The year-end update from Barratt on Wednesday should be fairly uneventful, with the group having said in May that its results will be “modestly” ahead of expectations.
Even though the FTSE 100 housebuilder, along with the rest of its peers, has seen build costs spiral in recent years it reported “good progress” on driving margin improvements this year, helped by “refinements” to its housing ranges. Build costs are still expected to rise by between 3-4% this year.
Trading performance has been solid, with reservation rates in 2019 at 0.79 per site, per week compared with 0.80 this time last year, forward sales are flat at £3.37bn and strong cash generation is expected to leave £600mln-650mln in the bank.
Analysts at Hargreaves Lansdown noted that Barratt shares have been held back by investors’ worries about the impact a disorderly exit from the EU could have on the company.
“That prompted a change in dividend policy from the Barratt board. The group intends to return the same £446.9mln of cash to investors, but now has the flexibility to split this between dividends and share repurchases,” they said in a preview.
“There’s not been any buybacks as yet, but it’ll be interesting to see whether the group plans on making any share repurchases in the coming months,” the analysts added.
How is SuperDry’s turnaround coming along?
Meanwhile, SuperDry’s annual profits are expected to halve when the troubled coat maker reports its full-year results.
Investors already know that sales were flat at £872mln for the year to the end of April, and UBS analysts expect pre-tax profits to have fallen by 53% to £45mln.
The numbers are likely to take a back seat though, with shareholders more interested in how the turnaround is progressing under Julian Dunkerton – the group’s founder who recently returned following an intense boardroom battle.
“Given the recent change in management we believe the outlook for a brand turnaround will be more important than current trading,” said UBS analysts in a preview note to clients.
“The key focus for us will be: 1) the magnitude of possible near-term investments (P&L and cash flow); 2) reaction from wholesale partners to new product ranges; 3) quality of the inventory stock file; 4) impact of lower promotions on the top line,” they added.
Few surprises see from strong Dunelm fourth quarter
Homeware retailer Dunelm PLC (LON:DNLM) is poised to end its year on a high with fourth quarter results, having previously upgraded its full-year profit expectations in June.
Like many other retailers, the group has continually highlighted “political and economic uncertainty”, so investors will be looking for any impact on trading from the Brexit debacle.
The group will also potentially update on its digital capabilities, which it has sought to improve in a bid to boost business.
Analysts at UBS are expecting a strong performance for the FTSE 250-listed retailer’s fourth quarter, forecasting an increase in like-for-like sales of 14%, although they added that they expect “few surprises” in the update.
Can ‘Spoons offset cost pressures with volume increase?
JD Wetherspoon PLC’s (LON:JDW) costs will be under the spotlight when it releases a pre-close trading update.
The no-frill pubs group has had no trouble selling more of its cheap food and drink this year, but making more money out of those sales has proved difficult.
In November, it was forced to lower its expectations for the year, citing soaring staff costs in the hospitality sector.
Still, with like-for-like sales growth gently accelerating throughout the year, shareholders will be hoping that the volume increase might actually be enough to offset the cost pressures and get the bottom-line close to last year’s record.
Concerns about UK economy weigh on PageGroup
Recruiter PageGroup PLC (LON:PAGE) managed to deliver growth in gross profit across all regions in the first quarter despite the drag of Brexit uncertainty on UK business confidence.
However, its shares are trading some 15% below its peak levels last autumn amid concerns about the outlook for the UK economy and other key global markets.
AJ Bell pointed out that gross profit growth has decelerated in the last two quarters so it will be interesting to see if this trend has continued when PageGroup publishes its second-quarter trading update.
Markets eye rate cut hints from Fed
The Federal Reserve may provide hints on its next move on interest rates when it releases the minutes of its June policy meeting.
The US central bank left interest rates on hold last month and indicated there would be no cuts this year and only one or two next year.
However, the Fed is widely expected to lower the benchmark rate by 25 basis points later this month to bolster the economy after recent data pointed to weak employment, low inflation expectations and a decline in consumer confidence.
“At the beginning of the year, the market thought rates would almost certainly be either unchanged or higher by the end of the year,” said Marshall Gittler, chief strategist and head of education at ACLS Global.
“Now that’s seen as having zero chance; the question is only how many cuts there will be. Right now a Fed funds rate of 1.75%, i.e. three more cuts, is seen as the most likely scenario.”
UK GDP expected to rebound in May
The UK economy shrank by 0.4% in April as the stockpiling of goods to deal with a disorderly Brexit slowed after the deadline date for the UK’s departure from the European Union was delayed.
The fall was worse than analysts had expected and marked the second consecutive month of contraction after a 0.1% decline in March.
The Office for National Statistics (ONS) estimated that UK economic growth eased to 0.3% in the three months to April from 0.5% in the three months to March.
Pre-Brexit stockpiling boosted the UK economy in January and February but the effects wore off in the following two months after the government pushed back its proposed Brexit deadline to October 31 from March 29.
Another major contributor to the weaker gross domestic product (GDP) in April was a drop in car production as manufacturers prepared for a no-deal Brexit by bringing forward annual shutdowns.
On Wednesday, the ONS will release its estimates for UK GDP in May and for the three months to May.
In a preview, economists at RBC Capital Markets pointed out that car production recovered by 45,000 to 116,000 units in May, which should give back some of the 0.2 percentage points it thinks the auto sector shaved off growth in April.
With an expected positive contribution from services, RBC’s economists expect to see a “sufficiently large” rebound in month-on-month GDP in May. They predict the UK economy grew by 0.1% in the three months to May, marking a slowdown on the previous month’s estimate.
Significant announcements expected for Wednesday July 10:
Trading updates: Barratt Developments PLC (LON:BDEV), JD Wetherspoon PLC (LON:JDW), PageGroup PLC (LON:PAGE), Dunelm PLC (Q4) (LON:DNLM)
Finals: Superdry PLC (LON:SDRY), Yourgene PLC (LON:YGEN)
Economic data: UK monthly GDP estimate; UK trade; UK index of production; UK construction output; FOMC minutes