Following recent poor 2018 results from HSBC Holdings PLC (LON:HSBA), investors in Standard Chartered PLC (LON:STAN) will likely be holding their breath ahead of the emerging markets-focused bank’s full-year results on Tuesday – especially after news last week of a £900mln fourth-quarter charge for expected investigation penalties.
Other banks saw performance drop off in the final months of 2018, and analysts think there is “every chance” that Standard Chartered will also have found the going tough in the fourth quarter.
“We expect fourth quarter adjusted pre-tax profit of US$597mln, down from US$1,069mln quarter-on-quarter, driven primarily from the fourth quarter inclusion of the US$310mln UK bank levy,” analysts at UBS said in a note to clients.
A new three-year strategy plan is set to be announced alongside the numbers which is what most shareholders, and indeed the sector, will be paying attention to.
Standard Chartered management’s outlook for emerging markets for the year ahead will also be worth noting.
Help to buy, CEO succession a focus for Persimmon
Full-year results from Persimmon PLC (LON:PSN) on Tuesday could be overshadowed after weekend press reports suggested that the FTSE 100-listed housebuilder could be stripped of its right to participate in the government’s Help to Buy scheme.
According to The Times, the government is considering banning Persimmon from the scheme amid complaints about the quality of the company’s homes and leasehold charges attached to new homes, so any reaction comments will be eyed.
The other focus will be on the permanent successor for chief executive Jeff Fairburn who was asked to resign in November following a furore over the award to him of a nine-figure bonus which was reduced to £75mln after the group received criticism from shareholders and the public.
Announcing that Fairburn’s would depart at the end of 2018, Persimmon said it believed the “distraction” around this pay had continued to have a “negative impact on the reputation of the business”. The group appointed managing director David Jenkinson as its interim chief executive.
In a preview of full-year numbers, analysts at UBS said “the most likely (is) outcome that the current interim CEO is appointed as the new permanent CEO.”
In a trading update last month, Persimmon disclosed its sales volumes and average sale prices during the year and said it expected 2018 pre-tax profit to be modestly ahead of the market consensus forecast.
The UBS analysts said, therefore, the focus for the results will be on the group’s margins and cash returns. The Swiss Bank’s analysts expect the firm to report an operating margin of 30.5% resulting in an increase in pre-exceptional pre-tax profit of £1.086bn, up from £977mln a year earlier.
They see Persimmon confirming a dividend payment of 125p, in addition to the 110p pay-out it made in July last year.
Margins also a focus for Croda
FTSE 100-listed specialty chemicals firm Croda international PLC (LON:CRDA) should see its full-year margins boosted by organic growth and acquisitions, while a special dividend or share buy-back is also possible.
Recent robust organic sales from customer proxies in Croda's Personal Care division, L'Oreal and Estee Lauder, would suggest a continuation of strong organic sales in the fourth quarter of 2018, according to analysts at UBS.
They said that would provide upside risk to their estimate of 2018 margins for the group at 1.7% and for its Personal Care business at 4.5%.
The analysts also pointed out that the outlook for 2019 margins is positive given the potential for reduced losses at the Plant Impact acquisition, as well as the first annual savings from Croda’s bio-surfactants investment in the US.
They concluded: “We also look out for a special dividend/buyback announcement given that we estimate year-end net debt/EBITDA of only 0.8x, even accounting for the €72mln cost of the pre-Christmas acquisition of Brenntag's Biosector asset.”
Significant announcements expected on Tuesday:
Finals: Standard Chartered PLC (LON:STAN), Persimmon PLC (LON:PSN), Croda International PLC (LON:CRDA), Meggitt PLC (LON:MGGT), Travis Perkins PLC (LON:TPK), Derwent London PLC (LON:DLN), Drax Group PLC (LON:DRX), Morgan Advanced Materials plc (LON:MGAM), Augean PLC (LON:AUG), Lighthouse Group PLC (LON:LGT), Synectics PLC (LON:SNX)
Interims: Town Centre Securities PLC (LON:TOWN), Green REIT PLC (LON:GEN)
Trading update: Babcock International Group PLC (Q3) (LON:BAB)
Economic data: US housing starts; US house price index; US consumer confidence