The bluechip reporting season may seem to be fairly slow at present, but a number of key updates will still attract attention next week from the retail sector, utilities, and tour operators.
However, the main focus is likely to on be the latest policy decision from the Federal Reserve, with the US central bank widely expected to hike interest rates by another 25 basis points to a range of 2.00%-2.25%.
Fed boss Jerome Powell’s press conference will, as always, also be closely watched, although economists at RBC Capital, expect his comments to reflect growing upside risks to the economic backdrop given the current US trade wars.
In a preview, they said: “He is likely to throw shade on the notion that tariffs are a significant downside risk. Expect him to be asked about the politicization of the Fed—but also expect that he’ll craftily dodge this one.
The RBC economists’ continued: “Beyond the hike and press conference, we think the summary of economic projections is likely to garner outsized attention.
“We will get the Fed’s estimate for where they think Fed Funds should be in 2021 for the first time. While there is unlikely to be any change to the 2018 and 2019 medians, we think the median increases to 3.6% in 2020 and that allows the Fed to show rates on hold in 2021 at that level.”
High street barometer from Next
The main corporate focus for the week will be interim results from Next Plc (LON:NXT), which are due on Tuesday, with the bluechip clothing retailer’s shares having performed well in the first half of the year.
However, clouds have begun to gather over the sector in the past few months, and Next’s trading update in late July showed sales growth slowed in the second quarter and the company said some sales might have been brought forward from August.
Graham Spooner, investment research analyst at The Share Centre said the fact that full-year guidance was not raised at that point was also seen as disappointing by some, so there will again be much attention on that.
Investors will also be looking even more intently at the company’s high street sales given the recent news from employee-owned John Lewis of a 99% collapse in first-half profits due to increased discounting, Spooner added.
Pennon update on tap
Monday’s trading update from mid-cap water company Pennon Group plc (LON:PNN) comes in the wake of the submission of its 2020-2025 business plan to Ofwat, the water watchdog.
In it, it pledged that customers of its sUBSidiary, South West Water, would experience customer bills that would be lower in 2025 than they were fifteen years earlier, and lower than they are today.
Shareholders will hope it is able to do this while maintaining the dividends that are the main – some would say the only – reason for holding the shares.
The trading period under review will include the unusually hot summer and investors will be expecting commentary on how this has affected trading.
As well as its water business, Pennon has its Viridor waste management arm as well. In May, Chris Loughlin, Pennon’s chief executive, said Pennon “continues to expect UK residual waste market dynamics to be favourable, with demand for energy recovery facilities exceeding capacity into the long term.”
UU hit by volatile weather
Bluechip multi-utility United Utilities Group PLC (LON:UU.) will issue a trading statement covering the last six months on Friday having also recently outlined its business plan for the 2020-25 period.
The company is proposing a 10.5% reduction in real terms in average bills over the period, which will be welcomed by customers, if not by shareholders.
Those shareholders will be more interested in whether United Utilities can reverse a decline in pre-tax profits reported in its full-year results back in May.
“The significant progress we have made positions us well as we look towards the next regulatory period and gives us confidence that we can rise to the longer-term challenges resulting from a growing population, affordability concerns and the impact of more volatile weather,” said chief executive Steve Mogford in the results statement.
The weather has certainly been volatile this year, ranging from the Beast from the East to a scorching Indian summer.
Egypt deaths to hit Thomas Cook and TUI?
You only have to look at the share prices of Thomas Cook Group PLC (LON:TCG) and TUI (LON:TUI) to see it has been a rough ride for the London-listed tour operators of late.
The hot summer weather at home meant us Brits didn’t feel as compelled to head abroad in search of warmer climes, hitting demand for package holidays.
Back in its third-quarter update, Thomas Cook lowered its full-year guidance slightly to account for the higher number of people enjoying a ‘staycation’.
Since then, the deaths of a British couple staying at a popular Thomas Cook resort in Egypt has dominated the news and analysts reckon that could have dented sales for one of the tour operators’ higher-margin destinations.
On top of that, margins on Spanish holidays are coming under more and more pressure as competition on those nearer routes heats up.
More company-specifically, UBS analysts expect TUI to repeat its full-year guidance as weakness in UK bookings is offset by Germany, where capacity has increased following the collapse of Air Berlin.
As for Thomas Cook, the number crunchers think there could be another slight downgrade to its forecasts should the negative press with regards to Egypt have impacted bookings as they expect. Look out to see if that issue has put people off making future bookings as well.
Steady as she goes for Saga
Over-50s holidays, healthcare and insurance provider Saga PLC (LON:SAGA) is due to report its first-half results on Thursday, with UBS expecting a 5% year-on-year decline in profits to £98mln.
The FTSE 250 group is due to take delivery of its new ship, the Spirit of Discovery, next summer and UBS wants to see bookings for its first 19 cruises rise to around 58%.
In its first-quarter update, Saga reported a sharp rise in motor and home insurance volumes, and analysts are looking for further acceleration
The Swiss bank added: “We expect to see continued solid trends in broking new business growth and ship bookings, but we note both appear to be priced into consensus expectations already.”
“Broking growth and cruise bookings are key to helping sentiment improve.”
Less fizz for AG Barr
AG Barr PLC (LON:BAG) is another business having to adapt to change as, prompted by the UK government’s tax levy on sugary drinks, the group earlier this year decided to cut the amount of sugar in its famous Iron Bru recipe.
Interim results from the soft drinks maker, due on Tuesday, will provide an opportunity for investors to see more of how the new formulation is going down with consumers, with previous updates having proved reassuring.
Hargreaves Lansdown’s Salmon pointed out: “It’s easy to see why the decision to change a winning formula prompted a few worries, although recent updates have proven just the tonic to ease concerns. The new recipe has continued to grow market share.”
“However”, the equity analyst added, “Barr’s management is keeping the champagne on ice for now. More money is to be poured into the advertising budget over the second half.
“While that’ll limit margin progression, we think it’s a sensible move. Preservation of the brand for the long-term is the order of the day, and it’d be unwise to cut corners at this crucial juncture.”
Swedish sweetness eyed for Hotel Chocolat
Any tasty developments from Hotel Chocolat Group PLC’s (LON:HOTC) agreement with Nordic firm Retail Brands will be eyed when the firm reports its final results on Tuesday.
The luxury chocolate maker agreed in July to transfer its retail stores in Denmark to Retail Brands, saying it would use its “strong local knowledge” of the Scandinavian market to grow the company’s brand in the region.
At the time Hotel Chocolat said it retained an option to buy back the business after five years, but until then goods would be sold to the partner on wholesale terms, and a royalty levied on sales.
Investors will also be looking to see if there is more good news in the full-year numbers after a trading update on 18 July said revenue had increased by 12% to £116mln as year-on-year sales rose 6%, boosted by 15 new stores and 2000,000 new online sales.
Hopes of a brighter horizon for the AA
Investors in auto recovery and insurance firm the AA plc (LON:AA.) will be hoping for any uplift in its currently gloomy profit forecast when it reports interims on Wednesday.
In a trading update in August, the FTSE 250-listed firm said its reduced profit forecasts had remained unchanged despite an 8% rise in roadside call-outs in July as they had resulted in higher costs, with the company forced to use third-party garages due to an unexpected surge in breakdowns following severe weather.
In February, the group cut its dividend and earnings expectations and unveiled a strategy to invest more into new technologies and roadside improvement, so investors will likely be looking for any news of positive progress in the second half.
Significant announcements expected week ending September 28:
Monday September 24:
Trading update: Pennon Group plc (LON:PNN)
Interims: Chariot Oil & Gas Ltd. (LON:CHAR), Deltex Medical Group plc (LON:DEMG), Dillstone Group PLC (LON:DSG), Gama Aviation PLC (LON:GMAA), Instem Plc (LON:INS), Kape Technologies PLC (LON:KAPE), Maxcyte PLC (LON:MXCT), Nasstar Plc (LON:NASA), Pennant International Group PLC (LON:PEN), Spectra Systems Corporation (LON:SPSY), Trinity Exploration & Production PLC (LON:TRIN), XL Media PLC (LON:XLM)
Finals: Duke Royalty Limited (LON:DUKE), River & Mercantile Group PLC (LON:RIV)
Economic data: CBI industrial trends survey; Chicago Fed national activity index; Dallas Fed manufacturing survey
Tuesday September 25:
Trading updates: CMC Markets Plc (LON:CMCX), Low & Bonar PLC (LON:LWB), One Media IP Group PLC (LON:OMIP)
Interims: Next Plc (LON:NXT), AG Barr PLC (LON:BAG), Alltitude Group PLC (LON:ALT), Animalcare Group PLC (LON:ANCR), Card Factory PLC (LON:CARD), Ebiquity plc (LON:EBQ), Fireangel Safety Technology Group PLC (LON:FA.), Harvey Nash Group plc (LON:HVN), Keystone Law Group PLC (LON:KEYS), Learning Technologies Group PLC (LON:LTG), Mortgage Advice Bureau Holdings PLC (LON:MAB1), Mi-Pay Group PLC (LON:MPAY), Osirium Technologies PLC (LON:OSI), Premier Technical Services Group PLC (LON:PTSG), Sumo Group PLC (LON:SUMO), S&U PLC (LON:SUS), WANdisco PLC (LON:WAND)
Finals: Hotel Chocolat PLC (LON:HOTC), Close Brothers Group PLC (LON:CBG), Blancco Technology Group PLC (LON:BLTG), Scancell Holdings Plc (LON:SCLP), Swallowfield plc (LON:SWL)
Economic data: FOMC meeting begins; US consumer confidence; US house prices indexes
Wednesday September 26:
US FOMC rate decision
Interims: The AA plc (LON:AA.), Boohoo Group PLC (LON:BOO), Amryt Pharma PLC (LON:AMYT), Armadale Capital PLC (LON:ACP), Billing Services Group Ltd. (LON:BILL), CentralNic Group PLC (LON:CNIC), Corero Network Security PLC (LON:CNS), Crawshaw Group PLC (LON:CRAW), Destiny Pharma plc (LON:DEST), Minds + Machines Ltd. (LON:MMX), Pelatro PLC (LON:PTRO), Summit Germany Limited (LON:SMTG)
Finals: Accrol Group Holdings PLC (LON:ACRL), Allergy Therapeutics plc (LON:AGY), James Halstead PLC (LON:JHD), Town Centre Securities PLC (LON:TOWN)
Trading updates: MITIE Group PLC (LON:MTO), PZ Cussons PLC (LON:PZC), SSP Group PLC (LON:SSP), Trifast PLC (LON:TRI), Futura Medical PLC (LON:FUM), NCC Group PLC (LON:NCC)
Economic data: BBA UK mortgage lending data; CBI distributive trades survey; US new home sales
Thursday September 27:
Trading update: TUI AG (LON:TUI), Halma PLC (LON:HLMA)
Finals: Clinigen Group PLC (LON:CLIN), CVS Group PLC (LON:CVS), Hansard Global PLC (LON:HSD), Bluefield Solar Income Fund Limited (LON:BSIF)
Interims: Saga PLC (LON:SAGA), 888 Holdings PLC (LON:888), BioPharma Credit PLC (LON:BPCR), Circassia Pharmaceuticals PLC (LON:CIR), Maistro PLC (LON:MAIS), Midatech Pharma Plc (LON:MTPH), Petropavlovsk PLC (LON:POG)
Ex-dividends to clip 0.8 points off FTSE 100 index: Hargreaves Lansdown PLC (LON:HL.), Smurfit Kappa Group PLC (LON:SKG), Wm Morrison Supermarkets PLC (LON:MRW)
Economic data: Nationwide UK house price index; US weekly jobless claims; US GDP; US durable goods orders; US international trade in goods
Friday September 28:
Trading update: United Utilities Group PLC (LON:UU.),
Interims: GAN PLC (LON:GAN), Nostra Terra Oil & Gas Co. PLC (LON:NTOG), Richoux Group plc (LON:RIC)
Economic data: UK quarterly GDP, balance of payments; CBI growth indicator survey; US personal income and spending; US Chicago PMI; University of Michigan final consumer sentiment reading