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Persimmon to post lower profits as it tries to move on from build quality complaints

Another relatively quiet week of financial news is expected

Persimmon -
Persimmon reports its interim results on Tuesday

First-half results from housebuilder Persimmon PLC (LON:PSN) will be in focus in the coming week as it tries to rebuild its reputation after customer complaints about poor build quality.

In a trading update last month, the FTSE 100 group revealed it had sold fewer houses than last year so far in 2019, largely due to management’s decision to delay sales until later on in the construction process.

Investors will be keen to see further progress on build quality and customer satisfaction as it attempts to move from complaints about new-build homes.

The company is also trying to put a scandal over executive pay behind it.

Chief executive Jeff Fairburn stepped down last November after coming under pressure over the £75mln bonus he was awarded as part of a long-term incentive plan. He was replaced by managing director David Jenkinson.

Persimmon is expected to reveal in the interim results on Tuesday that margins remained close to the 31% the company achieved in 2018, despite slightly higher selling prices.

“Lower revenue and stable margins mean lower profits – but we’re not expecting a big hit,” said Hargreaves Lansdown.

UBS analysts have pencilled in a pre-tax profit of £509mln (H1 18: £520mln), adding that sales and margin guidance will be “key”.

A big concern for the housebuilders, which are all reliant on a strong UK economy, is Brexit, so the market will be looking at how Persimmon is positioning itself for the 31 October deadline.

NSF investors await to hear next steps after failed Provident Financial takeover

Non-Standard Finance PLC (LON:NSF) is likely to try its best to sweep its failed hostile takeover bid for Provident Financial PLC (LON:PFG) under the rug when it reports its interim results on Tuesday.

The subprime lender abandoned its months-long battle to buy rival Provident Financial in June following resistance from shareholders.

When NSF reports its first-half numbers, a key focus for investors will be on any remarks about what the company plans to do next.

As for the financials, Peel Hunt expects NSF to post a 45% rise in adjusted pre-tax profit to just over £8mln.

“Interim results will reflect the strong ongoing loan book growth in guarantor and branch based lending whilst home collected credit is expected to be more modest,” the broker said.

However, Peel Hunt added the results will be dampened by one-off deal-related costs, which are expected to come to £10.0-10.5mln.

Laura Ashley results hit by ‘very demanding’ trading

Full-year results from Laura Ashley Holdings plc (LON:ALY) on Thursday are expected to make for a grim reading after the British retailer warned of poor trading.  

In an April trading update the homewares and clothing seller said the results will miss market forecasts as trading conditions were “very demanding” in the third quarter.

The statement comes months after a ditched takeover plan by Flacks Group.

Flacks said in April that it would not make a firm offer for Laura Ashley after the retailer dismissed an unsolicited bid from the investment firm.

CRH share buyback announcement expected

Irish building materials supplier CRH PLC (LON:CRH) reports its first-half results on Thursday in the wake of announcing it will sell its European distribution unit in a deal worth €1.64bn.

The disposal of the European distribution business is part of the group’s strategy to actively manage its portfolio for higher growth and more sustainable returns.

CRH plans to use the proceeds of the sale for general corporate purposes, acquisitions and returns to shareholders through an ongoing share buyback programme.

UBS said CRH is likely to announce another £350mln share buyback for the rest of the year in the interim results.

It expects CRH will report sales of €13.15bn, up 4.3% on a like-for-like basis, and earnings (EBITDA) of €1.56bn, compared to €1.1bn last year.

“We expect guidance for the second half to be for further EBITDA growth (UBS estimate +6%),” UBS said.

“We will also look for more colour on the previously issued margin improvement targets by 2021.”

Strong profit growth seen from Playtech

Playtech PLC (LON:PTEC) is due to publish interims on Thursday in a year that the gaming software provider expects to deliver a strong rise in underlying profits following a difficult but improved performance in 2018.

Shares in the FTSE 250 outfit, whose software is used by online casino and betting operators, are down almost two thirds in the past two years as the core B2B technology business was hit by a collapse in revenues from unregulated Asian markets.

Having now diversified into online financial trading and with the acquisition of Italian retail betting rival Snaitech, management have guided to underlying earnings (adjusted EBITDA) for the current year of €390mln-€415mln, after climbing 7% to €343mln last year on revenue up 54% to €1.24bn.

Analysts at JP Morgan Cazenove recently proposed a punt on Playtech, kicking off coverage of the stock with an ‘overweight’ rating and a punchy 603p price target.

Analysts see Playtech as “well placed to meet guidance for FY19, which we think will represent a trough in terms of organic growth, margin and cash flow”, suggesting the business is “less risky” than it was even a few months ago as revenues have been diversified by nature and geography by the acquisition of Snaitech, which dilutes the elevated risks associated with the B2B business.

February also saw Playtech sign a “significant extension” to its long-term deal with Ladbrokes and Coral owner GVC, which itself reported strong online growth this week.

Finablr posts first results since IPO

Tuesday will see the maiden interim results from Travelex owner Finablr PLC (LON:FIN), which floated on London’s main market in May.

The UAE-based payments and bureau de change group was forced to slash the pricing of the initial public offer to 174p per share from the initial 210p-260p range.

Since the IPO, the company has put out a first-quarter trading update for Travelex, where revenue grew 3% to £174.5mln, amid a “strong” performance for the Middle East and Turkey.

Underlying earnings (EBITDA) from the core Travelex business, excluding disposed operations, gained 79% to £2.9mln.

“Travelex's revenue is generally lower for the first quarter of the year because a significant part of its business serves the leisure segment of the travel industry, which is particularly active during the summer season in the Northern hemisphere,” management said.

JPMorgan Cazenove, which was a sponsor on the IPO, is estimating that the group can generate compound annual EBITDA growth of 19% for the period from 2018 to 2021.

With the shares having hit a low as 140p and rallied but still below the IPO price, Barclays, which was a joint co-ordinator on the IPO, said it expects “it will take time and a number of positive data points for the market to attribute fair value to the stock”.

Rank yet to hit its stride

Final results are expected to spin round from Mecca Bingo owner Rank Group PLC (LON:RNK) on Thursday.

At the end of May, the FTSE 250 group’s £115mln offer for Stride Gaming PLC (LON:STR) was recommended by the online bingo specialist’s board, with backing from shareholders holding more than 61% of the shares.

“The joining of our businesses will accelerate delivery of Rank's transformation plan and create one of the UK's leading online gaming businesses,” said Rank boss John O'Reilly.

Stride has had a difficult year as the online gaming industry has dealt with increased compliance and due diligence measures, the combination should roughly double Rank’s digital revenues, provide significant “synergy benefits” and bring improved technology in house, said broker Shore Capital.

For the year to June 2019, Shore has forecast Rank will generate earnings per share of 14p, increasing to 15.8p in the following year thanks to digital growth and the benefits of a current transformation programme, with Stride adding around 3p per share after three years.

Blue-chip miners report in shadow of global slowdown

BHP’s share price has been under pressure this month amid concerns over global growth, the US-China trade spat and a slowdown in Chinese construction activity.

Earnings forecasts for the group have already been revised down after a mixed production update in July, so future production levels for the company’s various commodities, particularly iron ore, will be closely watched by investors when the group reports its finals on Monday.

Meanwhile, fellow blue-chip miner Antofagasta will be hoping to keep the good news flowing in its interims on Thursday after a production update in July reported a 22.2% increase in copper production for the first six months to 387,300 tonnes.

The Chilean miner has guided for 2019 copper production of between 750,000-790,000 tonnes, so any changes to this forecast are likely to be watched closely.

There may also be some news on what the company intends to do with its share of US$5.84bn in damages received from the government of Pakistan as the result of a seven-year-long arbitration over the Reko Diq project, which was run by a 50:50 joint venture between Antofagasta and Barrick Gold Corp (TSE:ABX).

Investors await restructuring and dividend news from Wood Group

Recent volatility in the oil price has caused issues for many companies in the oilfield services sector, and John Wood is likely to be no exception when it reports its interims on Tuesday.

The FTSE 250 group‘s results will be watched for any news on how its restructuring programme is progressing, as well as whether it still expects a 25% increase in operating profits, have guided for such a figure back in June.

Investors will also be hoping for any news on increased dividends as the company’s cash flow has steadily improved this year, raising hopes of a higher pay-out.

John Laing hopes for pick-up in renewables assets 

Infrastructure investor John Laing Group PLC (LON:JLG) will publish its half-year results on Thursday.

June’s trading update showed the company raked in £131mln from realisation in the first six months of the year, including the sale of stakes in a sports stadium in Australia and a wind farm in Texas. Over the next three years, bosses expect realisations will reach £1bn.

Issues with some of John Laing’s renewable assets – including lack of wind and transmission issues – have hampered performance in that division, but things have been better in the Public Private Partnership business, with Denver Eagle and Sydney Light Rail projects making good progress.

“We expect Jun 19 net asset value of c335p as JLG continues to create under-appreciated value, helped by a likely continuing fall in secondary market discount rates,” said City broker Peel Hunt.

Hansteen earnings tipped to grow

Industrial REIT, Hansteen Holdings plc (LON:HSTN), is due to post its half-year numbers on Wednesday.

The shares have been weak recently, down 10% or so over the past month and trading at a 17% discount to net asset value. Peel Hunt said this makes Hansteen “the best value way” to play the UK industrial property market.

“This will be the first period since the 35p special dividend last year and whilst we expect both EPS (FY19: 5.1p) and DPS (FY19: 4.8p) to be progressive, this will be after an adjustment for the c26% return of capital,” added the analysts.

The company, which buys and manages business parks and industrial estates, has been one of the beneficiaries of the shift to online as it has pushed up demand for big warehouses.

Hansteen had been selling off some of its assets before the next property cycle, but it recently said it would focus on managing its residual holdings for income and value growth.

 

Major announcements expected:

Monday August 19:

Finals:  BHP Group PLC (LON:BHP), Omega Diagnostics Group Plc (LON:ODX)

Interims: BATM Advanced PLC (LON:BVC)

Economic data: Eurozone CPI

Tuesday August 20

Finals: Scancell Holdings PLC (LON:SCLP)

Interims: Non-Standard Finance PLC (LON:NSF), Empiric PLC (LON:ESP), Finablr PLC (LON:FIN), Global Ports Holding PLC (LON:GPH), Kenmare Resources PLC (LON:KMR), Persimmon PLC (LON:PSN), John Wood Group PLC (LON:WG.)

AGMs: Circle Property PLC (LON:CRC)

Wednesday August 21:

Interims: Charter Court PLC (LON:CCFS), Costain PLC (LON:COST), Empresaria Group plc (LON:EMR), Hansteen Holdings PLC (LON:HSTN)

Economic data: UK public sector net borrowing, US existing home sales, MBA US mortgage applications, US crude oil inventories

Thursday August 22:

Finals: Arcontech Group PLC (LON:ARC), Laura Ashley PLC (LON:ALY), Rank PLC (LON:RANK)

Interims: Anglo Pacific PLC (LON:APF), Antofagasta PLC (LON:ANTO), CRH PLC (LON:CRH), Foresight Solar PLC (LON:FSFL), John Laing PLC (LON:JLG), Macfarlane Group PLC (LON:MACF), NMC Healthcare PLC (LON:NMC), Playtech PLC (LON:PTEC), Premier Oil PLC (LON:PMO), Sopheon PLC (LON:SPE), Sportech plc (LON:SPO)

FTSE 100 ex-dividends: Berkeley Group PLC (LON:BKG), London Stock Exchange Group PLC (LON:LSE)

Economic data: US weekly jobless claims

Friday August 23:         

Interims: Computacenter PLC (LON:CCC), Glenveagh PLC (LON:GLV), Afarak Group PLC (AFRK)

Economic data: US new home sales

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