigating actions.
However, the broker concluded: “In our view, CMC’s focus on high value professional clients will show regulatory resilience, and the shares will re-rate as the market sees the sustainability and attractions of this model.”
Not so fine and MITIE
Back in March, outsourcer MITIE Group PLC (LON:MTO) issued a below expectations pre-close trading update, so the market will be hoping that the full-year numbers, also on Thursday, will contain no more bad news.
Peel Hunt is forecasting the FTSE SmallCap group to report an 8% fall in pre-tax profit to £61.4mln, with the consensus estimate at £61.6mln.
The broker expects MITIE’s full-year revenue to be up by around 2% year-on-year to £2.2bn with its Engineering, Security, Care & Custody business strong, but Property Management & Waste weak.
It also sees MITIE’s average daily net debt falling by £50mln year-on-year to around £286mln, but expects period-end net debt to be £50m-£70mln higher at around £197mln-£217mln.
Plastic not fantastic for RPC Group
As one of Europe’s largest manufacturers of plastic packaging, the crack down on plastics in both the UK and Europe has weighed heavily on RPC Group PLC (LON:RPC), which reports full-year results on Wednesday.
The EU’s most recent proposals target single use plastics, like cutlery and straws, and calls for all plastic bottles to be recycled by 2025.
However, Nicholas Hyett, equity analyst, Hargreaves Lansdown says: “Despite those headwinds RPC has continued reporting fairly healthy results.
“The third quarter trading update saw management guide for significant revenue growth, with profits and cash generation in line with expectations.
“The hope is that the group is able maintain its recent track record of organic earnings growth of around 3% a year, boosted by acquisitions.”
The analysts added: “Longer term we feel RPC’s focus on innovative design should mean it’s well placed to weather a more difficult plastics environment.
“Tougher regulation may even improve its position relative to smaller competitors. We’ll be looking for evidence to support that assessment next Wednesday.”
Used car market weighing on Auto Trader
Full-year numbers from FTSE 250-listed Auto Trader Group PLC (LON:AUTO) on Thursday are likely to make for poor reading as the second hand car market continues to suffer in the face of worries over diesel bans and the switch to electric vehicles.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Growth is expected to be in the mid-single digits this year, a significant slowdown on previous years.
“But with Auto Trader now firmly established as the dominant player in a mature market, that’s only to be expected - especially as conditions in the UK car market look far from rosy.”
He added: “The good news is that with net debt considerably lower than in previous years and cash generation still strong, there’s plenty of scope for dividend growth in the near term.
“Our longer-term concern is that some pretty bruising competitors look to be eyeing up a slice of Auto Trader’s pie.
“Amazon have been rumoured to be looking at entering the car market and UK rival Motors.co.uk has recently announced a partnership with Facebook to list its wares on marketplace.”
Margin strain expected at Fuller, Smith & Turner
A trading update from brewery and pubs group Fuller, Smith & Turner PLC (LON:FTSA) on Friday is likely to show steady like-for-like sales but a strain on margins continuing.
Back in January, the FTSE SmallCap firm posted a solid set of figures for the 42 weeks to January 20, despite what the firm described as a "challenging" trading environment.
Fuller’s said like-for-like sales in its Managed Pubs & Hotels division rose 3.0% for the period, while like-for-like profit in Tenanted Inns rose 2.0%, with beer and cider volumes flat.
Liberum Capital said Fuller’s solid trading is testament to the well-invested estate and its premium offering, but it noted the firm is stepping up investment in systems and IT capex which will weigh on margins.
The City broker is forecasting Fuller’s posting managed like-for-like sales growth of 3.4% this year with EBIT margin of 12.3%, down 35 basis points.
They concluded: “Assets are recorded at cost and hence NAV of 593p per share doesn’t reflect the true value of bricks and mortar nor the value of the Chiswick site, however we prefer the growth potential of City Pubs and Young's”.
Significant events expected:
Monday June 4:
Finals: Abzena plc (LON:ABZA), RhythmOne PLC (LON:RTHM)
Trading update: Tungsten Corporation (LON:TUNG)
Economic data: UK construction PMI; US factory orders
Tuesday June 5:
Finals: AO World PLC (LON:AO.), Quiz Plc (LON:QUIZ), Altitude Group PLC (LON:ALT), Carclo PLC (LON:CAR), DiscoverIE Group PLC (LON:DSCV), Fulcrum Utility Services PLC (LON:FCRM), GB Group PLC (LON:GBG), KCOM Group PLC (LON:KCOM), Vianet Group PLC (VNET), VP (LON:VP), WYG PLC (LON:WYG)
Interims: Driver Group PLC (LON:DRV), Gooch & Housego PLC (LON:GHH), Summitt Therapeutics PLC (Q1) (LON:SUMM)
Economic data: UK PMI services index; US ISM non-manufacturing index; US PMI services index; US JOLTS
Wednesday June 6:
Trading update: WH Smith Plc (Q3) (LON:SMWH)
Finals: RPC Group PLC (LON:RPC), Alpha Financial Markets Consulting PLC (LON:AFM), Findel PLC (LON:FDL), Tricorn Group PLC (LON:TCN) , Workspace Group plc (LON:WRK)
Economic data: Halifax UK house prices; US international trade; US productivity and costs
Thursday June 7:
Finals: CMC Markets Plc (LON:CMC), MITIE Group PLC (LON:MTO), Auto Trader Group PLC (LON:AUTO), G3 Exploration Limited (LON:G3E), Ramsdens Holdings PLC (LON:RFX)
Interims: Impax Asset Management Group PLC (LON:IPX), RWS Holdings PLC (LON:RWS)
Ex-dividends: To knock 10.6 points off FTSE 100 index - Associated British Foods plc (LON:ABF), Evraz plc (LON:EVR), J Sainsbury plc (LON:SBRY), Johnson Matthey PLC (LON:JMAT), Scottish Mortgage Investment Trust PLC (LON:SMT), Vodafone Group PLC (LON:VOD)
Economic data: US weekly jobless claims; US consumer credit
Friday June 8:
Trading update: Fuller Smith & Turner PLC (LON:FSTA)
Finals: First Property Group PLC (LON:FPO), Volex PLC (LON:VLX)
Economic data: US wholesale trade