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Bank of England's 'Super Thursday' and slew of corporate earnings eyed as Chinese New Year begins

The week ahead includes updates from Thomas Cook, Superdry, Ryanair and Tate & Lyle, among others.

Carney
Given the uncertainty over Brexit, the BoE is likely to keep monetary policy unchanged

The Bank of England’s first “Super Thursday” of 2019 and a batch of corporate earnings from blue-chips will give market participants plenty to keep busy with in the coming week.

Super Thursday is expected to be a bit of a damp squib, with the Bank of England unlikely to change monetary policy given the uncertainties over Brexit, which also makes the forecasts in the central bank’s quarterly inflation report opaque.

Lee Wild, Head of Market Strategy at interactive investor commented: “The trend for hyping up a day of sporting events has spilled over into the world of finance, and perhaps even the Bank of England was surprised when it too got its own ‘Super Thursday’.

“Britain’s central bankers will announce both their latest decision on UK interest rates and quarterly inflation report at midday on the 7th. Of course, each of these has implications whatever is decided, but the Brexit debacle and its impact on economic growth has taken a rate hike off the table.

“Weak consumer spending and a pullback in oil prices should also deliver a benign outcome on inflation near to the 2% target. While interest rate policy will do nothing to underpin sterling, a soft Brexit, or no Brexit at all, will.”

It should be more interesting on the company front with trading updates and earnings from Thomas Cook Group PLC (LON:TCG), Ocado (LON:OCDO), Superdry PLC (LON:SDRY), Ryanair Holdings PLC (LON:RYA) and Tate & Lyle PLC (LON:TATE), among others.

Investors will also get to see how well the housing market is holding up in uncertain times when Redrow plc (LON:RDW), Barratt Developments PLC (LON:BDEV) and Bellway PLC (LON:BWY) update the market on trading.

Thomas Cook to post wider quarterly loss

Thomas Cook Group PLC (LON:TCG) is expected to post a wider first-quarter loss on Thursday after a slow start to winter trading.

In the full year results statement in November, the travel firm said bookings for winter holidays were down 3% on last year while bookings for summer this year have had a “mixed start”. Summer holiday bookings where ahead in the UK but lower in Northern and Continental Europe.

Morgan Stanley said since then it has seen “anecdotal evidence” of relatively weak trading and very low prices in the UK for holidays during the peak summer season.

The investment bank pointed to research from price comparison site, TravelSupermarket, which claimed summer 2019 holiday package prices have been slashed by more than a third in a bid to attract early bookings.

“While some UK agents mentioned a good start to the booking season, this seems to be coming at the expense of lower prices,” Morgan Stanley said.

“The outlook for the German market is also mixed, with TUI recently mentioning strong demand for Turkey, Egypt and long haul destinations (read here), but our call with a major German operator citing mid-single digit booking drops in January.”

Morgan Stanley expects Thomas Cook to post a loss of £52mln, compared to last year’s loss of £42mln, on revenue up 1% to £1.77bn.  

Will Ocado confirm talks with M&S?

Ocado PLC’s (LON:OCDO) full year results are likely to be overshadowed by rumours of “secret talks” with Marks and Spencer PLC (LON:MKS) about a supply deal.

The online grocer is understood to be considering replacing Waitrose as its groceries supplier with M&S, according to the Mail on Sunday.

In reaction to the news, shares in Ocado and M&S jumped on Monday, which suggests investors would be happy with such an arrangement.

The market has also speculated that M&S might buy Ocado’s entire grocery delivery operation. That would leave Ocado to focus on its technology business.

Ocado has been transitioning to an international technology firm by supplying its digital platform and warehouses to other supermarkets.

However, its own grocery delivery business is still going strong, given the competition the sector is facing.  

In the fourth quarter, retail revenue rose 12% on the year to £390.7mln as average orders per week gained 13.1% to 320,000 after expanding capacity with new warehouses in Andover and Erith.

Chief executive Tim Steiner said: “Although in many respects 2018 has been a transformative year for Ocado, the story has only just begun.”

Investors hope for better news from Superdry after profit warning

Superdry PLC (LON:SDRY) has warned that it expects full-year profits to slump due to consumer uncertainty and a lack of innovation in its core clothing categories.

The retailer said in a December trading update that its over-reliance on sales of jackets and sweats meant it was affected by “unseasonably warm weather” in November and into December.

“This has resulted in an adverse profit impact of around £11mln in November and the Company expects a potentially similar profit impact in December if trading conditions do not improve,” the company said.

It anticipates underlying profit before tax of £55mln to £70mln for the year, compared to £97mln the previous year.

When Superdry publishes its third-quarter results on Thursday, investors will be looking to see how much progress it has made with its product innovation and diversification programme that was launched last spring.

The group has hired former Nike executive Phil Dickinson as its new creative chief to help the company with the programme.

Trio of housebuilders bring results and updates to the table amid patchy market outlook

Housebuilder Barratt Developments PLC (LON:BDEV) will be looking to make good on its strong start to the fiscal year when its reports its interims on Wednesday.

In an October trading statement, the firm said forward sales, including joint ventures, came to 12,903 units at a value of £3.14bn on October 14, compared to 12,277 units at a value of £2.8bn a year ago.

Barratt was also given a lift by a bullish sector note from Berenberg in January after the sector rose 14% at the start of the year after losing a quarter of its value in 2018.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said that Barratt had “started well” in 2019, adding that “government schemes like help-to-buy and easier mortgage access means Barratt’s been able to boost revenues in recent years”.

However, she added that the horizon was “not totally clear” after the government announced the end of Help to Buy in 2023 as well as a slowdown in the property market in London and the South East.

“With the sands shifting somewhat, investors will want to see Barratt’s taking steps to protect profitability if foundations start to creak.”

Redrow plc (LON:RDW) will be joining Barratt in reporting its half-year results on Wednesday, although it may face a more difficult crowd given the impending retirement of its chief executive and founder Steve Morgan in March as well as an update in November that revealed net private reservations had barely budged in the 18 weeks to 3 November at £588mln from £586mln the year before.

However, there may be room to manoeuvre with Redrow’s average selling price rising 4.6% in the 18 week period to £388,000 in addition to a strong £132mln cash position.

Completing the housebuilding trifecta on Thursday will be Bellway PLC (LON:BWY), who will be eyed for any deviation from its expansion strategy when it issues a first-quarter trading update.

In its full-year results in October, the firm said its order book at the end of September had grown to £1.47bn, representing 5,380 homes, from £1.36bn a year earlier (5,034 homes).

The group had also cited potential risks from Brexit but was confident it had a solid platform to increase output in 2019, so any deviation from this will be noted as exit day approaches.

Ryanair: No more warnings, please

Ryanair PLC (LON:RYA) cut its full-year profit guidance on 18 January, saying that lower fares in the winter period offset a rise in traffic, therefore investors will be hoping for no further surprises when the Irish budget airline issues a third-quarter trading update on Monday.

The dual Dublin and London-listed firm lowered its guidance for the 2019 fiscal year to between €1bn-€1.1bn from a previous range of €1.1bn-€1.2bn.

The January profit warning was the second from the airline in four months, having previously cut its full-year guidance to €1.25bn from €1.35bn in October on the back of staff strikes, passenger compensation costs, and high oil prices.

Michael O'Leary, Ryanair’s often outspoken chief executive, said in January that while the firm was “disappointed” at the new guidance, the stronger than expected traffic and ancillary revenue figures would help to “defray” the impact of the lower winter fares.

Tate & Lyle PLC hopes to keep investors sweet

Food group Tate & Lyle PLC (LON:TATE) will be aiming to keep investors sweet with a third-quarter trading update on Thursday.

In its interims in November, the group saw higher costs hold back profitability, so shareholders will be eying any mitigation or milestones in its cost efficiency programme, which is aiming to save £75mln over the next four years.

Analysts at The Share Centre said that investors will likely focus on North America, the company’s biggest market, adding that “an amount of positive expectations” have been building as the share price has made steady progress and was outperforming.

Another solid showing expected from Compass 

The performance of Compass Group PLC’s (LON:CPG) all-important US division will be in focus when the world’s largest catering firm serves up a first-quarter trading update on Thursday.

Full-year numbers unveiled back in November were solid with revenues rising 5.5%, and the FTSE 100 company expects a similar level of growth this year.

Costs have been on the rise recently so any cost-related comments will be of interest, as will Compass’ outlook in its emerging markets given signs of an economic slowdown in China.

The market is expecting profit margins to increase slightly this year so any mention of that will be a focus as well.

Launch of Advair generic to dent outlook at GSK

UK drugs giant GlaxoSmithKline PLC (LON:GSK) is set to publish a full-year trading update on Wednesday, and 2018’s results will almost be certainly better than the market had anticipated this time last year.

That’s because of the delay in the launch of a generic rival to GSK’s blockbuster Advair asthma inhaler, although Dutch pharma giant recently had its copycat version approved by the FDA.

That will no doubt eat into 2019’s earnings and it will be interesting to see if GSK has figured out what the exact impact will be on this year’s numbers.

Other drugs are also starting to face competition from cut-price rivals, but sales of some of the FTSE 100’s newer drugs, particularly the Shingrix shingles vaccine, should offset this somewhat.

GSK’s net profit column is likely to get a boost from the recent US$3.8bn sale of its consumer nutrition business to Unilever plc (LON:ULVR).

Any additional details on GSK’s planned break-up after it merged its consumer health assets with those of Pfizer last month will also be eyed.

Smith & Nephew tipped to deliver solid 2018 numbers

On Thursday, Smith & Nephew PLC (LON:SN.) boss Namal Nawana is expected to report a solid 2018 in what will be his first full-year results presentation since taking the helm last May.

Back in November, the FTSE 100 medtech group told investors that its artificial hips and knees division had been performing slightly better than expected.

But weakness in Europe and in the Wound Bioactives business means that revenue growth will likely be towards the “bottom end” of the previous guidance of 2-3%, according to UBS analysts.

While revenue is unlikely to beat forecasts, S&N expects margins to be above last year’s thanks to successful cost-cutting and a favourable legal settlement.

BP to show ‘good year-on-year progress’

Growth considerations will potentially be a focal point, away from the financial bullet points, as BP plc (LON:BP). updates the market with full-year results on Monday.

BP is among only a few big oil firms positioned to expand in what is seen as a more challenging environment.

“Sharp commodity declines combined with a challenging downstream means the strong earnings and cash momentum apparent for much of the past two years should end this quarter,” Deutsche Bank analyst Lucas Herrmann said in a recent note.

Results should show good year-on-year progress with headline cash flow strongly supported by the material release of working capital, helpful for balance sheets.”

Deutsche rates BP as a ‘buy’ with a 590p price target. The German bank believes that BP’s market valuation continues to “understate the visibility of its growth and balance in its portfolio.”

SSE interims unlikely to please investors

UK utility SSE PLC (LON:SSE) will on Friday provide a trading update for the market, and it may not make for pleasant reading if you’re a shareholder, suggests The Share Centre.

“2018 proved to be a difficult year for the group, culminating in the failure to merge its retail business with Innogy and the rebasing of the dividend for 2020,” the broker said.

“Any further updates on the group’s future plans and regulatory issues will be worth noting.

“The recent cold weather is likely to have come too late to have boosted demand.”

Year of the Pig hopefully not lean

Elsewhere in the world, Chinese markets will be celebrating the Lunar New Year public holidays, which start on February 4 for seven days.

Rebecca O’Keeffe, Head of Investments at interactive investor says: “The year of the dog was pretty awful for investors in China, as trade wars and other headwinds saw the Chinese equity market tumble. Investors will be hoping that the year of the pig is significantly better.

“The post Chinese New Year period often sees the economy pick up during the main industrial period immediately thereafter.  Given the amount of stimulus recently enacted by Chinese authorities, investors should be on the lookout for positive economic surprises from China in coming months.

“And if trade negotiations between the world’s two biggest global superpowers are successful as well, then China could well be the place to invest in 2019.”

Significant announcements expected for week ending Feb 8:

Monday February 4:

Trading update: Ryanair PLC (Q3) (LON:RYA)

Economic data: UK construction PMI; US factory orders

Tuesday February 5:

Finals: BP plc (Q4) (LON:BP.), Ocado PLC (LON:OCDO), St Modwen Properties PLC (LON:SMP), RM Plc (LON:RM.). Amino Technologies PLC (LON:AMO)

Interims: Mattioli Woods plc (LON:MTW)

Economic data: UK services PMI; US ISM non-manufacturing; US services PMI; US balance of trade

Wednesday February 6:

Finals: GlaxoSmithKline PLC (Q4) (LON:GSK)

Interims: Barratt Developments PLC (LON:BDEV), Redrow plc (LON:RDW), Frontier Developments PLC (LON:FDEV)

Trading updates: Severn Trent PLC (LON:SVT), DP Poland Plc (LON:DPP), CYBG PLC (LON:CYBG), Electrocomponents PLC (LON:ECM), Victrex PLC (AGM) (LON:VCT)

Economic data: US JOLT job openings

Thursday February 7:

Bank of England monetary policy decision/inflation report

Trading updates: Thomas Cook PLC (Q1) (LON:TCG), Bellway PLC (LON:BWY), Compass Group PLC (AGM) (LON:CPG), Superdry PLC (Q3) (LON:SDRY), Tate & Lyle PLC (LON:TATE)

Finals: Smith & Nephew PLC (LON:SN.), DCC Plc (LON:DCC), Beazley PLC (LON:BZY)

Interims: Supermarket Income REIT PLC (LON:SUPR)

Ex-dividends to clip 0.45 points off FTSE 100 index: Sage Group PLC (LON:SGE)

Economic data: Halifax UK house prices; US weekly jobless claims

Friday February 8:

Trading updates: SSE PLC (Q3) (LON:SSE)  

Economic data: US wholesale inventories

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