The latest update from Royal Mail Group PLC (LON:RMG) will be the main corporate focus on Tuesday, with the privatised mail delivery firm having posted a disappointing first half performance which saw it miss cost savings target and struggle with an ongoing decline in letter volumes.
The FTSE 100-listed firm’s pre-tax profit fell to £33mln in the 26 weeks to September 23, down from £77mln a year earlier although revenue rose by 1% to £4.93bn, up from £4.83bn, as 9% growth in its European business, Global Logistics Systems offset a 1% drop in the UK parcels, international and letters unit.
Analysts at UBS expect to see a similar trend when the postal operator reports its results for the nine months ended December 23.
“We believe that 9-month trends will likely be similar to H1, with UK parcel volume and revenue +7% (H1: +6%) and UK letter volume -7 %, with revenue -5%,” the Swiss bank’s analysts said.
“Given strong e-commerce growth over Christmas, the key question is whether costs and productivity developed in line with guidance.”
Royal Mail’s current guidance for the 2019 financial year is for adjusted group operating profit before transformation costs of £500-550mln. The consensus forecast is £509mln.
Market conditions key for Hargreaves Lansdown
Interim results from blue-chip savings platform group Hargreaves Lansdown PLC (LON:HL.) could slightly disappoint given weaker market conditions in the final quarter of 2018.
In a preview, analysts at Peel Hunt pointed out that consensus estimates for the FTSE 100-listed firm’s first-half profits stand at around £156mln, implying growth of around 6%, based on net new business of £2.6bn, and a period-closing assets under administration figure of £88bn.
The analysts think it is inevitable that full-year consensus estimates will move lower given the market, however, they believe the great attraction and strength of HL is its ability to continue to attract assets, even in periods of increased volatility.
One interesting point in the results, the Peel Hunt analysts said, will be the take-up of its Active Savings proposition, where the number of underlying products continues to increase.
Crest Nicholson braces for drop in profits
Moving down the market ladder, FTSE 250-listed housebuilder Crest Nicholson PLC (LON:CRST) won’t have much to celebrate in its final results having forecast a drop in profits for the 12 months in October.
At the time, the firm said the usual pick up in sales volumes in the Autumn period had not been evident across September and October as many home buyers decided to put off purchases amid the political and economic uncertainty in the UK.
While investors will be on the look-out for any impact from new cost-cutting measures and slower build rates, any news of a new chief financial officer could also be welcomed seeing as Crest has been without once since October when incumbent Robert Allen stepped down amid the profit warning.
Analysts at Redburn have certainly not been feeling positive, downgrading Crest to ‘neutral’ from ‘buy’ on the grounds that it was “unlikely” the firm would reach its profit estimates for 2019 for between £170mln-£190mln.
“Consensus (£169m) believes in the low end of the range, but we are 10% below that, at £152mln” the analysts said, adding that it did appear Crest was “faring less well” than similarly priced peers such as Berkeley and Countryside Properties.
Sales growth flattens for Domino’s Pizza
In their full-year forecasts, analysts at Peel Hunt are assuming that Domino’s Pizza PLC (LON:DOM) will see no sales growth in the fourth-quarter of 2018, against an 6.1% advance the year earlier, in comparison to 4.6% growth in the previous three quarters versus 4.3% over the same quarters in 2017.
However, the Peel Hunt analysts said: “We believe there is still plenty of structural growth in the traditional pizza delivery market, of which Domino’s is taking a disproportionate share, exploiting its dominant brand position (c5x the turnover of the nearest competitor) that also supports expansion and growing its marketing/advertising firepower.”
They said even though their forward forecast assumptions are, in their view, cautious in relation to like-for-like sales (3% per annum) and margins (down in 2018E and stable thereafter), even on these assumptions, the analysts estimate that Domino’s pre-tax profit should reach £170mln in 2025, by which point they think £1bn could be returned to shareholders
Brexit Plan B
Away from the company news, investors will also eye the latest twist in the Brexit saga, with a parliamentary vote due on Theresa May’s Plan B, following Plan A’s rejection earlier this month.
The UK prime minister has vowed to seek changes from the European Commission to the Irish ‘backstop’ measures regarding the border between Northern Ireland and the Irish Republic after the UK leaves the EU.
May has also scrapped the £65 fee EU citizens were due to pay to secure the right to continue living in the UK after Brexit.
However, few other details about how her deal would be changed have emerged so far before next the latest vote.
Significant events expected on Tuesday:
Trading updates: Royal Mail Group PLC (LON:RMG), Domino’s Pizza PLC (LON:DOM), Greencore PLC (LON:GNC), Luceco PLC (LON:LUCE), UDG Healthcare PLC (LON:UDG), Intermediate Capital Group PLC (LON:ICP)
Interims: Hargreaves Lansdown PLC (LON:HL.), PZ Cussons PLC (LON:PZC), NWF Group plc (LON:NWF), Filtronic PLC (LON:FTC)
Finals: Crest Nicholson PLC (LON:CRST)
Economic data: US consumer confidence; US goods trade balance; US Case-Shiller