FTSE flood ahead with numbers from bookies, banks and builders

In the coming week, results are expected from AB Foods, Reckitt Benckiser, WPP, Rio Tinto, William Hill, Flutter Entertainment, StanChart and Metro Bank

Reckitt Benckiser
What does Reckitt's new CEO have in store for its array of brands

In the coming week there will be a flood of results, with more than a fifth of the FTSE 100 dishing out numbers and dozens more from the FTSE 250, as well as an indication of who will be moving between the two in the next quarterly reshuffle.  

At the end of the week, FTSE Russell may confirm that NMC Health PLC (LON:NMC) will drop out of the blue chip index next month, with Pearson (LON:PSON) also on the verge.

The race for promotion from the mid-caps to the big time is being led by Intermediate Capital Group (LON:ICP) and Bellway (LON:BWY), which have seen their shares jump 28% and 30% in the past three months.

“Perilously close to the drop – but safe for the moment and therefore worth keeping an eye on for the next couple of weeks – are Morrisons, Centrica, Kingfisher and Sainsbury,” said Richard Hunter at Interactive Investor.

ABF - how is coronavirus affecting Primark?

At the start of the week, Associated British Foods PLC’s (LON:ABF) update should not come with many surprises, considering the market last heard from the Primark owner in mid-January.

The fast fashion chain remains the main focus for investors, who want to know about its UK performance, overseas expansion plans and impact from coronavirus on China and its supply chain.

Sales in European markets such as France and Italy have been strong recently although Germany is seen by analysts as the main opportunity for growth.

While worries about Primark’s performance has led to AB Foods’ shares currently sitting 25% off their all-time from a few years ago, the November and December trading threw considerable shade on the weak performances seen elsewhere on the high street.

Primark saw just a “marginal decline” in UK like-for-like sales in the 14 weeks to 4 January, which compares extremely well with the sector's deterioration in yuletide selling.

Another key element will be the sugar business, which may see a rise in profits this year thanks to cost reduction.

Reckitt’s new regime

The coming Thursday it will be difficult to stand out from the crowd, with at least a tenth of the FTSE 100 reporting results, but finals from Reckitt Benckiser Group PLC (LON:RB.) may rise above the throng as they come with a strategy presentation from new boss Laxman Narasimhan.

The ex-Pepsi man started life at the Durex, Nurofen and Cillit Bang owner with a profit warning in October that he attributed to US retailer de-stocking and a difficult market for infant food in China.

He trimmed the full-year outlook to LFL sales growth of 0-2%, only a few months after predecessor Rakesh Kapoor had cut the guidance to 2-3% from 3-4%. 

Investors will have a long list of things they are keen to hear from Narasimhan, including about future shareholder returns, whether a split of the Health and Home business is still on the table, how he plans to stabilise profit margins across the group, a solution to slowing sales from his predecessor’s US$16.6bn acquisition of infant food group Mead Johnson, plus any updates on legacy mis-selling costs from the Indivior spin-off and the Korean humidifier lawsuit.  

UBS analysts forecast 0.9% like-for-like growth in the fourth quarter, helped by a stronger cold/flu season but slower Infant Nutrition. 

“For 2020 we expect the new CEO to set out his view on the sustainable LFL growth rate for RB going forward as well as announce a margin cut. The size of this potential margin reset likely to be an important focus for investors.”

WPP getting whipped into shape

Another giant where a new boss is slightly further down the restructuring road, is WPP PLC (LON:WPP), which also on Thursday will announce the first under chief executive Mark Reid’s new strategy.

Coming up to two years since longtime boss Martin Sorrell stepped down, the advertising group’s efforts to slim down the behemoth last year included selling its 60% stake in market research group Kantar for £3.2bn.

All eyes on Thursday will be on whether the group has managed to sustain positive growth in the final three months of the year, having returned to growth in the second and third quarters.

A key area of interest will be the company’s North American businesses, where some trends were improving despite shrinking revenue, and global integrated agencies, which are key revenue drivers but also very exposed to digital disruption.

Cost savings from merging some of its businesses together could also provide some positivity for the bottom line.

UBS has forecast group net revenue growth of 0.5% to €12.9bn, although earnings per share are expected to drop 12% to 95.7p against consensus estimates of 97.7p as a result of higher tax rates and finance charges. 

Betting on the bookies

Rather than slimming down, bookmakers William Hill PLC (LON:WMH) and Flutter Entertainment PLC (LON:FLTR) have been looking to expand via big deals. 

Hill’s is first up on Wednesday with its final results where it is likely to flag the last week’s new partnership with US broadcast giant CBS Sports, as well as any commentary on the potential impact of the UK's ban on bookmakers accepting bets from credit cards, which is due to come into force on 14 April.

For the figures, management have guided to an operating profit of £143mln, though analysts at UBS are foresting a profit beat despite revenues falling 0.7% year-on-year to £1.6bn.

Following on Thursday with its own finals will be Paddy Power and Betfair owner Flutter, although the figures are slightly overshadowed by an ongoing probe by UK competition regulators over the company’s planned merger with Canadian poker giant The Stars Group (NASDAQ:TSGI).

The Competition & Markets Authority said in early February that it would be investigating whether the merger will result in “a substantial lessening of competition” in the UK, with a decision expected to be made by 31 March, even though Australian regulators have approved the combination.

For the year just gone, UBS are forecasting revenues of £2.1bn and group earnings (EBITDA) of £420mln versus guidance of between £420-440mln.

STAN’s plan 

Standard Chartered PLC (LON:STAN) is currently working its way through a strategic plan that involves scaling back its retail banking operations to focus on wealth management and digital banking in a bid to achieve a return on equity of over 10% and cut costs.

The bank’s final results on Thursday will come after the Asia focused bank beat underlying profit estimates in the third quarter.

StanChart was still relatively cautious on its outlook going forward, so any changes to forecasts will be watched closely, especially any potential impact on the lender from the coronavirus epidemic.

Some analysts expect the announcement of a share buyback of around US$1bn.

Will Rio pay a special divi? 

Rio Tinto plc’s (LON:RIO) recent production update showed various issues hitting overall output, with weather in Australia hampering iron ore production, copper production down due to falling ore grades and technical issues affected aluminium production. 

Iron is the key for Rio and 2019 saw higher iron ore prices on average higher than the year before, however analysts at the Share Centre said the restarting of production by Vale and the lingering effects of the Covid-19 are expected to result in falling iron ore and other commodity prices during 2020.

Those at RBC Capital Markets this month warned that mining equities and commodities prices are likely to be under pressure in the near term due to worries about the impact of the coronavirus outbreak.

For copper, RBC cut its 2020 price forecast to $2.70 per lb from $3.00/lb and trimmed its iron ore price forecast for 2020 by 6%, though the analysts said any weaker copper and iron prices in the near term could improve later in 2020 if China uses stimulus to recover from the outbreak.

The consensus forecast is for a final dividend of US$2.4 and some analysts expect a special dividend too.

Three builders

Three housebuilders reports finals over the week, all not long after year-end trading statements. 

Persimmon PLC (LON:PSN) said home completion volumes fell 3.6% and average selling prices (ASPs) were flat, so analysts expect sales of around £3.4bn.

The focus will be on profits, current trading and the outlook, including an update to the capital return programme, with a huge cash balance of £844mln at the end of December. 

UBS sees potential upside for returns and expects Persimmon’s completion volumes and ASPs to grow in 2020 but profit margins to compress slightly.

Taylor Wimpey PLC’s (LON:TW.) year-end update showed volumes up 5%, ASP growth of 2% that was a lower than forecast, and a balance sheet bulging with £546mln of cash.

TW said it plans pay out £600mln more to investors in 2020.

The UBS analysts noted that other builders have seen double digit growth in sales per site per week in 2020 but TW has a particularly tough comparison from last year, so “may be flat to down given the focus on margins in 2020. Key will be an update on pricing traction in the new year.”

Fresh from changing its name from Bovis to Vistry Group PLC (LON:VTY), the FTSE 250 company said in January that underlying profits for 2019 would be “slightly ahead” of market forecasts.

The integration of its Linden Homes acquisition from Galliford Try earlier in the month was “well underway”, which was of interest to Galliford shareholders who were left holding 29% of the enlarged group after the deal.

Vistry’s outlook was rather vague apart from that volumes are intended to be flat for 2020, with no comments on profit margins.

Peel Hunt's analysts expect the merger and related synergies to drive “a lot of growth" and the market is "not fully valuing the Partnerships business, which has the scope to post very strong growth over the next 3-5 years”.

BAT’s short-term view cleared out

British American Tobacco PLC (LON:BATS) is joining the finals party on Thursday a month after analysts at Morgan Stanley said US regulatory risk around vaping had “abated” in the short term.

However, the future may bring new entries and further regulations that could disrupt long-standing players such as BAT.

Washington is tightening laws around vaping to make it less appealing to kids, while there is widespread concern over the safety of such products for adult consumers as well.

Moreover, the minimum age to buy nicotine products in the US has been raised to 21 from 18, with expected reduction in cigarette volumes as well as menthol products.

While the combustible business remains the largest, “the next generation product portfolio remains key to sentiment,” analysts at UBS said.

For now, investors can rest assured the FTSE 100-listed group has met targets, as stated in a December update.

Meggitt - 737 Max and coronavirus in focus

Meggitt PLC (LON:MGGT) numbers on Tuesday should show revenues growth of 6-7%, according to management’s guidance.

The aerospace, defence and energy group said it expected operating margin to be towards the lower end of the range of 17.7-18.2%.

Meggitt is likely will comment on the hit by Boeing 737 Max grounding and the coronavirus, as well as the performance of the civil and defence markets.

The group currently supplies spares parts to Boeing for the MAX aircraft and warned in November that the grounding of the planes would place a cap on its operating margins for 2019.

Aston Martin on a Stroll

A pre-close update in early January from Aston Martin Lagonda Global Holdings PLC (LON:AML) revealed that the retail sales of its supercars were up 12% but wholesale vehicle sales were down 7%. 

The key order book for the brand's first SUV, the DBX, stood at 1,800 units, and the board said underlying profit (EBITDA) for the year was expected to be £130-140mln - around half the previous year. Debt was expected to head towards £900mln.

Then the big news came at the end of the month when Canadian billionaire and F1 backer Lawrence Stroll led a consortium of financial heavyweights in a bail-out of the carmaker, providing a £55.5mln short-term loan and proposing an immediate injection of a £182mln equity investment and a £318mln rights issue after the results to pare debt and provide additional liquidity to fund the DBX ramp-up.

For 2019, analysts at Peel Hunt said they expect break even at the operating profit level on sales of £963m.

"For FY20, our model has 2,000 DBX vehicles, but the additional depreciation and amortisation costs are expected to result in another pre-tax loss."

Serco and the contract flow

Outsourcer Serco Group PLC’s (LON:SRP) finals come mid-week, where investors expect to hear on the dividend following a detailed pre-close and encouraging recent contract news.

It would be the first payout since 2014, though analysts at UBS were upbeat, with a first half dividend in 2020 also likely.

Another focus will be the size and shape of the bid pipeline after winning more than £5bn of work in 2019, with a healthy rate of new opportunities could support further upgrades later in the year, the analysts said.

Revenues are forecast to come in at £3.2bn, for underlying earnings (EBITA) of £120mln. 

Metro measures the damage

Metro Bank PLC (LON:MTRO) will finally reveal the extent of last year’s damage on Wednesday’s preliminary results, with its shares having plummeted from above 4,000p two years ago to less than 200p.

It is the also sixth-most shorted share in the UK suggesting many think there is more bad news to come.

The dog-friendly bank has been under fire since revealing a massive accounting blunder in January 2019, prompting an investigation by the authorities.

Customers ended up withdrawing £2bn in funds, meaning that pre-tax profits collapsed 83% to £3.4mln in the half-year to 30 June and swung to a £3.3mln loss in the third quarter.

To keep afloat, the company has been raising cash through a £375mln share placing in May, a £500mln sale of a mortgage portfolio in July and a £350mln bond issue with an eye-watering 9.5% coupon in October.

Founder and chairman Vernon Hill left in October after months of pressure by investors, while chief executive Craig Donaldson was gone by December.

Dan Frumkin, now at the helm, will respond to investors looking for a turnaround.

Rolls-Royce in reverse

Investors are bracing for Rolls-Royce Holdings PLC’s (LON:RR.) finals at the end of the week.

The engine maker has been through a tough year, with supply chain disruption due to flaws in its Trent 1000 engine as well as the deterioration of some of its end markets.

Investors want to hear updates on how much the troubled engine is costing, the impact of the Boeing 737 Max grounding and the consequences of Airbus' decision to cut A330 production to keep A350 rates.

The outlook for 2020 is expected to include the inevitable comment on coronavirus disruption.

“If difficulties show no signs of improving, the outlook remains relatively bleak for the group,” analysts at the Share Centre said.

“Although the valuation has come back in line with its longer term average it is clear there are still a number of risks associated with this British icon.”

LSE to announce shorter hours?

When it delivers its final results on Friday, the London Stock Exchange Group PLC (LON:LSE) may provide an update on whether it might shorten the LSE trading day from its current 8am-4.30pm.

A consultation was launched on shortening the trading hours in December following calls by industry bodies who said such a change would improve workplace culture and liquidity.

As well as financial journalists praying for a later start, investors will also be on the look-out for any updates on the group’s US$27bn deal to buy data provider Refinitiv, which was confirmed in November.

There is also likely to be speculation around any assets the firm could be looking to sell off to appease anti-trust regulators and fund the costly merger.

Press reports in December indicated the LSE was not planning to sell its Borsa Italiana subsidiary despite rumoured interest from Euronext, which runs markets in Amsterdam, Brussels, London, Lisbon, Dublin, Oslo and Paris.

Significant announcements expected for week ending 28 February:

Monday February 24:

Finals: Bunzl PLC (LON:BNZL), Ascential PLC (LON:ASCL), CC Japan Income & Growth Trust PLC (LON:CCJI), EasyHotel PLC (LON:EZH), Kosmos Energy Ltd (LON:KOS), Merian Chrysalis Investment Company (LON:MERI), Quartix Holdings plc (LON:QTX), Reach PLC (LON:RCH), RTC Group PLC (LON:RTC)

Interims: Finsbury Food Group PLC (LON:FIF), Dechra Pharmaceuticals PLC (LON:DPH), Tristel Plc (LON:TSTL)

Trading announcements: Associated British Foods PLC (LON:ABF)

Tuesday February 25:

Finals: Croda International PLC (LON:CRDA), Meggitt PLC (LON:MGGT), Derwent London PLC (LON:DLN), Hammerson PLC (LON:HMSO), Petrofac Ltd (LON:PFC), Synetics PLC (LON:SNX)

Interims: Hotel Chocolat Group PLC (LON:HOTC), Innovaderma PLC (LON:IDP), Clinigen Group PLC (LON:CLIN), Morgan Advanced Materials plc (LON:MGAM), Dotdigital Group PLC (LON:DOTD), Springfield Properties PLC (LON:SPR), Bluefield Solar Income Fund Limited (LON:BSIF)

Economic data: CBI UK distributive trades survey, US consumer confidence, US house prices

Wednesday February 26:

Finals: Rio Tinto plc (LON:RIO), Taylor Wimpey PLC (LON:TW.), Avast PLC (LON:AVST), Nichols PLC (LON:NICL), Restaurant Group PLC (LON:RTN), Serco Group PLC (LON:SRP), Unite Group PLC (LON:UTG), William Hill PLC (LON:WMH), Weir Group PLC (LON:WEIR)

Interims: Revolution Bars Group PLC (LON:RBG), Avingtrans PLC (LON:AVG), Town Centre Securities PLC (LON:TOWN)

Thursday February 27:

Finals: British American Tobacco PLC (LON:BATS), Evraz PLC (LON:EVR), Flutter Entertainment PLC (LON:FLTR), Hikma Pharmaceuticals PLC (LON:HIK), Mondi PLC (LON:MNDI), Persimmon PLC (LON:PSN), Reckitt Benckiser Group PLC (LON:RB.), Standard Chartered PLC (LON:STAN), Rentokil Initial PLC (LON:RTO), RSA Insurance Group PLC (LON:RSA), St James’s Place PLC (LON:STJ), WPP PLC (LON:WPP), Aston Martin Lagonda Global Holding PLC (LON:AML), Bakkavor Group PLC (LON:BAKK), Inchcape PLC (LON:INCH), Drax Group PLC (LON:DRX), James Fisher & Sons PLC (LON:FSJ), F.B.D. Holdings PLC (LON:FBH), Grafton Group PLC (LON:GFTU), Greencoat UK Wind PLC (LON:UKW), Hastings Group Holdings PLC (LON:HSTG), Howden Joinery Group PLC (LON:HWDN), Hunting PLC (LON:HTG), Macfarlane Group PLC (LON:MACF), National Express Group PLC (LON:NEX), PPHE Hotel Group Ltd (LON:PPH), Provident Financial PLC (LON:PFG), Playtech PLC (LON:PTEC), Vesuvius Plc (LON:VSVS), Vistry Group PLC (LON:VTY)

Interims: Haydale Graphene Industries PLC (LON:HAYD), Genus plc (LON:GNS), Netcall PLC (LON:NET), Pantheon International PLC (LON:PIN),

FTSE 100 ex-dividends to knock 27.5 points off the index: HSBC Holdings PLC (LON:HSBA), Barclays PLC (LON:BARC), AstraZeneca PLC (LON:AZN), Diageo PLC (LON:DGE), easyJet PLC (LON:EZJ)


Economic data: US GDP, US durable goods orders, UK house prices

Friday February 28:

Finals: CRH PLC (LON:CRH), International Consolidated Airlines Group SA (LON:IAG), London Stock Exchange Group PLC (LON:LSE), Rightmove PLC (LON:RMV), Rolls-Royce Holdings PLC (LON:RR.), ConvaTec Group PLC (LON:CTEC), Essentra PLC (LON:ESNT), Jupiter Fund Management PLC (LON:JUP), Foxtons Group PLC (LON:FOXT), Glenveagh Properties PLC (LON:GLV), IMI PLC (LON:IMI), Man Group PLC (LON:EMG)

Economic data: UK consumer confidence, US personal spending, US balance of trade, US consumer sentiment, US Chicago PMI

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