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Tesco and Greggs face high bar, Woodford the boot

The independent board of Woodford Patient Capital Trust is expected to give fund manager Neil Woodford the boot

Grit Real Estate Income Group -

In among the coming week’s macro data deluge data and political shenanigans, retail investors will be looking forward to Tesco’s half-time numbers and hearing whether Neil Woodford has got the boot from his eponymous investment trust.

Shares in Britain’s largest supermarket have been essentially flat over the past year but have risen 10% over the past month, suggesting hopes for a continuation of its solid start to its financial year.

Like-for-like sales were up 0.8% in the UK and Ireland for the first 13 weeks to 25 May, its fourteenth straight quarter of growth, but this was slower than in previous quarters and with weaker European growth mean group LFLs flattened off to just 0.2%.

Analysts at Shore Capital are looking to see whether the supermarket has managed to retain decent UK trading over the summer months in view of tough comparatives from last year’s hot, football-fueled summer.

Another sticking point may be the firm’s newly launched discount brand, Jack’s, which despite much fanfare at launch was in the news in the past week as a high-profile store conversion was embarrassingly changed back from a Jack’s to a Tesco’s.

Wednesday’s eyes will also be fixed on the progress the FTSE 100 group has made in raising operating profit margins to its target range of between 3.5% and 4%, and if there is has been a healthy increase from half-year dividend of 1.67p a year ago.

Boot hangs over Woodford

When Woodford Patient Capital Trust (WPCT) puts out interim results on Monday, the board is expected to update investors on whether fund manager Neil Woodford is getting the boot.

A few weeks back the board of the fund, which as an investment trust has an independent board of directors that can hire and fire the fund manager as they see fit, said it was “monitoring the situation” with Woodford and mulling whether to appoint a different manager.

Shares in WPCT have fallen more than 40% since the start of June to below 44p, less than half the price of the then-record flotation in 2015, hit by the sliding value of its assets and connections to the open-ended Woodford Equity Income fund, which has been gated in the wake of a huge wave of redemptions following months of poor performance.

This past week, the trust’s net asset value was cut 4% to 43.5p after a writedown in three of its holdings, including the collapse of Sphere Medical due to lack of funding.

Pressure on Woodford’s Equity Income fund, which invests in many of the same companies as the trust, has fueled a damaging circle, as his reduced ability to support companies with further investment has put them under pressure and hit their valuations, creating further pressure on the funds.

Analysts at JPMorgan Cazenove said this last writedown should be the last for now, as “it seems reasonable to think that all the material write-downs have been announced prior to the results on Monday”.

But they see Woodford’s departure and the wind-up of the trust are the most likely outcomes: “It looks increasingly likely that the company that bears Woodford’s name will move to another manager.”

They “hope for a controlled liquidation” to close the circa-35% discount below the revised NAV.

Broker Numis said the share price has reached a level where there “could well be support” a bid.

Greggs pasty bar set high

Greggs has been the taste of the City this year, with its shares up almost 60% this year on the back of the positive reception for its new vegan sausage roll.

Last time we heard from bakery chain, in July, it had beaten the high street gloom with a 10.5% jump in like-for-like sales of its pasties, sending the shares sizzling up to an all-time high of almost £25.

Analysts at UBS were still bullish on Greggs last month, reckoning the baker still had plenty of room to grow, and could increase the number of branches by half, to a total of 3,000 in UK.

The bar is set high for its third-quarter trading update due on Tuesday, and shares may tumble if expectations are missed.

Investors will be looking to see whether Greggs has sustained its tasty LFL sales growth, which analysts at Peel Hunt expect will simmer down to a modest 6% in the second half of the year.

Peel Hunt expects sales to stay strong, but warns the main concern for Gregg’s forecast will be the price of pork, which has been rising after African Swine Fever hit Chinese farms in August.

TED talks

Interim numbers from Ted Baker are out on Thursday after what has been a turbulent half year, between the chief executive stepping down after sexual harassment allegations and a profit warning issued in July.

The brand seems to have retained its popularity with customers, but blamed competitors for cutting prices, with management’s solution being to announce new products and cost reductions as a long-term strategy.

The shares have plunged from over £31 a year and a half ago to below £10 today and analysts expect only a modest recovery between 2021 and 2022, with a forecast £53mln pre-tax profit for the full year.

Nonetheless, the fashion retailer recently bagged product licence deals with Next in childrenswear and a new partner in Japan, and appointed Rachel Osborne, formerly at Debenhams, as chief financial officer.

Analyst Russ Mould at AJ Bell fears another profit warning could be ahead, as well as a second straight dividend cut.

All about the US for Ferguson as UK demerges

Having announced in early September that it will be spinning out its UK operation into a separate business, as well as replacing its chief executive, there could be some extra pressure for Ferguson’s US business to deliver in its full-year results on Tuesday.

The group is planning to detach its British operation, Wolseley, and list it as a separate business, with the remaining parts of the company to potentially re-list on the US market.

Peel Hunt is expecting the firm’s American operation to keep growing its market share, mostly through bolt-on acquisitions and organic growth, however, it may be too early for any further news on the UK demerger or a review of its stock market listing.

Meanwhile, a mixed picture for the US economy, amplified by a recent interest rate cut from the Federal Reserve, may prove a concern for some given the pivot towards North America.

For the figures themselves, UBS is predicting the firm will report sales of US$21bn, 5.3% growth in like-for-like (LFL) sales year-on-year and an underlying pre-tax profit of US$1.5bn.

For the US business, the Swiss bank expects fourth-quarter LFL sales growth of 4%, up from 3.5% in the third quarter.

Significant announcements expected for week ending 4 October:

Monday 30 September:

Finals: Grit Real Estate Inc (LON:GR1T)

Interims: Altitude Group (LON:ALT), Ariana (LON:AAU), Creo Medical (LON:CREO), Etalon (LON:ETLN), Nasstar (LON:NASA)

AGMs: Accsys Technologies (LON:AXS), Hardy Oil (LON:HDY), Renalytix AI PLC (LON:RENX), Panoply Holdings (LON:TPX)

Economic data: UK GDP, German retail sales and CPI

Tuesday 1 October:

Finals: Ferguson PLC (LON:FERG), James Halstead PLC (LON:JHD), Scs Group PLC (LON:SCS)

Trading statements: Greggs PLC (LON:GRG)

Economic data: Manufacturing PMIs from China, UK, EU and US, Aus rate decision, EU inflation

Wednesday 2 October:

Finals: Ceres Power Holdings PLC (LON:CWR)

Interims: Inspiration Healthcare Group PLC (LON:IHC), Tesco PLC (LON:TSCO)

AGMs: Open Orphan PLC (LON:ORPH)

Economic data: BRC shop price index, UK construction PMI, US MBA mortgage applications, US ADP employment

Thursday 3 October:

Finals: Genedrive PLC (LON:GDR)

Interims: Ted Baker plc (LON:TED)

AGMs: Arcontech Group PLC (LON:ARC), Photo-Me International PLC (LON:PHTM), Purplebricks Group PLC (LON:PURP)

FTSE 100 ex-dividends: DS Smith (LON:SMDS)

Economic data: Services PMI from UK, EU, US, US initial jobless claims, ISM non-manufacturing PMI

Friday 4 October:

Trading statements: Audioboom Group PLC (LON:BOOM)

Economic data: US non-farm payrolls, unemployment, earnings

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