With the end of August and the final UK bank holiday before Christmas fast-approaching, the corporate diary flow slows to almost a trickle in the coming week, with little economic data due either.
Only four FTSE 100-listed companies are scheduled to unveil updates – miner BHP Billiton plc (LON:BLT), housebuilder Persimmon PLC (LON:PSN), Irish construction group CRH PLC (LON:CRH), and Middle East hospitals operator NMC Healthcare PLC (LON:NMC).
BHP Billiton's numbers should be the biggest draw, although the trading performance of the world’s biggest miner is expected to take something of a back seat to a strategy announcement with its full-year results on Tuesday.
Activist investor Elliott Management has been pushing for strategic changes at BHP over the past year, including the sale of its underperforming US shale business.
In August, BHP bowed to the pressure and said it would sell the shale assets to BP PLC (LON:BP) as part of a wider plan to exit non-core operations.
Elliott also wants BHP to cancel its London listing and trade solely on the Australian Stock Exchange but the company has so far turned down this request.
Investors are squarely focused on BHP’s next move so any remarks on its strategy will be closely eyed when the group publishes its annual earnings.
As for its financial performance, analysts expect a strong set of results from BHP on the back of a recovery in commodity prices. Last month the company reported better-than-expected fourth quarter production and reiterated its full-year cost guidance.
The group is expected to announce a share buyback, supported by the proceeds of the shale business disposal.
Deutsche Bank estimates earnings (EBITDA) of US$24.3bn, net debt of US$11.7bn and free cash flow of US$12bn for the year.
“Net debt levels are approaching the lower end of the company’s $10-15bn target range and we expect a buyback to be announced within the next 12 months – as soon as the FY18 results in August is possible,” the bank said. “Sale of the Onshore business should accelerate and upscale cash returns.”
Rate hike to hit sales at Persimmon?
Last month’s trading update showed housebuilder Persimmon PLC (LON:PSN) grew sales by 5% to £1.84bn in the first half, but will that growth continue?
Mark Carney and co, as expected, went ahead and raised interest rates a few weeks ago, so investors will be looking at Tuesday’s interim results to see if that has had any effect on the FTSE 100 company’s selling power.
Reassuring figures on mortgage approvals in July showed another month of growth, though – an indicator that the first-time buyers Persimmon relies heavily on are still making their way on to the property ladder, thanks to initiatives like the Help to Buy scheme.
US housing demand important for CRH
CRH’s profitability is strongly linked to the health of the global economy, in particular, the US and European housing and construction activity, and recent results have highlighted continuing demand from the US.
The group recently announced initiatives aimed at improving margins and cash generation along with a review of its European operations, and its view on future infrastructure spend will be worth noting.
In a preview, analysts at UBS said they expect the Irish firm to report first-half like-for-like sales growth of 1.4% to €11.984bn, with underlying earnings (EBITDA) rising by 1.3% to €1.096bn.
The analysts also said they expect CRH to provide “more granularity of how the recently announced margin targets will be achieved" and expects second-half guidance like for like sales growth guidance of 5.7%.
More of the same from NMC Health
Gulf-based healthcare group NMC Healthcare has seen its shares comfortably outperform the market this year following good results in March.
They showed full-year patient numbers up 33.5%, so investors will be hoping for more of the same from Monday’s interims.
In a preview, Graham Spooner, Investment Research Analyst at The Share Centre, commented: “The company, which is targeting higher value treatments and procedures, forecast further growth at that point so the market will be expecting to see evidence of that in this report.”
Asia in focus at Playtech
Away from the blue-chips, FTSE 250-listed gaming software group Playtech PLC (LON:PTEC) has endured something of a difficult year, issuing a pair of profit warnings which have almost halved its market cap, although its €846mln acquisition of Italian rival Snaitech provided some better news.
After several years of above-market growth, struggles in Asia have snapped its winning streak. As a result, the price-to-earnings ratio has fallen to around 9. Prior to last month’s warning, the stock hadn’t traded below 10 times earnings for six years, according to Hargreaves Lansdown.
Given Playtech’s troubles in Asia, a more favourable outlook in the region and a decent start for the recently acquired Italian business could make the shares start to look good value. These are the two areas the market will be looking at in Thursday’s half-year report.
Strong loan growth, weaker margins for OneSavings Bank
Analysts at RBC Capital Market predict the challenger bank’s net interest margin – a key measure of lenders’ profitability – to fall to 3.0% in the first half from 3.16% a year ago due to “additional balance sheet liquidity from Term Funding Scheme (TFS) funds and tight mortgage spread conditions”.
At the end of the first quarter, the lender had a total drawing of £1.5bn after the Bank of England ended its TFS in February. The loan book grew by 5% in the quarter after receiving strong levels of applications in the company’s core buy-to-let and commercial businesses.
OSB said it was confident of delivering “at least mid-teens net loan book growth” this year. RBC is forecasting 22% year-on-year growth in net loans to £7.9bn for the first half.
“Our numbers assume a slowdown in growth in the second half to 16% year-on-year for the full year. We expect the investment in residential to lead to additional growth in 2019, but not 2018.”
RBC expects the interim dividend to be raised 22% to 4.3p. OSB has guided to a pay-out ratio for the full year of at least 25%.
Synergies eyed for Wood Group
The key focus for first-half results from mid-cap oil services firm John Wood Group PLC (LONLWG.) will be on order and margin momentum, the US onshore sector recovery, and the integration process following last year’s takeover of AMEC Foster Wheeler.
In a pre-close trading update, the FTSE 250-listed company said its first-half revenues are estimated to be in the range of US$5.1bn-US$5.2bn while underlying earnings (EBITA) are seen at US$250mln-US$260mln, and net debt at end-June is expected to be US$1.7bn.
On synergies, the company anticipated an exit run rate of around US$800mln by the first year post-completion and expected to deliver annualised run-rate cost synergies of at least US$170mln by the end of the third year.
Infrastructure firms to build on previous optimism
Meanwhile, infrastructure specialist Costain Group PLC (LON:COST) will be aiming to at least meet the expectations set by a first-half trading update in July when it releases its half-year results on Wednesday.
The firm said in the update that it was on track to meet its full-year expectations as its order book remained unchanged from a year earlier at £3.7bn while it also maintained a preferred bidder position of £400mln and high tendering levels in the first half.
Investors may also be looking for any further information on the group’s latest contract wins including the M6 J2a-J26 smart motorway contract and Motorway Incident Detection and Automated Signalling (MIDAS) technology systems contract for Highways England.
Investment opportunities include a £7mln public-private partnership (PPP) in Europe for which John Laing is the preferred bidder, a further 12 shortlisted PPP bids in North America and Europe at a potential value of £360mln and seven renewable energy positions worth £240mln.
Although after the company asked shareholders to stump up £210.2mln in a rights issue in March to cover its 2017 investments, investors will be wary of a repeat, especially if the company issues another special dividend as it did in March.
Maidens due from Avast
In a preview, analysts at UBS said that having delivered 9% constant currency, pro forma growth in the first quarter and having set a target at IPO of delivering high single-digit organic constant currency revenue growth in the year, they believe investors are expecting a broadly similar performance in the second quarter.
They added: “We are looking for US$408mln in continuing H1 billings and US$390mln in continuing H1 revenues, representing underlying growth of 8% in both cases.”
Significant announcements expected this week:
Monday, August 20:
Tuesday, August 21:
Economic data: UK public sector finances; CBI industrial trends survey
Wednesday, August 22:
Economic data: US existing home sales; US FOMC minutes
Thursday, August 23:
Interims: CRH PLC (LON:CRH); Playtech PLC (LON:PTEC), Anglo Pacific Group PLC (LON:APF), John Laing Group PLC (LON:JLG), Macfarlane Group PLC (LON:MACF), OneSavings Bank PLC (LON:OSB), Phoenix Group Holdings PLC (LON:PHNX), Premier Oil PLC (LON:PMO), Sportech plc (LON:SPO)
Ex-dividends: Carnival PLC (LON:CCL), Croda International PLC (LON:CRDA), Imperial Brands PLC (LON:IMB), London Stock Exchange Group PLC (LON:LSE), Mondi Plc (LON:MNDI) , Paddy Power Betfair plc (LON:PPB), Prudential PLC (LON:PRU), Royal Bank of Scotland Group PLC (LON:RBS)
Economic data: CBI distributive trades survey; US weekly jobless claims; US new home sales; US flash composite PMI
Friday, August 24:
Economic data: US durable goods orders