It might be a shortened trading week in London, but the four sessions after the Easter holidays will certainly pack a punch on the corporate news front with a plethora of big guns to report trading updates and results.
The first-quarter results season from the UK banking sector kicks off with numbers from Royal Bank of Scotland PLC (LON:RBS) and Barclays PLC (LON:BARC), while drugs giant AstraZeneca PLC (LON:AZN), and a trio of media blue-chips – WPP PLC (LON:WPP), Pearson PLC (LON:PSON) and RELX Group PLC (LON:RELX) - also grace the company news diary.
RBS back on track
The most interest will probably be on Friday’s update from RBS which looks finally to be back on track after drawing a line under legacy issues following its taxpayer bailout in 2008.
The bank, which is still 62% owned by the UK taxpayer, last year paid its first dividend since the 2008 financial crisis after a US$4.9bn settlement with the US Department of Justice over mortgage-backed securities.
RBS paid an interim dividend of 2p per share and a final dividend of 7.5p per share.
Analysts at Deutsche Bank think RBS could return another £11bn to shareholders over the next three years.
At its full year results in February, RBS said it aimed to end 2019 with risk weighted assets of around £185bn–£190bn. It expects to incur £1.5bn in restructuring costs this year but plans to reduce operating expenditure by £300mln.
RBS said it remained “comfortable” with its 2020 target of a return on tangible equity of more than 12% but added that its goal for a cost to income ratio of less than 50% was “increasingly challenging for the business to achieve with the risk being to the downside”.
“This reflects the ongoing economic and political uncertainty and the additional ongoing costs associated with ring-fencing and Brexit,” it said.
Investors will be looking to see whether RBS is on track to meet its targets when it reports its first quarter results on Friday.
Barclays’ under-pressure investment bank in focus
Barclays will need to prove its turnaround plan for the investment bank is on track when it posts its first quarter results on Thursday.
Activist investor Edward Bramson, whose vehicle owns a 5.5% stake in Barclays, wants to see its investment bank scaled back and the focus switched to other less risky parts of the business.
But Barclays has said it plans to improve the performance of the division rather than cut it back, prompting Bramson to request a seat on the group’s board to push his agenda.
Bramson has called on other shareholders back his campaign to be elected as a non-executive director on the board at the bank’s annual general meeting on May 2.
For this reason, Barclays will be under pressure to show shareholders that its plan for the investment bank is the right one.
In February, the lender hit back at Bramson by reporting a 15% increase in profit at the investment bank.
“With Bank of America reporting choppy conditions in its investment banking and trading business, and JP Morgan warning about a ‘high teens’ percentage fall in trading revenues, Q1 results could prove another stick with which Bramson can beat the Barclays board,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
Jefferies International expects Barclays to report pre-tax profit of £1.5bn for the first quarter, compared to a £236mln loss a year earlier when the bank had to pay US$2bn to settle a lawsuit in the US over the sale of mortgage-backed securities.
It estimates broadly flat total income of £5.4bn with the investment bank falling to £2.4bn income from £2.8bn last.
Cash in focus at AstraZeneca
Away from the banks, after years of declines, AstraZeneca total revenues should return to growth this year.
In Friday’s first-quarter numbers, investors will want to see that this corner has been turned as expected.
Old drugs which have lost patent protection make up an ever-decreasing proportion of sales, and the growth is being driven by new cancer drugs, with Tagrisso the stand-out performer so far.
Contributions from newer additions such as Imfinzi and Lynparza should also pick up as they mature and new indications added.
Much of the market’s focus will be on cash, though. Even after the group’s recent bumper US$3.5bn fundraise, at US$19bn Astra’s debts remain substantial and the commitment to sustaining the dividend will only add pressure on the company to start converting revenues into cash.
North American account losses to weigh on WPP
Switching to media, blue-chip advertising giant WPP will issue a first quarter trading update on Friday.
Analysts at Liberum Capital forecast the company reporting a fall in Q1 organic net sales (or revenues less pass through costs) of -2.2%.
They see North America as the main driver of the declines, down an expected -9.5% year-on-year due to the loss of accounts including a large chunk of Ford.
The analysts added: “We don’t expect much new from the statement, either on FY performance or a possible partial sale of the Kantar business.”
They concluded: “At c. 9x FY19E adjusted PE and offering a 6.6% dividend yield, the shares are attractively valued but there probably needs to be signs of an improvement in Q2 performance to drive further momentum.”
More reassurance needed from Pearson
Investors will be hoping for more reassurance from publishing group Pearson when it issues a first-quarter 2019 trading update on Friday, with the FTSE 100 firm’s full-year 2018 results released at the end of February proving mixed.
The company said then that it expects company-wide sales to stabilise this year before growing again in 2020 and beyond, as it reported in-line 2018 profit and a big fall in net debt, with analysts expecting the first quarter to show organic revenue growth of around 1%.
Earlier in February, Pearson had also announced a deal to sell its US K12 courseware business to Nexus Capital Management for US$250mln, a move continuing a shift in its focus from textbooks to digital education courses, so more news on this will be sought by the market.
In March, JPMorgan Cazenove upgraded its rating for Pearson to ‘overweight’ from ‘neutral’ after raising earnings estimates sharply on the back of stronger higher education growth and better operational gearing.
The US bank’s analysts said: “We expect top-line growth to accelerate from -1% in 2018 to +3% in 2022 driven by US Higher Education & structural growth activities that represent 36% of revenues.”
The US bank’s analysts raised their longer-term forecasts for Pearson’s underlying earnings (EBIT) by 25%-30% as a result of stronger higher education growth and better operational gearing.
Academic journals blow hopefully won’t dent RELX confidence
Staying in media, blue-chip business Information and exhibitions firm RELX will also issue a first quarter trading update this week, on Thursday, with the Anglo-Dutch group having said with its 2018 final in February that it is confident of another year of growth in 2019.
The company said then that the key business trends in the early part of 2019 are not much different to 2018 when it revealed underlying year-on-year revenue growth of 4% in 2018; in sterling terms, revenue growth was 2%.
However, since then, RELX revealed at the start of March that the University of California had cancelled a multi-million-pound academic journals contract with the group.
The firm’s Elsevier unit publishes almost half-a-million academic articles every year and while UC was happy to keep paying its hefty subscription fee so it could continue to access them, for the same price it also wanted RELX to distribute its authors’ work to other researchers for free, something universities would normally have to pay extra for.
Analysts have said it was “no wonder” the publisher refused to give in to such demands given that it would have undermined its business model, but the number crunchers did not expect the cancellation to affect this year’s numbers too much, so some reassurance will be sought.
Primark still important for AB Foods
Also among the blue chips, Associated British Food PLC (LON:ABF) put its investors on edge at the back-end of 2018 when it warned that its seemingly infallible star asset, Primark, had endured a “challenging” November.
Thankfully trading picked up over Christmas and ABF said in February that profits at the no-frills clothes retailer will be “well ahead” of last year when it reports its half-year results on Wednesday.
Given that it accounts for more than 60% of the business, Primark’s performance is all-important, especially with the sugar division continuing to struggle amid falling prices in the EU.
The largest Primark in the world, complete with hair salon and café, opened in Birmingham at the beginning of April, so investors and analysts will be keen to see how that is getting on.
Away from gloom-defying Primark, ABF’s grocery and ingredients division, which includes the Twinings and Ryvita brands, should also show top- and bottom-line growth.
Investors want update on Just Eat’s search for new CEO
Just Eat PLC (LON:JE.) has been the dominant player in the online takeaway sector for years, but it has started to come under pressure from the deep-pocketed Uber Eats and Deliveroo of late.
To try to head off that threat, the FTSE 100-listed group has poured tens of millions into rolling out a delivery service. The extra investment meant Just Eat swung to a loss in 2017, but it paid off last year as it returned to profitability.
Last month, bosses guided for revenue of £1.0bn-£1.1bn and underlying earnings in the range of £185mln-£205mln this year. In Friday’s first-quarter update, the market will be hoping that guidance is repeated, if not upgraded.
Away from the general performance and financials, investors will hope to hear more on who the next boss might be. Chief executive Peter Plumb stepped down in January and there has been no news on his successor, although a search is underway.
Croda International eyed for continued cash flow
FTSE 100 chemicals firm Croda International PLC (LON:CRDA) will be hoping to keep investors sweet with a trading update on Wednesday, although there may be a difficult bar to clear after the company unveiled a £150mln special dividend at its full year results in February, taking its total for last year to £270mln.
As the windfall was down to increased cash flow following the completion of a new manufacturing plant in North America, investors will likely be eyeing any signs that this trend could continue to deliver healthy payouts.
There may also be more news on Brenntag Biosector, a vaccine adjuvant maker that Croda acquired for €72mln in December as part of a move into the pharmaceuticals sector.
Taylor Wimpey hopes to deliver more of the same
Having made a “positive start” to 2019, investors in blue-chip housebuilder Taylor Wimpey PLC (LON:TW.) will be hoping for more good news from a trading update on Thursday.
After healthy profit and cash growth seen in its full year results in February, shareholders will be hoping for more of the same in order to keep the group’s dividend payments going. There will also be eyes on the forward order book as an indicator of future demand.
However, concerns around the potential end of the UK government’s Help to Buy scheme in 2023 as well as the recent slowdown in house price rises, both of which could impact the sector, are likely to persist.
Boeing crisis hangs over Meggitt
Moving down to the FTSE 250 index, an AGM and accompanying trading update from engineering group Meggitt PLC (LON:MGGT) on Thursday looks to be overshadowed by the ongoing crisis involving Boeing’s 737 MAX aircraft.
Meggitt, which supplies parts for the MAX’s engines, has already seen its shares drop as a result of Boeing’s plans to cut production of the 737 to 42 per month from 52, so investors will be on the lookout for how this could impact Meggitt’s inventory as well as its sales.
The firm may try and divert attention to orders it secured last year for engine composites on the Pratt & Whitney F-135 and F-119 engines and brakes on the Airbus A321neo, with investors eyeing any signs that it could be switching its focus away from Boeing.
No tears expected from Boohoo investors
Online fashion retailer Boohoo Group PLC (LON:BOO) will reports its full-year results on Wednesday and investors will be hoping it can continue the more positive trend seen from AIM-listed peer ASOS plc (LON:ASC) in a recent update.
Before Christmas last year, Boohoo shares wobbled after ASOS issued a shock profit warning, however, a trading update from Boohoo in January was very reassuring and showed a 43% rise in revenue in the final four months of 2018.
On Wednesday, the market will be focusing on how Boohoo.com’s US trading is going, having been strong so far this year, with PrettyLittleThing the best performing brand.
Any update on the group’s plans to expand its key Burnley warehouse will also be of interest.
Significant announcements expected for week ending April 26:
Monday April 22:
EASTER BANK HOLIDAY
Tuesday April 23:
AGMs: ECR Minerals PLC (LON:ECR), Franchise Brands PLC (LON:FRAN)
Economic data: CBI industrial trends survey; US new home sales; US Markit composite PMI
Wednesday April 24:
Trading updates: Croda International PLC (LON:CRDA), CRH PLC (LON:CRH)
Interims: Associated British Foods plc (LON:ABF), AB Dynamics PLC (LON:ABDP)
Finals: Boohoo.com PLC (LON:BOO), Maxcyte PLC (LON:MXCT), Mi-Pay Group PLC (LON:MPAY), Petropavlovsk PLC (LON:POG), PureTech Health PLC (LON:PRTC), WANdisco PLC (LON:WAND)
AGMs: Shanta Gold PLC (LON:SHG)
Economic data: UK trade in goods; UK public sector finances; German IFO business climate index
Thursday April 25:
Trading updates: Barclays PLC (Q1) (LON:BARC), Anglo American PLC (LON:AAL), Taylor Wimpey PLC (LON:TW.), Meggitt PLC (LON:MGGT), RELX (LON:RELX), KAZ Minerals PLC (LON:KAZ), Acacia Mining PLC (LON:ACA), Synthomer PLC (LON:SYNT)
Interims: RDI REIT PLC (LON:RDI)
Finals: Ferrexpo PLC (LON:FXPO), Deltex Medical PLC (LON:DEMG)
FTSE 100 ex-dividends: Antofagasta PLC (LON:ANTO), Fresnillo plc (LON:FRES), Glencore PLC (LON:GLEN), Informa PLC (LON:INF), Legal & General Group PLC (LON:LGEN), Rolls-Royce Holdings PLC (LON:RR.)
Economic data: UK BBA mortgage lending figures; CBI distributive trades survey; US weekly jobless claims; US durable goods orders
Friday April 26:
Trading updates: Royal Bank of Scotland Group PLC (Q1) (LON:RBS), AstraZeneca PLC (Q1) (LON:AZN), Just Eat PLC (LON:JE.), Pearson PLC (LON:PSON), WPP PLC (LON:WPP), Rotork PLC (LON:ROR), Hastings PLC (LOH:HSTG)
Finals: EU Supply PLC (LON:EUSP)
AGMs: Capital Drilling Ltd. (LON:CAPD), Greencoat UK Wind PLC (LON:WIND)
Economic data: US preliminary GDP; University of Michigan final consumer sentiment index