Shareholders in Premier Inn owner Whitbread plc's (LON:WTB) may still feel rich after July's £2.5bn handout from the sale of Costa Coffee, but half-year results come in the midst of some negative news from the hotels sector.
At the end of last week, smaller rival easyHotel gave a grim assessment of UK market, saying its London hotels performed well enough but regional hotels saw a 2.8% decline, with a number of regions hit by double-digit drops.
Across the UK, sector-wide revenue per available room (revpar) is down by an average of 0.7% this year, according to market data from STR Global.
Recently, however, UBS upgraded Whitbread shares to 'buy' from 'neutral' as they said the recent share price valuation implies that the market is predicting Whitbread's revpar will fall 10%, while analysts at the Swiss bank reckon the fall will be nearer 3%.
Germany is expected to remain a drag on earnings until the 2022 financial year, but the UBS analysts believe the group has an opportunity to create “material value” in a country with similar characteristics as the UK, possibly even better.
In the first quarter, Premier Inn reported a 6.0% fall in revpar, with total accommodation sales down 1.5% and like-for-like sales down 4.6%, blaming weaker business and consumer confidence due to Brexit uncertainty.
Tough for Travis
Investors will be wondering how the economic backdrop has impacted the company’s third quarter, especially after Grafton’s warning last week that UK business has been hit by "increased economic uncertainty" that was preventing consumers from spending in home improvement projects.
With such strong pressure from macro conditions, Peel Hunt said this might mean the benefits from Travis Perkins’ operational improvements may be offset.
Also hotly anticipated will be news on sales at Wickes and the plumbing and heating division, which have been dividing consensus forecasts for adjusted results.
Anglo's diversity its strength, sometimes
Diversified miner Anglo American (LON:AAL) is deliver third-quarter production reports on Tuesday.
Shares in many companies in the sector have stumbled in the last six months amid the ongoing trade war between the US and China, the world’s two biggest economies and major base metals importers.
Anglo American could be a winner since it should be better protected from copper and iron ore volatility as its 80%-owned platinum group metals division Amplats turned a corner and has risen strongly this year thanks to rising demand for palladium, used in batteries, and platinum, which has benefited from a bullish precious metals market.
RBC Capital Markets rates the diversified miner a “top pick” and raised its target price to 2,300p, meanwhile Credit Suisse has rated it an “outperform”.
Significant events on Tuesday 22 October:
Interims: Whitbread Group PLC (LON:WTB)
Trading statement: Anglo American plc (LON:AAL), Bunzl PLC (LON:BNZL), Gear4Music Holdings PLC (LON:G4M), Reckitt Benckiser Group PLC (LON:RB.), St James's Place PLC (LON:STJ), Travis Perkins PLC (LON:TPK)
Economic announcements: UK public sector net borrowing, CBI industrial trends survey, US existing home sales, China policy decision