The sun might be shining brightly at present but the spring and early summer weather was far from perfect, so investors might be worried that Associated British Foods plc (LON:ABF) latest update could disappoint on Thursday.
So far this year, low sugar prices have taken the shine off what has been a relatively stable showing from the FTSE 100-listed firm’s star asset, discount clothing retailer Primark, which continues to outperform most of its peers.
Still, European sugar prices are slowly recovering, and AB Foods has already said it expects profits to rebound towards levels comparable with last year.
However, the plunge in sugar profits has put the onus very much on Primark in recent years, with the cheap clothes seller now accounting for around two-thirds of group operating profits.
New store openings have kept Primark’s headline sales moving forward, and Hargreaves Lansdown analysts reckon “hopes for further top-line growth aren’t unreasonable”.
That said, they added, it will be interesting to see what impact the weather has had on sales.
Quality improvements key for Persimmon
Also among the blue-chips, a half-year update is due from Persimmon PLC (LON:PSN) on Thursday, with the housebuilder having seen its shares drop by more than 13% since trading news in May to hit a little above a two-year low.
For the first four months of the year, Persimmon’s sales rate dropped by 5% and forward-sales revenue was down by 3.6% as it attempts to improve customer relations after complaints about poor build quality, punitive leasehold terms and excessive executive bonus scheme.
While the FTSE 100-listed firm maintained that the new-build housing market was proving “resilient” and current forward sales position were “strong”, it was having to make a “more targeted approach” to site sales and was investing in the customer care team, operations and technology.
Analysts at UBS expect Persimmon’s first-half housing completions to be flat at 8,072, with average selling prices to be up 1.3%, resulting in total revenue growth of 1.3% to £1.77bn.
While Persimmon does not report margins with its trading updates, UBS expects the firm’s first half operating margins to be up slightly before making a sharper decline in the second half due to the increased customer services investment.
Leadership the key for MJ Gleeson
Small cap housebuilder MJ Gleeson PLC (LON:GLEE) will also issue a trading update on Thursday with the main focus on leadership issues for the group.
On 10 June it was announced that Gleeson’s CEO Jolyon Harrison would leave the company with immediate effect, with James Thomson - former CEO of Keepmoat Homes – appointed as the firm’s interim CEO while the search process for a permanent CEO takes place.
As part of the June announcement, the group also reiterated its guidance for full year pre-tax profit of £40.6mln, which would be in line with consensus.
Analysts at Peel Hunt cut their stance for MJ Gleeson to ‘reduce’ from ‘hold’ in the wake of the June news.
They said: “Though worthy of trading at a small premium to the sector due to the defensive qualities of the low cost homes and northern focus, we believe the current valuation looks demanding, particularly given the uncertainty surrounding management.”
Significant events expected on Thursday:
Trading updates: Associated British Foods PLC (LON:ABF), Persimmon PLC (LON:PSN), MJ Gleeson PLC (LON:GLEE), 3i Infrastructure PLC (LON:3IN)
Ex-dividends to knock 5.3 points off FTSE 100: Aveva PLC (LON:AVV), Coca-Cola HBC PLC (LON:CCH), International Consolidated Airlines Group PLC (LON:IAG), Next PLC (LON:NXT)
Economic data: UK Halifax house prices; US balance of trade; US weekly jobless claims