Following a short week, the market returns to a full five days filled with earnings from retailers, tour operators and property developers as well as the all-important UK jobs report.
Tisci’s collection to steal the show in Burberry finals
Burberry has been trying to take the brand more upmarket, having brought in former Givenchy designer Riccardo Tisci as its new chief creative officer to lead the change.
The fashion group released Tisci’s debut runway collection to stores in February. By May, all product deliveries will be his designs.
However, any sales uplift from the collection will fall outside results for the year to March 31.
Ahead of the results on Thursday, the company has guided to broadly stable revenue and adjusted operating margins along with cost savings of £100mln.
“With the new collection from Riccardo Tisci hitting the shelves only at the end of fiscal Q4, we expect another relatively muted set of results,” UBS said.
The investment bank predicts fourth quarter organic sales growth of 3%, comprising a 1% like-for-like rise, flat underlying space and a +1% positive impact from retail calendar adjustments.
For the second half of 2019 it assumes flat underlying total sales of £1.5bn, EBIT of £262mln, a 175 basis points drop in the margin to 17.4% and earnings per share of 48.8p.
“The market will likely be closely watching out for any commentary on the performance of Tisci's collection in store and any further signs of the turnaround being successful,” UBS said.
Warmer weather to boost Kingfisher sales
Kingfisher had a difficult 2018 with profits plummeting 52.8% on the back of struggles at its French DIY business Castorama and a tough UK retail market.
Following the poor performance, the company – also the owner of B&Q and Screwfix – has started a succession plan for chief executive Véronique Laury but a departure date is yet to be agreed.
Investors will be looking out for an update on the search for a new boss when the group reports its first quarter trading update on Wednesday. They will also be hoping for signs of recovery during the period.
“There will be considerable interest in this first quarter trading update given that spring is usually a strong period for DIY activity and the Easter bank holiday weekend enjoyed exceptionally good weather this year. That should bode well for the B&Q and Screwfix businesses,” The Share Centre said.
UBS forecasts like-for-like sales growth of 1.7% for the first quarter, compared to a 4% drop reported the same period a year ago.
The investment bank said the recovery is largely based on weak comparisons with last year’s ‘Beast from the East’ snowfall affecting footfall.
It sees a 5% increase in like-for-like sales at both B&Q and Screwfix while it predicts a 2% decline for its French businesses Castorama and Brico Dépôt.
Thomas Cook to update on sale of airline, funding plans
Analysts expect Thomas Cook to have racked up a hefty loss when the struggling travel group reports its results on Thursday.
UBS expects to see an underlying loss of around £167mln for the first six months of its financial year, wider than the £127mln loss it posted this time last year.
Declining profitability in the Nordics and continental Europe is forecast to be the main issues, while the later timing of Easter, currency headwinds and higher fuel prices will also likely weigh on the bottom line.
The numbers are likely to play second fiddle though. Investors will be more interested in an update on the proposed sale of the airline, which Lufthansa is looking at.
Reports last week suggested that a £400mln funding from lenders might also be announced alongside the results, and bosses recently confirmed they were in talks with their banks.
Another point of interest will be the latest trends in bookings and pricing for the key summer period.
TUI's Boeing dramas eyed
The outlook for TUI does not look so bright either.
In March, the company warned its earnings for the year could fall as much as 26% due to the grounding of Boeing's 737 MAX range of aircraft earlier this month.
TUI’s fleet currently includes 15 of the grounded aircraft, with eight more scheduled for delivery by the end of May.
Boeing 737 Max 8 and 9 aircraft were grounded in March after a fatal Ethiopian Airlines crash.
Even before the troubles with Boeing, TUI had a shocking first quarter.
Net losses widened in the period to €111.9mln from €68.3mln last year, although revenue increased 5% to €3.70bn.
The group said the “extraordinary hot weather” throughout the UK and much of Europe between June and October meant people put off booking a warm winter getaway.
That forced it to trim prices, which in turn knocked margins, a problem not helped by sterling’s continued weakness.
For the second quarter, UBS predicts an underlying EBITA loss of €223mln, compared to last year's €134mln loss.
It sees the tour operator division being dented by a later Easter and the hotels business coming under pressure from tough competition in Spain but the cruise arm delivering a strong performance.
Better times for On The Beach
By contrast, On The Beach Group PLC (LON:OTB) is expected to report a “good first half” when it publishes its interim results on Tuesday.
Back in February, the all-inclusive holidays site posted a 20% jump in ‘revenue after marketing’, although things are likely to have become a bit more tricky of late, given recent industry data.
Analysts think this summer should prove easier as well, with no World Cup this time around and a four-month heatwave unlikely to hit the UK again.
City broker Peel Hunt has pencilled in a rise in underlying earnings (EBITDA) to £19mln in the first half of OTB’s financial year.
Deutsche Bank downbeat on Land Securities and British Land
A gloomy look at real estate giants Land Securities and British Land was offered from Deutsche Bank ahead of results on Tuesday and Wednesday, respectively.
Analysts at the German bank said that while there has been a slightly less negative view of the London office market, they expect “further, and accelerated, weakness” in retail rents, putting further pressure on both earnings and resulting in further write-downs in the retail portfolio to hit near term NAV estimates.
DB now expects flat earnings growth for both the coming results and beyond.
"This effect is more pronounced for British Land, given its higher exposure to the challenged retail warehouse segment," at around 25% of its total portfolio, while Landsec's retail portfolio is more exposed to higher quality Central London retail and hotels.
Countryside Properties investors hope for more of the same
Having reassured investors that it would full-year guidance after a recovery in its second quarter, Countryside Properties will be hoping to avoid any more changes at its interims on Thursday.
In March, the housebuilder’s modular timber frame factory in Warrington started full production and is set to deliver about 500 homes in the current financial year, so shareholders may be eyeing any possible upgrades that could come from the expanded production.
Some may also be on the lookout for news on the search for a new chief operating officer after incumbent Rebecca Worthington stepped down in April after four years at the firm.
Aston Martin hits a speed bump
The James Bond supercar maker, which floated in London last October, has already indicated that it will start 2019 in the slow lane as it spins away from supply bottlenecks at the end of last year.
At February’s finals, management guided to 7,100-7,300 wholesale volumes for 2019 and underlying earnings (EBITDA) down year-on-year in the first half.
Credit Suisse analysts pencilled in “rather weak” 8.5% top-line growth to £201mln, compared to 13.6% expected for the full year.
The analysts believe the supply issues in the end of 2018 and the fact that a lot of cars have been delivered to dealers at the end of December has led to high inventory levels at dealers beginning of the first quarter.
“These cars had to be sold in the course of Q1 2019 before dealers could order new cars,” they said, with wholesale likely to impacted by this but underlying retail demand still seems strong.
“We think the Q1 results may be perceived as an incremental negative, though we maintain our positive long-term view on Aston Martin, given its asset-light business model with high ROCE and cash conversion rates.”
Centrica investors hope for no more bad news
The British Gas owner has suffered a lot in 2019, with the stock down by almost a third since the turn of the year to 20-year lows.
Centrica warned in February that its 2019 results will be hit by caps to energy tariffs, which has sparked fears over the sustainability of its dividend.
Extensive cost-cutting plans have been put in place in a bid to protect cash and profits, but that can’t last forever. Analysts think the “writing is pretty much on the wall” for the dividend to be cut.
Mild first-quarter weather hasn’t helped sentiment either, with Brits not needing to whack up the thermostat like they did in the opening months of 2018.
Experian to see slowdown in growth
Shares in Experian PLC (LON:EXP) are at all-time high, having doubled in over the past three years, but Deutsche Bank in March downgraded the stock to ‘sell’ as it believed the shares were overvalued on the basis of its forecasts that the consumer credit reporter’s growth will soften in the next 12 months.
For the past year to March, DB forecast the company to have generated 8% organic growth.
The consensus range for the March 2020 results is 5-8%, and the German bank is at the bottom end of that range, seeing a further slowing to 4% in 2021.
“We expect that a slower level of growth will lead to a lower rating for the company.”
Another 'excellent quarter' from Compass forecast
Catering colossus Compass Group PLC (LON:CPG) is due to serve up half year results on Wednesday, following a first quarter trading update in February that showed cost cutting was helping offset lower volumes and higher costs at its UK business.
Organic revenue grew by 6.9%, led by North America and Europe, and the rest of the world slower.
The consensus forecast is for 6.2% growth for the half year, with EBIT of £952m.
For the full year, the company expects growth to be “slightly above the middle” of its target growth range of 4% to 6%, with modest margin progression, while Compass shares had risen 10% since start of year to an all-time high last month, but currently not much higher than level in June 2017.
Barclays recently downgraded the group for the first time in a decade, as the valuation had reached levels that made “upside feel more limited” and that they were now more cautious in the medium-term.
While the bank’s analysts expect “another excellent quarter of organic growth”, they were more negative about margins and noted the industry’s increasing capital requirements were a long-term threat.
CMA spectre looms large for Dignity
In its latest full year results, the group reported a fall in underlying pre-tax profit to £54.4mln from £77.8mln in 2017, so the firm will be looking to start its current fiscal year on more solid ground.
There is also the looming shadow of the ongoing review of the UK funeral sector by the Competition and Markets Authority (CMA), which was launched at the end of March to try and tackle the rising costs of funerals, as the spectre of tighter regulation could potentially spook investors.
Premier Foods faces potential grilling of future
The maker of Mr Kipling cakes, Premier Foods PLC (LON:PFD) will potentially be facing a lot of questions about its future boss at its final results on Tuesday after reports surfaced in April that the firm had approached the former head of Weetabix Ltd, Giles Turrell, to become its new chief executive.
Meanwhile, investors will likely be looking for any updates on how the group is planning to reduce its debts after calling off a sale of its Ambrosia custard unit earlier in the year.
There will also be hopes that the group’s Mr Kipling, Bisto and Batchelors brands have continued to increase market share and offset sales declines in other areas of the business.
Whatever the firm can come up, investors will be wanting as much good news as they can get to sooth the battered share price, which has fallen 60% over the last 12 months.
UK jobs the main macro event
Away from company news, market participants will be looking at Tuesday’s official UK jobs report to gauge the health of the country’s labour market amid concerns that Brexit uncertainty has weighed on business confidence.
Last month the Office for National Statistics revealed employers shrugged off concerns about the UK’s looming departure from the European Union in the three months to February with more jobs added and pay growth rising at the fastest rate in more than a decade.
For the next three-month period, RBC Capital Markets predict another “impressive rate” of job growth and sees the jobless rate remaining below 5% for a third successive month.
“However, with that large month-on-month gain dropping out of the quarter-on-quarter estimate from next month onwards, the pace of employment growth should slow over coming months,” it said.
“For wages, our view is that wage growth has peaked for the time being and we expect to see a slight moderation in wage growth in coming months and expect both the whole economy and regular pay growth measures to slow slightly this month.”
Significant announcements expected:
Monday May 13:
Economic data: US consumer inflation expectations
Tuesday May 14:
Economic data: UK jobs, average earnings; US export, import prices; US import, export prices
Wednesday May 15:
Trading updates: Kingfisher PLC (LON:KGF)
Economic data: US retail sales; US industrial, manufacturing production; NY Empire State manufacturing index
Thursday May 16:
Economic data: US weekly jobless claims; US housing starts; US Philly Fed manufacturing index
Friday May 17:
Economic data: US University of Michigan consumer sentiment index