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Apres moi le deluge: Flood of blue chip results to dominate in coming week, including BT Group

Over the five sessions in the Week Ahead, around 20% of the FTSE 100 index will report results or issue a trading update, with about half that number due on Thursday alone

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They include drugs giant AstraZeneca, oil major Royal Dutch Shell, and drinks firm Diageo

There might be the traditional summer hosepipe ban across much of the UK, but the tap gets turned on more fully for the blue-chip corporate diary in the coming week.

Over the five sessions, around 20% of the FTSE 100 index will report results or issue a trading update, with about half that number due on Thursday alone, including drugs giant AstraZeneca PLC (LON:AZN), oil major Royal Dutch Shell PLC (Q2) (LON:RDSA), and drinks firm Diageo plc (LON:DGE).

Among those heavyweights, product sales at AstraZeneca have plunged in recent years due to the loss of patents on a couple of its blockbuster drugs such as Crestor (statin) and Seroquel (bipolar).

That cycle looked to have come to an end in the final quarter of 2017 when sales edged higher, but they fell again in the first three months of 2018.

Astra is still forecasting a “low single-digit percentage increase” in product sales growth this year and investors will be looking for that guidance to be maintained when the drugs giant publishes its second-quarter trading update on Thursday.

To do just that, some of the FTSE 100 group’s newer drugs will need to step up and plug the gaps, with Lynparza and Tagrisso (both cancer), which the market has high hopes for, likely to be the most keenly eyed.

If the new kids do indeed step up to the plate, this could prove to be Astra’s turnaround year.

Recent pipeline successes for GSK

Another FTSE 100 drugmaker also due to post a second-quarter update is GlaxoSmithKline plc (LON:GSK), albeit on Wednesday.

GSK has had some success with its pipeline of late, particularly with a couple of its HIV and COPD treatments, so it will be interesting to hear what it has to say about those and the threat of generic competition from its rivals.

The west London-based company also recently completed the buy-out of Novartis's 36.5% stake in their consumer healthcare joint venture - the division that houses brands such as Beecham's and Panadol - for US$13bn in cash, which the management deemed was a better option than getting involved in the bidding for Pfizer's consumer division.

A bidding war for its Horlicks malted drinks business is reportedly on the cards too, so look out for any hints that the company is looking to say night-night to the drink, which is surprisingly popular in India.

Indivior’s star asset under attack

Staying with drugs, but on the second line, there is only one place to start with Indivior PLC (LON:INDV), which is set to publish its interim results on Wednesday.

Earlier this month it told investors it “cannot reliably provide” full-year guidance at the moment, although it did warn that 2018 profits will be below expectations, after Indian giant Dr Reddy’s launched a generic rival to Suboxone, Indivior’s blockbuster opioid addiction treatment.

A US court has told Dr Reddy’s to stop selling the drug until a patent dispute is resolved, but there is still a flood of the cheaper drug on the market which will hit Indivior’s top and bottom lines this year.

Investors will be seeking more guidance on the full-year outlook as well as some reassurance that one of its other rivals won’t launch their generic alternatives any time soon.

All in all, it’s been a nightmare few weeks for Indivior and its shareholders, given that Suboxone accounts for more than 80% of its annual sales.

BT keeps expectations low amid overhaul

BT Group plc (LON:BT.A) has tried to keep investors from expecting too much this year by saying it sees another fall in annual revenues and earnings amid a restructuring of the business.

The telecoms giant publishes its first-quarter update on Friday and analysts at Numis think the company will continue in its bid to repair investor sentiment.

“We think management guidance for the next few years has been set so as to minimise the risk of unwelcome surprises for investors,” Numis said.

BT’s consumer division is expected to deliver a 2% increase in sales and a 7% gain in underlying earnings (EBITDA) for the first quarter as the group overhauls the unit and merges it with mobile operator EE.

In May the company announced it was launching new packages that combine broadband, mobile and pay-TV as a single service and bill to attract new customers in a competitive market.

BT is also merging its business and public sector divisions to simplify its operations. Analysts expect the business and public sector arm to post a 4% drop sales and a 3% decline in EBITDA for the first quarter.

The network division, Openreach, is forecast to report a 2% dip in sales and an 8% fall in EBITDA for the period after regulator Ofcom forced it to cut prices and as the company incurs higher costs in carrying out an upgrade of the UK’s broadband infrastructure.

BT’s outlook for the 2018/19 fiscal year is for revenue to fall 2% and adjusted EBITDA to drop to £7.3bn to £7.4bn. Last year adjusted EBITDA edged down 2% to £7.5bn and revenue slipped 1% to £23bn.

In a bid to lift profits, BT is cutting costs by axing about 13,000 jobs over the next three years and moving out of its central London headquarters.

Following a 20% fall in the share price so far this year, investors will be hoping to hear BT is making progress on its restructuring. News on a successor to outgoing boss Gavin Patterson will also be a key focus.

World Cup and Love Island to boost ITV

The World Cup is expected to have provided a viewing surge for ITV plc (LON:ITV), particularly since England made it to the semi-finals for the first time since 1990.

The broadcaster reports its results for the six months to the end of June on Wednesday with the football likely to have boosted advertising revenue towards the end of the period. ITV’s hit reality TV show Love Island could also move the dial for revenues.

The interims follow an encouraging first-quarter trading update and analysts expect to hear the group was able to keep up the momentum in the second quarter.

“We will look for confirmation that this momentum has been maintained or possibly accelerated (given report of strong advertising demand around the FIFA World Cup) as well as for an update on content sales and evidence of progress in driving digital revenues,” Shore Capital said.

“Perhaps, more importantly, we also look forward to hearing the conclusions of CEO Carolyn McCall’s ‘strategic refresh’ – and particularly how she plans to accelerate growth in digital and content revenues both organically and through acquisitions.”

Analysts have forecast revenue of £1.5bn, earnings per share of 7.1p and a dividend of 27p each.

Analysts look to Pearson interims with caution

Pearson plc (LON:PSON) improved its performance in the first quarter but analysts have warned investors against getting their hopes up for the interim results on Friday.

In May, the education publishing group reported a 1% rise in underlying revenue in the first quarter, supported by growth in North America.

At the time, analysts cautioned against going overboard on the results since the first quarter is not a big one for Pearson.

“Pearson's Q1 is full of timing issues, seasonal mix effects and comparison issues, rendering it impossible to pull out an underlying pattern that is a useful predictor of FY progress,” Barclays said.

Pearson itself has warned that underlying market pressures in the US higher education segment continue to impact gross sales. It anticipates net sales in US higher education courseware to be flat to down mid-single digit per cent in 2018.

However, chief executive John Fallon said the group expects to grow underlying profit for the year after making

“good progress” against its strategic priorities including its digital transformation.

“Hopefully John Fallon can reassure investors still unsure about a strategic shift, that’s seen the group dispose of several businesses including the Financial Times, Penguin and The Economist, to focus on providing the next generation of educational resource,” said George Salmon, equity analyst at Hargreaves Lansdown.

Cash-flow reassurance the least for Shell

When Royal Dutch Shell updates the market on Thursday, investors will want to be at best impressed with cash-flow, at worst reassured.

Importantly, they’ll want to know that the more recent slips were indeed mere one-offs, as previously promised.

“Shell’s cash flow was disappointing in 4Q17 and again to some extent in 1Q18, and explained by management in terms of a number of one-off negative factors. With these falling away, and Shell’s exposure to strong LNG pricing as well as crude prices, we expect a sharp improvement in underlying CFFO to above USD10bn in 2Q18,” HSBC analysts said in a recent preview note.

HSBC also looked forward to news of a possible share buyback, but, acknowledged that Shell may not be quite ready yet.

“Shell’s management have repeatedly talked of wanting “line of sight” to their target gearing level of 20% before restarting buybacks,” the bank said.

“We don’t see gearing there yet – our end-2Q figure is 23.5% - but with a target to buy back USD25bn of stock by 2020, timing is getting fairly limited.

“With a strong crude price backdrop, Shell may choose to announce the restart of buybacks with these results. We don’t yet assume it in our numbers (we assume an early 2019 start), but we understand that market expectations of a near-term restart have risen considerably.” 

Tinge of negativity for Tullow

Investors can be forgiven for looking to Tullow Oil plc’s (LON:TLW) next update with at least a tinge of negativity following back to back legal disappointments - a nine-figure award is, of course, not an insignificant pill to swallow.

Nonetheless, as Tullow takes its medicine the commentary Wednesday’s interim statement will likely emphasise cash flows, crude prices and production growth.

The market will want commentary over the production operations, in June full-year production forecasts were upped (to 86,000-92,000 bopd).

“The producing assets are performing well and activity levels are ramping up with a second rig being added in Ghana, as expected, to deliver (modest on our estimates) near-term production growth,” Numis analyst Thomas Martin said in a note this week.

The analyst also noted that Tullow has yet to give a 2019 forecast, though he believes its output will be around 94,000 boepd for the next year.

“Overall, we still forecast production will be relatively flat during the period 2017-2020 (2% CAGR), resulting in a modestly declining FCF outlook,” he added.

Operationally, the company is advancing towards a final investment decision for its Uganda joint venture, meanwhile, in Kenya (where early production had to be halted due to local protests over crude trucking) full project sanction is not anticipated until late 2019.

Talk around the potentially very large Zama discovery offshore Mexico may provide the highlight for those looking to cherry pick the positives in the outlook statement.

Strikes a focus for Ryanair

With the preceding fortnight delivering two pilot strikes, the tensions around Ryanair PLC’s (LON:RYA) industrial relations are palpable, and, will no doubt be in the front of investor’s minds come Monday as the budget airline provides a trading update.

The relative recent strength of fuel prices adds further challenges to all budget airlines, not least Ryanair, and, of course, the spectre of Brexit looms for all of Europe’s cross-border carriers – and will most likely garner at least some commentary in the statement.

Those negative being said, analysts at Barclays Capital remain relatively upbeat, this week repeating an ‘overweight’ rating for Ryanair which is among the investment bank’s top rated airlines.

“We think the [second] quarter will be characterised by a strong underlying demand environment, a negative calendar Easter impact and rising costs related to disruption.”

Vodafone ringing the changes

Back with the predominant blue chips, Vodafone PLC’s (LON:VOD) latest trading update on Wednesday comes after the mobile phones operator’s full-year results in May pleased investors, although the announcement also of a change at the top, with the firm seeking a new chief executive, caused some jitters.

Investors will seek reassurances from the first-quarter figures, hoping that data demand continues to be the driving force for service revenues.

Emerging markets should still be fast growing and Vodafone investors will look at key European markets for evidence of a sustained turnaround.

Progress reports also will be expected for the Vodafone India merger and the recent acquisition of assets in Europe with updates on cost synergy expectations.

Bid situation overshadows Sky

While still swirling in the midst of a takeover war, investors will be looking out for anything that could push up the bid price of FTSE 100 pay-TV broadcaster Sky PLC (LON:SKY) when it releases a fourth-quarter trading statement on Wednesday.

Now that Comcast has pulled its bid for the assets currently being sold by major Sky shareholder 21st Century Fox, investors will be expecting the media giant to turn its guns fully on Sky, making a higher bid price even more likely.

Analysts at broker Liberum have said Comcasts decision to focus on Sky can be interpreted in two ways; “(1) it suggests a division of the spoils to Disney i.e. Disney is left to take the Fox US assets while Comcast gets Sky and / or (2) it is a warning shot to Disney to say that Comcast now has extra firepower to come back with an increased bid in case Fox/Disney looks to trump Comcast's 1475p bid.”

Diageo needs a stiff drink

Guinness stout to Jonnie Walker whisky firm Diageo - which posts interims on Thursday - has, rather unexpectedly, found itself on the front line of the brewing global trade war.

US whiskey now faces an additional 25% tax in the EU, as Europe looks to respond to tariffs placed on European imports in the US. Similar levies are being put in place in China, Canada and Mexico.

In a preview, Laith Khalaf, senior analyst at Hargreaves Lansdown commented: “Given that North American whiskey brands like Bulleit account for some 9% of Diageo’s sales that’s far from ideal – although the blue chip’s dominant position in scotch could mean it sees some benefit from consumers switching.”

He added; “Given Diageo’s target to improve operating margins by 1.75 percentage points over the three years to 2019, costs will be a focus in this set of results.”

Meanwhile, Diageo’s recent offer for shares in Chinese spirit maker Sichuan Shuijingfang suggests its management see potential in Asian markets despite recent headwinds.

Currency tailwinds turning to headwinds for Reckitt

First-half numbers from household products blue chip Reckitt Benckiser PLC (LON:RB.) on Friday come after further disappointments in an April trading update after a fairly disappointing set of full-year results.

Graham Spooner, investment research analyst at The Share Centre pointed out that investor’s expectations for the half-year figures may have been dampened, but the hope is that Reckitt’s management will not reduce their guidance for the full year’s revenues of between 2-3%.

However, the analysts added, the fact that currency tailwinds are turning into headwinds for the Vanish cleaning to Finish dishwasher products group will likely make this task more difficult.

Spooner said investors will also expect a progress report on the preparations to split the group into two separate divisions, Health and Hygiene and an update on the integration of the Mead Johnson acquisition.

Marston’s hoping for a World cup boost

Shares in the pubs and brewing group have had a tough year so far in 2018 with investors worried about the level of consumer spending and the prospect of rising interest rates squeezing disposable incomes.

However, the market will be watching to see if the World Cup and warm weather have boosted sales when brewer and pubs operator Marston’s plc (LON:MARS) issues a third-quarter update on Wednesday.

Investors will be focused on how the group’s Destination and Premium pubs, which include Generous George and Pitcher & Piano, are performing, with sales at the drinks-led taverns and the accommodation lodges also to be of interest.

Marston’s like-for-like sales dropped in the first half but the company previously said it expected the performance to improve in the second half.

Property market signs from Countrywide, Rightmove

Estate agency group Countrywide PLC (LON:CWD) will be hoping to mitigate some of the damage from its profit warning in June when it releases half-year results on Thursday.

The warning, the company’s fourth in eight months, arose after what it said was a subdued housing market in the first half of its financial year as it said its adjusted underlying earnings (EBITDA) estimates for the first half would be around £20mln than the same period last year.

The firm also suffered a share price drop as it indicated the prospect of equity dilution, with some City analysts estimating that the group required at least £125mln of fresh equity.

Meanwhile, FTSE 100-listed online property listing firm Rightmove PLC’s (LON:RMV) half-year results on Friday are also likely to be closely scrutinised.

Given the recent slump in UK house price growth at the start of July due to a glut of sellers, investors will be looking to see if the slowdown in the property market is having a knock-on effect on the fortunes of the online property lister as estate agencies struggle to keep afloat and cut commission rates.

Significant announcements expected this week:

Monday, July 23:

Interims: Ascential PLC (LON:ASCL), SThree PLC (LON:STHR)

Finals: SRT Marine Systems PLC (LON:SRT), Tungsten Corporation PLC (LON:TUNG)

Trading update: Ryanair PLC (Q1) (LON:RYA), Paragon Banking Group PLC (LON:PAG), Petra Diamonds PLC (LON:PDL)

Economic data: US existing home sales; Chicago Fed national activity index

Tuesday, July 24:

Interims: Hammerson PLC (LON:HMSO), Drax Group PLC (LON:DRX), Gresham Technologies plc (LON:GHT), Proteome Sciences plc (LON:PRM); Spectris plc (LON:SXS), Unite Group PLC (LON:UTG)

Finals: Highlands Natural Resources Plc (LON:HNR), PZ Cussons PLC (LON:PZC)

Trading update: Britvic Plc (LON:BVIC)

AGM: Halfords PLC (LON:HFD)

Economic data: CBI industrial trends survey; US FHFA home price index; US composite PMI

Wednesday, July 25:

Interims: GlaxoSmithKline plc (Q2) (LON:GSK), ITV plc (LON:ITV), Tullow Oil plc (LON:TLW), Indivior PLC (LON:INDV), Informa PLC (LON:INF), Primary Health Properties PLC (LON:PHP), Croda PLC (LON:CRDA), Capital & Counties Properties PLC (LON:CAPC), Staffline Group PLC (LON:STAF), Rathbone Brothers PLC (LON:RAT), Quartix Holdings plc (LON:QTX)

Finals: ANGLE PLC (LON:AGL), Joules Group PLC (LON:JOUL)

Trading update: Vodafone PLC (LON:VOD), Antofagasta PLC (LON:ANTO), Marston’s plc (Q3) (LON:MARS), Wizz Air Holdings PLC (Q1) (LON:WIZZ), Brewin Dolphin PLC (LON:BRW), Empressaria Group PLC (LON:EMR), QinetiQ PLC (LON:QQ.), Victrex PLC (LON:VCTX)

Economic data: UK CBI distributive trades survey; BBA mortgage lending figures; German IFO business climate report; US new homes sales; US MBA mortgage applications

Thursday, July 26:

Interims: AstraZeneca PLC (Q2) (LON:AZN), Royal Dutch Shell PLC (Q2) (LON:RDSA), Diageo plc (LON:DGE), Anglo American PLC (LON:AAL), Smith & Nephew PLC (LON:SN.), British American Tobacco plc (LON:BATS), Inchcape PLC (LON:INCH), Schroders PLC (LON:SDR), RELX PLC (LON:REL), National Express PLC (LON:NEX), SEGRO PLC (LON:SGRO), Intu Properties PLC (LON:INTU), Bodycote PLC (LON:BOY), Robert Walters PLC (LON:RWA), Vesuvius Plc (LON:VSVS), Howden Joinery Group PLC (LON:HWDN), Franchise Brands PLC (LON:FRAN), Lancashire PLC (LON:LRE), UBM PLC (LON:UBM), Virgin Money PLC (LON:VM.)

Finals: Sky PLC (LON:SKY), Renishaw PLC (LON:RSW)

Trading updates: Compass Group PLC (LON:CPG), Johnson Matthey PLC (LON:JMAT), Sage Group PLC (LON:SGE), Tate & Lyle PLC (LON:TATE), Countrywide PLC (LON:CWD), Daily Mail & General Trust PLC (LON:DMGT), Aveva Group PLC (LON:AVV), Sophos Group PLC (LON:SOPH), KAZ Minerals PLC (LON:KAZ)m Countryside Properties PLC (LON:CSPC)

Ex-dividends: To knock 3.2 points off FTSE 100 index -  Royal Mail PLC (LON:RMG), SSE plc (LON:SSE)

Economic data: US weekly jobless claims; US durable goods orders; US international trade in goods

Friday, July 27:

Trading updates: BT Group plc (Q1) (LON:BT.A), CYBG PLC (LON:CYBG)

Interims: Pearson plc (LON:PSON), Reckitt Benckiser PLC (LON:RB.), Rightmove PLC (LON:RMV), Jupiter Fund Management PLC (LON:JUP), Equiniti Group PLC (LON:EQN), Hutchison China Meditech Ltd (LON:HCM), UK Mail Group PLC (LON:UKM), Greencoat UK Wind PLC (LON:UKW)

AGMs: Vodafone PLC (LON:VOD), United Utilities PLC (LON:UU)

Economic data: US Q2 GDP

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