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US jobs to provide main focus, though UK PMIs still key as Brexit SNAFU continues

Aside from the UK and US data - and Brexit - corporate news in the week ahead will include updates from blue-chip budget airline easyjet and Ladbrokes Coral owner GVC Holdings

US jobs
Economists at ING expect to see US payrolls growth of around 160,000 for March after February's 20,000 number came in well below forecasts for 300,000

As a new month and a new quarter gets underway, and the Brexit saga continues to roll on, the coming week will bring data on how the key UK economic sectors are performing, although more macro attention will be directed across the Atlantic to the March US jobs report as underlying concerns over the health of the world’s biggest economy mount–up.

On the corporate front, the company diary is fairly sparse as the run-down to the Easter break gathers pace, although trading updates from blue-chip budget airline easyJet PLC (LON:EZJ) and Ladbrokes Coral betting group GVC Holdings PLC (LON:GVC).

easyJet guidance in focus following flight from Alitalia

FTSE 100-listed easyJet will have its full-year profit guidance firmly in focus when it issues a first-half trading update on Friday.

Given the cautious comments that accompanied its trading update in January investors will be interested in whether the caution has been borne out in the first half of the year, especially in an anticipated drop in revenue per seat materialises.

There may also be questions around the company’s recent decision to pull out of a consortium looking to buy troubled Italian carrier Alitalia, as well as any updates on Brexit impacts.

Cheltenham Festival results to help GVC’s Q1?

GVC Holdings will issue a first-quarter trading update on Friday, just a month after reporting its full-year numbers, with investors keen to see how Ladbrokes Coral did over the Cheltenham Festival of horse-racing in the middle of March, you mostly saw the favourites come in.

With its 2018 results, the group revealed that in the first eight weeks of 2019, net gaming revenue rose by 11% year-on-year, driven by a 22% increase in online revenues.

With profits from GVC’s betting shops expected to fall this year as a result of the introduction of £2mln maximum stakes on the fixed odds betting terminals (FOBT) that are often referred to as “the crack cocaine of gambling”, investors will be hoping that online growth has continued to strong.

The Aintree Grand National is coming up at the end of the week, the UK’s biggest betting event and the end of the football season is fast approaching too, so an indication of the outlook for the next quarter will be closely eyed

Topps Tiles struggles in difficult retail market

Away from the blue chips, mid-cap retailer Topps Tiles Plc (LON:TPT) has been overhauling its business to bring it up to speed with the digital age amid tough competition from online retailers.

As part of a turnaround plan to address sluggish sales, Topps has closed some of its stores and turned its focus to improving its online offering. 

Last time we heard from Topps, the company said like-for-like revenue fell 1.4% in the first three months of the fiscal year as it continued to struggle in a flagging UK market.

Topps will update the market on Wednesday with a first-half trading statement and investors will be looking for signs that the retailer’s strategy to move sales online has paid off.

New regulations hit CMC Markets revenues

CMC Markets Plc (LON:CMCX) has already warned that it expects full-year revenues to be hit by a regulatory clampdown on spreadbetting platforms.

The FTSE All Share-listed firm, which publishes its full-year trading update on Wednesday, in February downgraded its estimates for contract for difference and spreadbet revenue to be between 25% and 35% lower, compared to previous guidance for a 20% reduction.

New regulations designed to limit traders’ losses were brought in at the end of the summer and have weighed on the spreadbetting industry.

CMC has been trying to adapt to the regulatory changes but market conditions were challenging in the first two months of the year.

Chief executive Peter Cruddas has said he believes the industry will benefit from the new regulation over the medium-term and CMC is “strongly positioned to do so across its business due to its investment in leading technology and strategic diversification through its stockbroking and institutional businesses”.

Potential legal headache for Stagecoach

When it reports a trading update on Wednesday, it could be legal issues providing the most pain to FTSE 250-listed train operator Stagecoach Group PLC (LON:SGC) after a class action lawsuit was filed at the end of February by passengers alleging the firm alongside FirstGroup PLC (LON:FGP) and Go-Ahead Group PLC (LON:GOG) were overcharging on London’s southern commuter routes.

There may also be expectations of an update on Stagecoach’s East Midlands rail franchise, which was granted a short-term extension by the Department for Transport to 18 August from the previous end date of 3 March, as the company previously said it expected to net a “modest profit” from the agreement.

Can AA sustain recent uptick in performance?

Investors already know that AA PLC’s (LON:AA.) full-year results on Wednesday will be at the top end of expectations thanks to February’s pre-closing trading update.

All eyes will, therefore, be on whether that improvement can be sustained, which could be welcome change for the company given the battering its share price has faced in recent years.

The AA provides breakdown services for all new vehicles made by VW, Jaguar, Land Rover and many more.

These partnerships account for almost four-fifths of all AA customers, and progress in this division is more important than ever as the number of higher-margin personal memberships fell last year.

At the half-way stage of its year in July, the company had net debt of more than £2.5bn, and the dividend won’t surpass 2p until cash flows improve.

Saga’s dividend in focus

Saga PLC (LON:SAGA), which provides holidays, healthcare and financial services to over-50s, but it’s the group’s home and motor insurance business which is the real money maker.

Insurance underpins group cash flows and accounts for almost all of the company’s profits, although lower premiums dented performance in the first half.

Profits from that division feed into the dividend, although there has been concern over that of late: JP Morgan Cazenove recently questioned the sustainability of shareholder returns as margins come under pressure from increased competition.

The other concern is debt, which is due to creep up over the next couple of years as the group invests in new cruise ships.

Given that much of Saga’s focus is on the insurance market, it is perhaps unsurprising that boss Lance Batchelor is reportedly looking to sell two of its package holiday businesses, Titan and Destinology.

Slowdown at Electrocomponents to stabilise

FTSE 250-listed electronic components distributor Electrocomponents PLC (LON:ECM) will issue a short interim management statement on Thursday, covering trading trends for the full-year ending 31 March.

In a preview, analysts at UBS said: “As growth trends up to end-Jan are already known, the new information will be i) implied trading in Feb/Mar (we expect a slight further slowdown), and ii) any update on profit expectations for the year (we are in-line with consensus).”

They added: “After +10% organic revenue growth in Q-end Jun’18, and +10% growth in Q-end Sep’18, Electrocomponents reported a slowing to +6% for the 4-mths-to-Jan’19. However, commentary suggested that growth within Jan’19 itself was +7%.”

The analysts said Electrocomponents will likely only comment on profit expectations for full-year 2019, with the UBS forecast for pre-tax profit of £211mln in-line with the consensus of £210mln.

Peppa Pig still bringing home the bacon for EntertainmentOne

EntertainmentOne Limited (LON:ETO) has been signing high margin streaming deals for the likes of its Peppa Pig cartoon series, and growing licensing and merchandising have been bringing home the bacon for now, but the shift from distribution to production in the Film & TV unit needs to be closely watched.

In a preview of the FTSE 250-listed firm’s trading update, also due on Thursday, Sophie Lund-Yates, equity analyst at Hargreaves Lansdown said: “A pillar of future success is eOne’s ability to nurture a reputation as a producer of quality TV, which third parties will pay for.

“This division only makes up a small chunk of profit at the moment though, and the shift to content creator won’t happen overnight. With results in the division expected to be weighted to the second half, it’s one to keep an eye on.

She added: “Lastly, with the current library worth US$2bn, and a recent spate of M&A in the industry, there’s always the outside chance someone could make a bid for eOne at some point. We can’t know for sure if, or when, this could happen, but we think investors should watch this space.”

US Jobs bounce-back forecast for March

The latest US jobs report will be the week’s biggest macro focus, with economists hoping for a bounce back in March after a much weaker than expected performance in the previous month.

February’s non-farm payrolls only grew by 20,000, a big shock after economists had expected roughly 300,000 jobs to be created.

For March there is an expectation of a bounce back, with around 167,000 jobs forecast to be added, while the US unemployment rate should still hold at records lows of 3.8%.

However, a fair bit of other data is suggesting that strong US economic growth is slowly grinding to halt and the latest sentiment around more limited US interest rate rises, as a result, bears this out.

Economists at ING expect to see US payrolls growth of around 160,000 for March, with average earnings rising 0.3% month-on-month and the unemployment rate staying at 3.8%.

UK PMIs provide main domestic data

There is relatively little in terms of domestic economic data releases in the coming week aside from the latest purchasing manager’s reports for the manufacturing, construction and services sectors.

Being the largest sector, the services sector has been leading the UK economy forward and is still expected to show growth during March with the index in February at 51.3.

The manufacturing sector is also expected to show growth but some economists suggest this is a result of stockpiling for the Brexit uncertainty going forward.

However, both of these sectors have been trending lower in recent months, while the construction sector has been consistently weaker, with another month of reduced activity expected.

Significant announcements expected for week ending March 29:

Monday April 1:

Finals: Instem PLC (LON:INS)

AGMs: Big Sofa Technologies Group PLC (LON:BST)

Economic data: UK manufacturing PMI; US retail sales; US ISM manufacturing; US construction spending; US manufacturing PMI

Tuesday April 2:

Interims: YouGov PLC (LON:YOU)

Finals: Eden Research PLC (LON:EDEN), Belvoir Lettings PLC (LON:BLV), Next Fifteen Communications Group Plc (LON:NFC), DP Eurasia NV (LON:DPEU), Hydrogen Group PLC (LON:HYDG), MP Evans Group PLC (LON:MPE), Nucleus Financial Group PLC (LON:NUC), Proteome Sciences plc (LON:PRM), TP Group PLC (LON:TPG), Trinity Exploration & Production PLC (LON:TRIN)

Economic data: UK construction PMI; US durable goods orders

Wednesday April 3

Trading updates: Stagecoach PLC (LON:SGC), Topps Tiles Plc (LON:TPT), CMC Markets Plc (LON:CMCX)

Finals: The AA PLC (LON:AA), Minds + Machines Group Limited (LON:MMX), Shield Therapeutics PLC (LON:STX), JTC PLC (LON:JTC)

Interims: Applied Graphene Materials PLC (LON:AGM), Gattaca PLC (LON:GATC)

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

Thursday April 4:

Trading updates: EntertainmentOne PLC (LON:ETO), Electrocomponents PLC (LON:ECM)

Finals: Saga PLC (LON:SAGA), Hunters Property PLC (LON:HUNT), Smart Metering Systems PLC (LON:SMS)

Ex-dividends to knock 11 points off FTSE 100 index: Lloyds Bank PLC (LON:LLOY), Direct Line Insurance Group PLC (LON:DLG), Ferguson Plc (LON:FERG), Hikma Pharmaceuticals PLC (LON:HIK), Melrose industries PLC (LON:MRO), Pearson PLC (LON:PSON), Smith & Nephew PLC (LON:SN.), St James’s Place PLC (LON:STJ), Taylor Wimpey PLC (LON:TW.), DS Smith PLC (LON:SMDS), Smiths Group PLC (LON:SMIN)

Economic data: US weekly jobless claims; US Challenger job cuts

Friday April 5:

Trading update: easyJet PLC (LON:EZJ), GVC Holdings PLC (LON:GVC), Ferrexpo PLC (LON:FXPO)

Traffic figures: International Consolidated Airlines Group PLC (LON:IAG)

Finals: Creo Medical PLC (LON:CREO)         

AGMs; Tekcapital PLC (LON:TEK)

Economic data: US non-farm payrolls; US average hourly earnings; US consumer credit change

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