The big event for the UK next week will be Wednesday’s budget, the first outing for recently installed Chancellor of the Exchequer Rishi Sunak.
Most are expecting the government to focus on fulfilling Conservative election promises to ‘level up’ Britain’s deprived northern regions with infrastructure spending, as well as supporting businesses that could find themselves at the sharp end of the coronavirus pandemic.
Barclays said they expected the chancellor’s efforts to ‘level up’ the economy to cause deficits, “largely structural”, which could “grind from 2.1% of [gross domestic product] in 2019/20 to just shy of 3% in three years”.
Meanwhile, Sunak is also expected to announce an end to the freeze on fuel duty, introduced in 2010 by his predecessor George Osborne, as part of government efforts to tackle climate change and accelerate the transition towards electric vehicles before petrol and diesel cars are banned in 2035.
However, the plan is likely to encounter opposition from some Conservative MPs who have previously resisted ending the policy to protect motorist’s wallets.
Elsewhere on the macro front, Thursday will bring the latest interest rate decision from the European Central Bank, with US inflation and jobless claims data due across the rest of the week alongside a UK GDP reading.
Standard and Pru
It’s also the turn of further life insurers and asset managers to report results this week, with FTSE 100 giants Standard Life and Prudential PLC (LON:PRU), also joined by Pru’s spin-off M&G PLC (LON:MNG).
The demerger was completed in October, with Pru boss Mike Wells saying it would allow both businesses to “maximise their potential performance”.
However, activist investor Third Point, Pru’s second-largest shareholder with around 5% stake, said the life insurer should split itself again, to separate its US and Asian operations, claiming this will “increase investment in both businesses, optimise growth, and drive higher valuation”.
Analysts at Hargreaves Lansdown said there was a certain logic, “in so far as the logic for keeping the two units together isn’t immediately clear” but they were “not really convinced” splitting up would deliver many benefits either.
“Nonetheless the market noise does make these a relatively interesting set of results – with pressure on management to deliver.”
Investors will be interested to hear what management says about the fast-growing Asian operations in light of the coronavirus outbreak.
Meanwhile, Standard Life Aberdeen PLC’s (LON:SLA) final results on Tuesday come as some investors and analysts worry that a dividend cut is around the corner.
At the group’s half-year results in August, profits fell but the interim dividend was maintained at 7.3p after Lloyds agreed to pay a £140mln settlement after severing a contract to run its Scottish Widows fund portfolio and mandate wins came from Virgin Money and Skipton Building Society.
But, others in the sector have confirmed that weak fund flows in the third quarter turned around somewhat after December’s general election, though it seems hard to imagine that this can reverse the net outflows of £15.9bn in the first half.
M&G delivers post-split numbers
The separation and flotation of M&G, which is focused on European and UK savings, investment and retirement segments, was initially drubbed by analysts at Deutsche Bank, who said the business looked “unexciting”, with “not much growth and too much debt”.
However, the shares were felt to be “surprisingly compelling value” with expected dividends pointing to around a 9.1% yield in 2020, and that was with the shares well over 10% higher than they are now.
JPMorgan Cazenove made M&G, whose results on Tuesday will be their first since the split, its top pick in the sector earlier this year, saying the shares trade at an “unjustifiable” discount to peers.
This is based on the life business’s Solvency II equity valuation of 26% compared to Just Group trading at 53%, Phoenix at 90% and Legal & General at 125%.
“We believe that it could be worth 388p a share within the next 1-2 years”, versus the recent levels around 190p.
Balfour Beatty to cheer on HS2 green light
Balfour Beatty plc’s (LON:BBY) finals on Wednesday should not bring many surprises given the December trading update.
The construction group said full-year operating profit was going to come in slightly ahead of expectations, while the year-end order book was “significantly” higher even before the green light to HS2.
Revenue was flagged to be 5% higher, with profit from operations broadly flat and average monthly net cash to come in at £310mln, ahead of guidance.
Investors will focus on the outlook for construction and services in terms of commitment to HS2 and recent order book momentum.
Analysts at Peel Hunt said it is early for a formal update on the ongoing investigations in US military housing, part of its investments arm.
As the results come alongside the UK’s budget, investors will be hoping for an increase in infrastructure spending.
G4S goes cashless
G4S PLC’s (LON:GFS) finals on Thursday come weeks after the long-awaited demerger of its cash transportation business to Brink’s for £727mln.
The company has set out to focus on its security solutions business as well as payment technology.
The security provider hailed a positive outlook despite a 21% slump to £108mln profit before tax in the first half, mostly due to a £35mln goodwill impairment relating to Brazilian businesses acquired in 2012.
Other than that, the first half saw revenues growing 4% to £3.8bn, with secure solutions performing well in the Americas, Africa and Asia, which offset a decline in Europe, due to “commercial discipline in contract bidding”.
Horrorshow for Cineworld?
Two massive acquisitions in North America have helped Cineworld Group plc (LON:CINE) expand rapidly in recent years, with the US$2.1bn purchase of Canada’s Cineplex due to make it the largest cinema operator in the continent.
However, when it delivers its results on Friday most eyes are likely to be on how the company expects the coronavirus to impact its earnings as the risk of infection drives moviegoers away from its multiplexes.
The firm has already been dealt a blow by the decision to push back the release date for the latest James Bond film, No Time To Die, to November from April.
Cineworld attempted to downplay the impact of coronavirus on its business in an update on Friday, however, some analysts consider the Bond cancellation as a sign that more changes to the release schedule could follow.
The virus is also expected to compound the effects of declining cinema attendance, with the company’s interim results in August showing a fall in admissions, which was followed in November by a profit warning.
All of this will combine to put pressure on the group’s debt pile, which it has used to fund its recent acquisitions.
For the 2019 results, analysts are forecasting sales of around US$4.3bn compared to US$4.1bn last year, although pre-tax profits are expected to decline to US$375mln from US$417mln.
Virus on events horizon for Informa
Investors will be keen to hear what Informa PLC (LON:INF) has to say on Tuesday as the group declared in the first half of the year around 40% of its revenue came from North America, 30% from Asia and 10% from the Middle East, where various other conferences have been cancelled or postponed.
In the final quarters of last year, visitors were put off exhibitions in Hong Kong because of the political, while Dubai was another tough market.
The current analysts’ consensus is looking for Informa to report broadly flat sales of £2.9bn, a small increase in pre-tax profit to £816mln and a further hike in the dividend to 24.5p a share for 2020.
Analysts at Citigroup are worried that disruption to the events subsector could be worse than other segments of media and “have a knock-on effect into 2021”.
They added: “Altering the timing of events is not always easy... investors should focus on earnings/cash as well as revenues... possible hangover for forward bookings & pricing”.
DFS FURNITURE may feel coronavirus discomfort
DFS Furniture PLC (LON:DFS) is releasing its interims on Tuesday which the market is well aware will show a dip in sales.
The sofa maker reassured in January profits will be safe, though there might be a change post-coronavirus outbreak as 60% of its finished good products are imported from mainland Europe or China.
Revenues dropped 6% in the half-year to December in “a challenging consumer environment”, particularly in August and September.
Orders then started to pick up towards the end of the period during the crucial winter sales.
Tullow Oil hopes to avoid sinking further
Thursday’s final results for Tullow Oil PLC (LON:TLW) are likely to receive a fairly gloomy reception after the firm was booted out of the FTSE 250 index in the latest reshuffle.
The oiler’s demotion follows a hammering of its share price over the last six months as lower than expected production at its Ghanaian oil fields at the end of last year and a duster from the first well of its drilling campaign in Peru have combined to weigh heavily on the stock.
The low output from Ghana is particularly concerning for Tullow as it relies on production from those assets to pay down its large debt pile and fund further projects.
The figures are already predicted to show that Tullow’s share of production last year averaged 86,700 barrels per day, lower than its guidance in November, so instead the focus will shift towards whether it still expects US$150mln of free cash flow for the coming year.
The company could also face additional obstacles from lower oil prices and sluggish demand, both of which could be exacerbated by an economic slowdown caused by coronavirus.
Investors will also be keeping an eye out for commentary of heavy oil found in Guyana, which the firm thinks could be valuable.
Significant announcements expected for week ending 13 March:
Monday 9 March:
Finals: Clarkson PLC (LON:CKN), Foresight Solar Fund Ltd (LON:FSFL), Network International Holdings PLC (LON:NETW), Phoenix Group Holdings PLC (LON:PHNX)
Tuesday 10 March:
Finals: French Connection Group PLC (LON:FCCN), M&G PLC (LON:MNG), Standard Life Aberdeen PLC (LON:SLA), John Wood Group PLC (LON:WG.), Ultra Electronics Holdings PLC (LON:ULE), STV Group PLC (LON:STVG), Team17 Group PLC (LON:TM17), H&T GROUP PLC (LON:HAT), Biopharma Credit PLC (LON:BPCR), Forterra PLC (LON:FORT), Gresham Technologies plc (LON:GHT), Informa PLC (LON:INF), LSL Property Services PLC (LON:LSL), John Menzies PLC (LON:MNZS), The Simplybiz Group PLC (LON:SBIZ), Cairn Energy PLC (LON:CNE), TP ICAP PLC (LON:TCAP)
Interims: DFS Furniture PLC (LON:DFS), Close Brothers Group PLC (LON:CBG)
Wednesday 11 March:
UK Budget
Finals: Prudential PLC (LON:PRU), Balfour Beatty PLC (LON:BBY), Dignity PLC (LON:DTY), Breedon Group PLC (LON:BREE), FDM Group Holdings PLC (LON:FDM), Gem Diamonds Ltd (LON:GEMD), Lookers PLC (LON:LOOK), Aptitude Software Group PLC (LON:APTD), Advanced Medical Solutions Group PLC (LON:AMS), Spirax-Sarco Engineering PLC (LON:SPX), IP Group Plc (LON:IPO), Quilter PLC (LON:QLT)
Economic data: US inflation, UK GDP, UK production
Thursday 12 March:
Trading announcement: C&C Group PLC (LON:CCR)
Finals: G4S PLC (LON:GFS), Marshalls PLC (LON:MSLH), Computacenter plc (LON:CCC), Savills PLC (LON:SVS), Tullow Oil PLC (LON:TLW), Keller Group PLC (LON:KLR), Arrow Global Group PLC (LON:ARW), Oakley Capital Investments Ltd (LON:OCI), Helios Towers PLC (LON:HTWS), Valeura Energy Inc (LON:VLU), Secure Income REIT PLC (LON:SIR), Bodycote PLC (LON:BOY),
Interims: Go-Ahead Group PLC (LON:GOG), Galliford Try Holdings PLC (LON:GFRD), Brooks Macdonald Group plc (LON:BRK)
FTSE 100 ex-dividends to knock 3.91 points off the index: Land Securities Group PLC (LON:LAND), Anglo American Plc (LON:AAL), CRH PLC (LON:CRH)
AGM: Benchmark Holdings PLC (LON:BMK)
Economic data: ECB interest rate decision, US jobless claims, US PPI
Friday 13 March:
Finals: Cineworld Group PLC (LON:CINE), Eurocell PLC (LON:ECEL)
Economic data: US Michigan consumer sentiment