The UK banking sector’s first-quarter results season kicks off on Thursday with trading news from Barclays (LON:BARC), with the lender needing to prove the turnaround plan for its investment bank is on track.
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.
In February, the lender hit back at Bramson by reporting a 15% increase in profit at the investment bank.
The time out, Jefferies International expects Barclays to report overall 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.
Taylor Wimpey hopes to deliver more of the same
Elsewhere, having made a “positive start” to 2019, investors in Taylor Wimpey PLC (LON:TW.) will be hoping for more good news from the blue-chip housebuilder’s latest trading update.
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.
Academic journals blow hopefully won’t dent RELX confidence
Staying with the blue-chips, business Information and exhibitions firm RELX will issue a first quarter trading, 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.
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) could 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.
D-Day for Sainsbury’s/Asda
Away from the numbers, the UK competition watchdog is expected to announce its final decision on the proposed merger of Sainsbury PLC (LON:SBRY) and Walmart Inc's (NYSE:WMT) on Thursday.
In February, the UK Competition and Markets Authority suggested it was leaning towards rejecting the merger after provisional findings of its investigation raised “extensive competition concerns”. Concerns included higher food and petrol prices in markets where both companies have supermarkets and petrol stations, as well as reduced quality and choice for customers.
To alleviate the CMA’s worries, the companies agreed to sell up to 150 supermarkets, several convenience stores and a “sufficient number” of petrol stations. They also promised to slash prices by £1bn each year by the third year after completing the merger.
However, many analysts predict the CMA will still block the deal.
Significant events expected on Thursday April 25:
Trading updates: Barclays PLC (Q1) (LON:BARC), Taylor Wimpey PLC (LON:TW.), Meggitt PLC (LON:MGGT), RELX (LON:RELX), Anglo American PLC (LON:AAL), 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)
Ex-dividends to knock 7.66 points off FTSE 100 index: Antofagasta PLC (LON:ANTO), Fresnillo plc (LON:FRES), Glencore PLC (LON:GLEN), Informa PLC (LON:INF), Legal & General Group PLC (LON:LGEN), Spirax-Sarco Engineering PLC (LON:SPX)
Economic data: UK BBA mortgage lending figures; CBI distributive trades survey; US weekly jobless claims; US durable goods orders