The coming week will see results and updates from the travel sector, an industry hit perhaps the hardest by the coronavirus pandemic, as well as the utility sector, perhaps one of the most shielded sectors.
On the macro front, investors will be eyeing PMI data from both the US and UK over the week as well as the all-important US non-farm payrolls on Friday as a new month begins.
Workspace’s dividend is at risk
In fact, a dividend may not be declared since the property owner has deferred or reduced rent for its hardest-hit tenants, collecting only half of the rent due at the end of March.
Rental enquiries have seen a material slowdown since the lockdown began.
The property owner rents office space in London in flexible leases, giving more exposure to risks during the current crisis.
“Despite the disruption, the group thinks profit for the year ended March 31 will be in line with expectations, so it’s the outlook statement that’s most important next week,” analysts at Hargreaves Lansdown commented.
“Fortunately the group has considerable headroom on the terms set by its lenders, known as covenants – it can withstand a 61% fall in rental income or 63% fall in asset valuation.”
Our friends Electro
The last the market heard from Electrocomponents Plc (LON:ECM) was a coronavirus update on March 23, confirming a significant drop in sales volumes to customers into locked-down markets such as Italy and France.
Sales in the week ended March 22 revenue growth had slowed, the FTSE 250 group said, by a “high single-digit” percentage.
The industrial distributor added that in the preceding eleven weeks to March 15 saw like-for-like revenue growth of around 4%.
“Whilst early days in the scheme of the crisis we thought it read more positively than could have been expected,” said analysts at Peel Hunt in a preview of Tuesday's full-year numbers.
With Electro reporting a strong cash position and saying it had been able to leverage its global supply chain and strong online offering to mitigate the worst impact, using its UK hub to meet global demand, “we don't see a reason for these mini-trends to have changed materially,” the analysts said.
Wizz Air results come in for landing
The FTSE 250 group said on Friday that from July 1 it will open four new bases deploying 11 aircraft and launching over 50 new routes to Italy, Cyprus, Ukraine and Albania.
Chief executive József Váradi said the company sees “the potential to re-stimulate demand for low-cost travel and contribute to the vital recovery of tourism in these markets”.
The airline was one of the first to restart flights after initial coronavirus groundings and said it has new health and safety protocols designed to ensure that its customers and crew can fly safely.
For the first quarter just gone, the consensus forecast is for €2.8bn and the company has given guidance for €340-360mln of net profit before exceptional items.
In a preview, analysts at UBS said the focus will be on cash burn and vouchers, the outlook on how markets open, plus any financial guidance on the 2021 outlook and capex.
SSP Group to count damage
The operator of food and drink outlets in airports and train stations raised £216mln from an emergency placing in March and accessed government funds in April.
As per the last update, revenues in March alone – when trading was still allowed for a good part of the month – were expected to drop by 40%-45%, hitting operating profit by £50mln-£60mln.
The hospitality group has closed shops, sacked staff, reduced salaries and negotiated rents to save money.
Pennon looks to keep dividend afloat
Thursday will bring full-year figures from Pennon Group PLC (LON:PNN), with many investors likely hoping for more clarity on what the utility firm plans to pay out to shareholders over the next five years.
Over the previous five years, the policy has been to increase the dividend by at least 4% above inflation annually, however with water companies about to face a more difficult future following a tough Ofwat review in February covering 2020-25 the firm could decide to make its payout less generous alongside peers Severn Trent and United Utilities, who have both said they will only increase the dividend in line with inflation each year.
However, investors may care less about this than normal, as due to firms cutting and suspending dividends across the board amid the coronavirus pandemic the utility sector has become even more of a haven than usual.
While these firms are perhaps shielded from the fallout to some extent, they could see their business come under pressure if more customers find themselves unable to pay their bills.
However, Pennon’s balance sheet may be in a better position than most having recently pocketed £4.2bn from the sale of its waste recycling business Viridor.
Intermediate Capital hopes for better future
In January, the company was managing around €42.6bn of assets under administration and saw a solid inflow of around €4.6bn in its interim results which allowed it to lift its dividend to 15p, however, since then the group's shares have been hit hard by the coronavirus crisis and it has lost around 50% of its market value.
As a result, shareholders are likely to be focused on any updates about the group’s surrounding operations as well as how it hopes to mitigate the impact of the crisis and its outlook for demand in the future.
The macroeconomic calendar picks up again in the coming week, with the US jobs report on Friday as always a focal point at the start of a new month, especially with investors now also assessing the economic damage from the coronavirus pandemic.
Unemployment in the US is forecast to rise to 19.5%, up from the 14.7% reading in April to the highest level since the 1930s, with some economists saying that it is on course for a rate of around 25%.
Elsewhere, a return of Brexit to the headlines as the UK starts the next negotiating round with the European Union may almost seem reassuring as a break from the coronavirus but is a reminder of the extra economic pressure that may be around the corner.
June’s first week also brings PMI surveys on manufacturing, construction and services sectors for the UK, US and around the world.
Deutsche Bank economists noted that the flash readings in May hinted at an uptick from the record lows of April, though they still remained well below the 50 mark that separates expansion from contraction.
House price indexes from Nationwide on Tuesday and Halifax on Friday will be important for housebuilding companies and many households, with analysts at JPMorgan saying this data is “the big unknown” for the sector after it upped tools and restarted work on construction sites in May.
On Thursday, European Central Bank (ECB) President Christine Lagarde, who has so far held fire on changes to headline interest rates but has extended the ongoing quantitative easing programme, will reveal any new policy action.
Fans of Hamilton the musical will no doubt see the parallels in the EU at present, as several countries have rejected a plan from France and Germany for a €500bn recovery fund, fearing a similar situation to some country’s debt being consolidated at the EU level.
This is rather like Alexander Hamilton in the USA with the 1790 Funding Act, said Russ Mould, investment director at AJ Bell.
“The Germans fear this will lead to more of what they see as budgetary profligacy in the South, with the North bailing out Greece, Spain and others as a result. This is existential stuff for the EU so anyone with exposure to European assets needs to keep an eye on the debate,” Mould said,
Significant announcements expected for week ending June 5:
Monday June 1:
Finals: Sirius Real Estate Ltd (LON:SRE)
Economic data: UK manufacturing PMI, US manufacturing PMI
Tuesday June 2:
Wednesday June 3:
Economic data: UK services PMI, US services PMI, US non-manufacturing PMI, US ADP unemployment
Thursday June 4:
Economic data: US jobless claims, UK construction PMI
Friday June 5:
Economic data: US non-farm payrolls, UK consumer confidence, UK house prices