The impact of the UK’s recent heatwave on businesses has been mixed.
For most pub operators with a decent beer garden, the warm summer months has drawn in more customers. But more time spent at the pub left people with less time for, say, shopping on the high street or eating out at restaurants.
In the week ahead, we’ll hear whether the sunshine helped or hurt sales at retailers JD Sports Fashion PLC (LON:JD), Dunelm PLC (LON:DNLM) and Primark owner Associated British Food PLC (LON:ABF) as well as pub owner JD Wetherspoon PLC (LON:JDW).
Investors will also turn their attention to updates from Wm Morrison Supermarkets PLC (LON:MRW), Galliford Try plc (LON:GFRD), Ashtead Group PLC (LON:AHT), Cairn Energy PLC (LON:CNE) and GVC Holdings PLC (LON:GVC).
Away from company news, monetary policy decisions from the Bank of England and European Central Bank are the most notable events but neither of the central banks are expected to announce any changes so they are unlikely to bring much excitement to the market.
‘Spoons to have missed out on football fever?
The hot weather and a strong run by England at the World Cup have provided some respite for pUBS groups over summer, but will that extend to Wetherspoons, which is due to report its full-year results on Friday?
‘Spoons is well-known for rarely showing the football while most of its pUBS don’t have much of a beer garden, with both likely to have put off some punters.
That said, the pub chain said in July that like-for-like sales were up 5.2% year-on-year as the firm’s prime locations and value offering continue to appeal to the masses.
Chairman Tim Martin has repeatedly said sales would have to climb by at least that much if profits are to be maintained at last year’s levels given the sharp rise in business rates and staff costs.
Also of note, as always, will be Martin’s Brexit rant, which is likely to take up most of the announcement.
JD Sports expansion plans eyed
Investors in sports gear retailer JD Sports will be looking out for any more news regarding the international expansion of the firm when it releases a trading update on Tuesday.
In a statement ahead of its annual general meeting in June, JD’s chairman Peter Cowgill said the group was on track to meet its expectations for the full year, adding that the group was “excited about the opportunity ahead of us” following the acquisition of Finish Line in the US.
There will also be speculation regarding whether the firm can surpass its record profits last year when an ‘athleisure’ craze drove its pre-tax profits up 24% to £294.5mln.
Dunelm hopes to see struggles end
In another episode of high-street retail woe, troubled homewares firm Dunelm will be hoping to draw a line under a tough year when it reports its full-year results on Thursday.
Analysts at UBS are forecasting pre-tax profit for the group of £102mln, in line with guidance issued in July when Dunelm said it had struggled to sell its discounted product lines during the summer period, resulting in a £3mln dent to its earnings.
The Swiss bank added that the market was weaker than expected a year ago, with continued pressure on discretionary incomes as well as lower consumer confidence and a weaker housing market recently showing up in the figures of fellow retailer John Lewis.
Despite the circumstances, UBS said Dunelm was “much better positioned for the next five years” as a result of its stronger online offering, which had seen sales increase by 40% in the fourth quarter with active customers on dunelm.com up 18% year-on-year.
Morrisons to benefit from slowdown in growth at discounters
First half sales at Morrisons are forecast to grow amid signs of easing competitive pressures.
Competition from discount grocers Aldi and Lidl led to a price war between the so-called ‘Big Four’ supermarkets. But analysts have noted that store expansion and sales growth at the discounters have slowed recently.
Morrisons reports its interim results on Thursday with analysts expecting higher revenues and improved margins. Areas of focus will be cost on cutting measures and the performance of wholesale sales following deals with Amazon and the McColl’s convenience store chain.
UBS analysts said they believe the scale of Morrisons' cost-saving opportunity is under-appreciated and, with discounter space growth and like-for-like (LfL) sales both slowing, its pressure to reinvest is easing.
They predict Morrison’s reporting first-half like-for-like sales growth of 5.5%, with underlying earnings (EBIT) of £235mln, pre-tax profit at £203mln, and a margin of 2.69%, up 15 basis points year-on-year.
Few surprises expected from AB Foods
Analysts aren’t expecting too many surprises from ABF’s pre-close trading update on Monday.
Back in July, the group reiterated its full-year guidance and the market is expecting a small year-on-year rise in revenue and profits.
Investors will be paying close attention to the outlook for the sugar business which has come under increasing pressure as wholesale prices tumble.
Sales at ABF’s Primark division, the jewel in the crown, fell in the first half despite a solid performance in its core UK market.
UK sales will once again be in the spotlight given the recent fire which destroyed the main Belfast store, while margins at the value fashion retailer are expected to have picked up considerably in the second half.
Recovery going well at Galliford Try
Housebuilder and construction firm Galliford Try looks to be making a decent fist of recovering from the devastation caused by its partnership with Carillion.
Having tapped the market in May for £150mln, it expects to end the year with net debt of £30mln after having to spend more to build Aberdeen’s new ring road following the collapse of project partner Carillion in February.
The company has already revealed that its Linden Homes business delivered 3,442 housing completions in the year to end of June 2018, up from 3,296 last year, and that the average private sales price rose to £367,000 from £354,000, so the focus will be on trading in the second half of the calendar year.
Shareholders’ fingers will be crossed that there are no more provisions being made for the ill-fated Aberdeen Western Peripheral Route project.
Liberum Capital Markets is expecting pre-tax profit of £182.7mln and a full-year dividend of 76p, which is in line with consensus forecasts.
US the key for Ashtead
It’s an ill wind that blows nobody any good, and US-focused tool hire firm Ashtead last trading update was boosted by repair work done in the wake of hurricanes Harvey, Irma and Maria.
Tuesday will see the company issue results for the three months to the end of July, and the climate may not have been so helpful this time round.
The UK market remains competitive but the company’s Sunbelt business continues to thrive in the US.
Numis Securities remarked in June that, anecdotally, US construction sites have around US$25mln of Sunbelt rental equipment that would previously have been owned by a construction company, which the broker said is “clear evidence of the structural shift towards a rental model”.
An acquisition in August 2017 doubled the size of the Sunbelt Canada business and Numis continues to believe the Canadian market offers a “significant opportunity” for the group.
The broker said it would not be surprised were capital expenditure in the current fiscal year to be at the top end of the range, based on the strength of trading.
BoE meeting seen as a ‘non-event’
The Bank of England is widely-expected to stand pat on interest rates at Thursday’s monetary policy announcement but the market will be looking for any hints about future increases.
The central bank raised the benchmark interest rate in August to 0.75% from 0.5%, marking the second hike in a decade.
The Bank has indicated that it is in no hurry to raise rates again with future tightening of monetary policy to be gradual and limited.
“With the Bank of England having only raised interest rates from 0.50% to 0.75% at the early-August meeting of the Monetary Policy Committee (MPC), the September meeting can essentially be seen as a non-event,” said Howard Archer, chief economic advisor to the EY ITEM Club. “Unchanged interest rates following a unanimous 9-0 MPC vote looks to be a nailed-on certainty.”
Market participants are likely to be more interested in whether Mark Carney confirms if he will stay on as governor beyond his planned leaving date next June to help steer the economy through Brexit. Carney, who has already extended his term by a year, told lawmakers on parliament's Treasury Committee on Tuesday that he would remain in the role if necessary.
Market awaits ECB economic outlook
European Central Bank President Mario Draghi is expected hold a dovish press conference on monetary policy on Thursday amid political and market uncertainties.
Brexit negotiations, the Italian budget, emerging market volatility and the trade spat with the US are among some of the uncertainties facing the euro-area.
“The new ECB macro projections for 2018-2020, global trade and the situation in Italy are likely to be the key focus of the upcoming ECB meeting,” analysts at UBS said.
The ECB is unlikely to announce further policy changes after announcing in June that it would reduce the monthly pace of asset purchases after September before ending the quantitative easing programme at the end of December.
Weaker-than-expected performance at Kraken drags on Cairn Energy
Joint venture partnerships don’t come with any obligation for ‘spoiler alerts’ so, by the time Cairn Energy releases its half yearly financial results, on Tuesday, the market already knows that the Kraken field has been operating below expectations.
EnQuest, a 50% stakeholder in Kraken, revealed its results on Friday that the field had yielded an average of 31,000 barrels during the first six months of 2018, impacted by water injection issues during the second quarter.
One analyst noted that the injection issue had now been resolved and whilst Kraken is still performing “well below expected peak production”.
Cairn’s shares were off 1.2%, at around 229p, in response to EnQuest’s Kraken insight so, arguably the sentiments will be somewhat priced in.
Investor attentions will also be on the Cairn India matter, for which an outcome is anticipated in the fourth quarter.
GVC US expansion in focus
Expansion and emergence into the United States will be the key focus for investors in gambling firm GVC Holdings as it releases its results on Thursday.
GVC, in late July, did a deal with MGM Resorts amid the ‘land grab’ in the states which was kicked off by a US Supreme Court decision back in May, opening up sports betting.
The company and MGM, both companies have agreed to inject US$100mln each, as part of the 50/50 joint venture.
Given that the new season for the NFL, likely the biggest sports betting market, is just kicking off will be a key time for these new ventures.
Significant announcements expected week ending September 14:
Monday September 10:
Trading update: Associated British Foods plc (LON:ABF)
Interims: Gulf Keystone Petroleum Limited (LON:GKP)
Economic data: UK monthly GDP estimate; UK trade figures; UK industrial, manufacturing production; UK construction output; US consumer credit
Tuesday September 11:
Trading updates: Ashtead Group PLC (Q1) (LON:AHT)
Interims: Cairn Energy PLC (LON:CNE), JD Sports PLC (LON:JD.), DP Eurasia NV (LON:DPEU), ECSC Group PLC (LON:EUSP), EU Supply PLC (LON:EUSP), Hilton Food Group PLC (LON:HFG), Harworth Group PLC (LON:HWG), Midwich Group Plc (LON:MIWD), Nucleus Financial Group PLC (LON:NUC), The Simplybiz Group PLC (LON:SBIZ), Sanne Group PLC (LON:SNN), STM Group Plc (LON:STM), Silence Therapeutics PLC (LON:SLN), Surgical Innovations PLC (LON:SUN), Team17 Group PLC (LON:TM17), TP Group PLC (LON:TPG), Ventura PLC (LON:VEC)
Finals: Alumasc Group PLC (LON:ALU), CPL Resources PLC (LON:CPS), K3 Capital Group Plc (LON:K3C)
Economic data: UK labour market statistics; German ZEW business sentiment data; US wholesale inventories; US JOLT job openings
Wednesday September 12:
Finals: Dunelm Group PLC (LON:DNLM), Galliford Try plc (LON:GRFD), 1pm PLC (LON:OPM)
Interims: Goals Soccer Centres PLC (LON:GSC), Advanced Medical Solutions PLC (LON:AMS), Diversified Gas & Oil PLC (LON:DGOC), Epwin Group PLC (LON:EPWN), IGas Energy Plc (LON:IGAS), Medica Group PLC (LON:MGP), Ten Entertainment Group PLC (LON:TEG), Property Franchise Group PLC (LON:TPFG)
Trading update: Safestore Holdings PLC (LON:SAFE)
Economic data: US forward-PPI; Fed Beige Book
Thursday September 13:
BoE and ECB interest rate decisions
Interims: Wm Morrison Supermarkets PLC (LON:MRW), GVC Holdings PLC (LON:GVC), Faron Pharmaceuticals Oy (LON:FARN), Gresham House Plc (LON:GHE), Ophir Energy Plc (LON:OPHR), Oxford Biomedica PLC (LON:OXB), Safe Charge International Group Limited (LON:SCH), Xeros Technology Group PLC (LON:XSG)
Finals: Ricardo plc (LON:RCDO)
Ex-dividends: No FTSE 100 stocks
Economic data: US consumer price index; US weekly jobless claims
Friday September 14:
Finals: JD Wetherspoon PLC (LON:JDW)
Trading update: SThree PLC (LON:STHR)
Economic data: US retail sales; US industrial production; US import, export prices; University of Michigan consumer sentiment reading