After his giveaway UK Budget at the start of this week signalled the end of austerity, the Chancellor of the Exchequer will be looking to see whether the Bank of England will be sticking to his script on another 'Super Thursday', when the central bank announces its latest interest rate decision, posts minutes from its Monetary Policy Committee (MPC) meeting and publishes its quarterly Inflation Report.
Economists at RBC Capital expect the MPC to leave the UK bank rate unchanged at 0.75% in November, with a unanimous 9-0 vote anticipated again as in September, having hiked rates by 0.25% back in August.
They said while the recent better-than-expected domestic growth numbers and a strengthening in wage inflation will have to be factored in, these are likely to be offset by concerns over weaker global growth and stalling Brexit negotiations.
However, the RBC economists expect the policy message from the inflation report to continue to point to ‘gradual and limited’ policy tightening over the policy horizon with medium-term inflation projected to remain slightly above 2%.
Restructuring continues at BT as investors await new boss
On the corporate front, half-year results from BT Group PLC (LON:BT.A) will be a focus on Thursday though the numbers will be overshadowed by the impending end of the Gavin Patterson era at the telecoms giant.
We already knew the chief executive was on his way out and now we know when and who his successor will be following news last week that Patterson will hand over to Philip Jansen, the former boss of payments specialist, Worldpay at the end of January
While Patterson would no doubt like to sign off on a relative high - before Jansen, in all probability, writes down the value next year of all the investments made on Patterson’s watch - the group only announced the results of its strategic review back in May, which does not leave a lot of time for Patterson to have achieved much.
The first quarter of the current fiscal year (i.e. April to June) saw adjusted profit before tax on an IFRS 15 accounting standards basis rise to £816mln from £791mln a year ago despite a fall in revenues.
The improvement came largely as a result of the company slashing costs as part of its restructuring; it would be no surprise were the new boss to swing the axe even harder next year, given that he is said to be a “corporate restructuring specialist”.
Consensus expectations are for second quarter revenues to fall by 2.4% to £5.786bn, with adjusted underlying earnings (EBITDA) down 2.3% to £1.769bn.
Not so sure of Shell
‘Could do better’ was pretty much the City’s view of Royal Dutch Shell PLC’s (LON:RDSA) most recent results, so naturally, the market will be anxious to see signs of improvement, or, indeed whether the financial performance has in fact worsened.
In the summer, Morgan Stanley downgraded its rating for Shell to ‘neutral’, moving away from a previously positive stance.
“FCF and gearing are still set to improve but no longer in a differentiated manner,” Morgan Stanley analysts said at the time.
“Dividend growth is now lagging peers, and the buyback has started but at a lower than expected pace. We feel our overweight case is no longer supported.”
So, as the next set of figures loom the questions from shareholders are quite simple – how much cash are is shell generating and how much of it will be theirs?
New broom to deliver at Smith & Nephew
Newish Smith & Nephew PLC (LON:SN.) boss Namal Nawana was bullish about the artificial hips and knees maker’s health a few weeks after taking the helm, and investors will hope the firm’s interims on Thursday will back this up.
Although there is a tendency for new management to “kitchen sink” results – throw in every write-down and exceptional charge available – investors will be hoping that at the very least Nawana will reiterate full-year guidance for underlying revenue growth of between 2-3%, with margins at or above the 19.6% it achieved last year. The consensus forecast is for Q3 organic sales growth of 2.7%.
The new boss has vowed to streamline the operating model to reduce complexity, cut costs and improve the commercial model to accelerate top-line growth.
HSBC, which recently downgraded the stock to ‘hold’, would like management to provide more clarity on these strategic steps, “whether they come with additional restructuring costs and how management is going to address soft performances in segments including Advanced Wound Care, bioactives and AET [Arthroscopic Enabling Technologies].”
Takeda takeover looms for Shire
Drugs blue-chip Shire Plc (LON:SHP) will also announce its third-quarter numbers with the main focus to be on anything that could potentially cause a negative shareholder vote on the firm’s planned takeover by Takeda of Japan.
Earlier this week Takeda said it sell one of Shire's drugs in development to ease competition concerns as part of its bid to gain regulatory approval in Europe, so analysts at UBS think it will be hard for the Shire results to provide much new news on that topic.
The Swiss bank’s analysts estimate Shire’s total product sales of US$3,693mln and non-GAAP operating income of US$1.358bn.
Significant events expected on Thursday November 1:
Bank of England Policy meeting, inflation report
Interims: BT Group PLC (LON:BT.A), Royal Dutch Shell PLC (LON:RDSA), Smith & Nephew PLC (LON:SN.), Shire Plc (Q3) (LON:SHP), Indivior PLC (LON:INDV), Lancashire PLC (Q3) (LON:LRE)
Trading updates: Just Eat PLC (Q3) (LON:JE.), Croda International PLC (LON:CRDA), Carpetright PLC (LON:CPR)
AGMs: Sky PLC (LON:SKY), Go-Ahead Group PLC (LON:GOG)
Ex-dividends to clip 1.46 points off FTSE 100 index: Unilever plc (LON:ULVR)
Economic data: UK manufacturing PMI report; US weekly jobless claims; US Challenger job cuts; US ISM manufacturing report; US construction spending