The coming week is scheduled to see a litany of results from multiple sectors expected to be at the sharp end of the looming economic downturn, notably the construction industry, oil services and retail.
There will also be some news for defensive investors in the form of results from utility stocks, while the macro calendar is set to feature the Bank of England’s latest interest rate decision as its centrepiece.
Ashtead hopes to maintain recovery as economy darkens
Construction equipment hire firm Ashtead Group PLC (LON:AHT) has seemingly weathered the coronavirus pandemic well, with US rental revenues expected to fall by 15% year-on-year, less than some had feared.
The group also indicated that it has seen some improvements in the second half of April, however, the firm has still made drastic cuts to its spending, as well as putting merger activity and a share buyback on hold.
Looking ahead, the outlook for the construction industry is likely to remain the key factor, particularly with more signs that the world economy is heading for an almost unprecedented contraction.
While government infrastructure spending may help boost the sector somewhat, a more general downturn is likely to hit overall construction activity, meaning lower demand for the company’s equipment.
This downturn could also imperil Ashtead’s dividend growth streak, which has continued since 2005. Analysts are already predicting a final dividend of 35.8p, which would amount to a cut from last years payout.
Berkeley braces for profit hit
On Wednesday, Berkeley Group Holdings PLC (LON:BKG), the FTSE 100-listed housebuilder, will publish preliminary results for the year to end-April and dividends are likely to be in focus.
The last update was way back in late March, just days after the UK coronavirus lockdown, when the group warned that the disruption from closing construction sites would affect the final six weeks of its financial year.
Annual profits were expected to be “in the region of £475mln”, having said only weeks earlier that it was “on track” to meet previous expectations of around £555mln.
Two weeks earlier the board cancelled a promised £500mln of special returns, saying it would revert to its old plan and pay a £125mln dividend at the end of March, with plans to return another £140.1mln to shareholders by September 30 through a combination of share buy-backs and dividends.
At that point, it had an excess of £1bn of net cash when discounting the March payout.
With house prices and demand levels as the market reopens the big unknowns, analysts at JPMorgan Cazenove recently said their preference was for stocks with solid returns and strong balance sheet, such as Berkeley.
Is Boohoo in fashion for the summer season?
Boohoo Group PLC (LON:BOO) is releasing an update for the quarter to May, the first in its financial year.
Investors want to see if the online fashion retailer managed to maintain the good sales seen in April, which were actually up year-on-year, following a slump at the onset of the coronavirus lockdown.
There will be particular attention on discounts, as margins come under pressure in the increasingly competitive sector.
In a preview, Hargreaves Lansdown pointed out that international expansion is the key to future success for the AIM-listed giant.
“Coronavirus means there may be some disruption in the near-term, but investors should keep a lookout for any information about future expansion plans, or expectations, across the pond,” said analyst Hargreaves' Sophie Lund-Yates.
“News at the end of May that boohoo bought the remaining 34% stake in Pretty Little Thing means the spotlight will be shining on the smaller brand. boohoo’s existing 66% stake recorded a 37% rise in sales for the full year. To help fund the deal boohoo issued new shares, diluting current shareholders – to that end investors will be hoping PLT’s numbers are still, well, pretty.”
SSE and National Grid eyed for dividend news
Energy company SSE PLC’s (LON:SSE) dividend will be in the spotlight when it reports full-year results on Wednesday.
The energy provider, which sold its domestic retail business to OVO in January, said in March that it expected a full-year payout of 80p per share but cautioned that the timing and amount could be reconsidered if circumstances change.
“It’s at times like this when utilities should show their true might,” said analysts at Hargreaves Lansdown in a preview. “While other sectors face low to zero earnings and dividends have disappeared en masse, it should be largely business as usual for companies tasked with keeping the lights on and water flowing in the UK.”
There are not many surprises expected in the full-year results, though water utilities have recently noted that some business customers were failing to pay bills.
SSE said electricity demand had been holding up during the early part of the coronavirus crisis but power demand has dropped over lockdown due to lower business demand.
With earnings per share guided to the lower end of an 83p-88p range, dividend cover remains somewhat unconvincing, said the Hargreaves analysts, though the group recently raised €1.1bn from a bond issue.
“We’ll have to wait and see if this is in fact the intended use of that extra cash.”
Thursday’s final results from National Grid PLC (LON:NG.) will also see the dividend in focus as well as any comment on the company’s future payments.
The electricity network operator said earlier this year that it had not suffered any material impact from the coronavirus pandemic, however, it added that it would continue to monitor the situation before making a final decision on its dividend.
With recent economic data pointing to a sharp economic slowdown and firms cutting jobs across the board, investors may also be keeping an eye on whether National Grid will also make any moves to cut costs.
John Wood looks to stay afloat amid oil price slide
The end of the week will bring a trading update from oil services firm John Wood Group PLC (LON:WG.), with investors likely to focus on how the falling price of oil has affected the company’s business.
The company is likely to be focused on its cash flow and costs as well as revisiting and possibly accelerating its debt reduction plans.
Shareholders are also likely to keep an eye on any declines in the company’s order book, which at the last update stood at about US$8bn, although there could be some silver linings from areas outside of the traditional oil services business such as renewables.
Macro matters
Thursday’s Bank of England Monetary Policy Committee (MPC) meeting is the centrepiece of the UK macroeconomic calendar in the coming week, along with new rounds of unemployment, inflation and house price data.
The BoE MPC is expected to keep interest rates unchanged at the historic low of 0.1% on Thursday. However, after some members called for an extension of quantitative easing (QE) last time, some economists suggest a new round of QE could be coming to help support the economy and share prices.
The asset purchase facility is likely to be increased by £200bn over the course of the summer, according to Rabobank in a preview.
"The MPC could go ‘all in’, but we believe it will opt for a more flexible approach by adding £100bn next week, and then another £100bn in August," the Dutch bank's analysts said.
While there has been plenty of market chatter and official talk about negative interest rates, Rabobank’s economists said they didn’t think that the MPC is ready to explore this avenue yet.
Significant announcements expected for week ending June 19:
Monday June 15:
Finals: Evgen Pharma PLC (LON:EVG)
Interims: SThree PLC (LON:STEM)
Tuesday June 16:
Finals: Ashtead Group PLC (LON:AHT), Eckoh PLC (LON:ECK), Braemar Shipping Services PLC (LON:BMS), Checkit PLC (LON:CKT), Tatton Asset Management PLC (LON:TAM), Telecom Plus PLC (LON:TEP)
Interims: Oxford Biodynamics PLC (LON:OBD)
Economic data: UK employment data, US retail sales
Wednesday June 17:
Trading updates: Boohoo Group PLC (LON:BOO), Hill & Smith Holdings PLC (LON:HILS), Origin Enterprises PLC (LON:OGN)
Finals: SSE PLC (LON:SSE), Kingfisher PLC (LON:KGF), The Berkeley Group Holdings PLC (LON:BKG), De La Rue PLC (LON:DLAR), Enteq Upstream PLC (LON:NTQ), Severfield PLC (LON:SFR), Wincanton Plc (LON:WIN)
Economic data: UK inflation
Thursday June 18:
BoE interest rate decision
Finals: National Grid PLC (LON:NG.)
Interims: Blue Prism Group PLC (LON:PRSM), Caretech Holdings PLC (LON:CTH), Safestore Holdings PLC (LON:SAFE)
FTSE 100 ex-dividends to knock 0.39 points off the index: Intermediate Capital Group PLC (LON:ICP)
Economic data: US weekly jobless claims
Friday June 19:
Trading updates: John Wood Group PLC (LON:WG.)
Interims: Carnival PLC (LON:CCL)
Finals: Record PLC (LON:REC)
Economic data: UK retail sales