The week ahead will see multiple blue-chip firms across a wide range of industries deliver half-year results, with numbers from Rolls-Royce Holdings PLC (LON:RR.), Bunzl PLC (LON:BNZL) and WPP PLC (LON:WPP) among the key events over the week.
There will also be results from doorstep lender Provident Financial Group PLC (LON:PFG) and Paddy Power owner Flutter Entertainment PLC (LON:FLTR), while US jobless claims data and other macro smatterings will provide interest away from the corporate diary.
Bunzl delivers interims
Bunzl PLC (LON:BNZL), which reports half-year results on Monday, has seemingly been one of the lesser-heralded ‘winners’ amid the coronavirus pandemic.
The FTSE 100 distribution giant, whose shares have risen almost 90% since a low in March and are up more than 15% in the year to date, said in June that trading in the first half of 2020 had been better than expected, helped by clients stocking up on products.
While the virus led to “substantial” declines in profitability in the grocery and foodservice sectors, this had been offset for strong demand for coronavirus-related products, with strong performances of its higher-margin cleaning and hygiene and healthcare sectors. Revenues are expected to be up around 6%.
Stocking up in the first half is likely to mean the second half will be tougher, so UBS analysts expect that Bunzl's management “will point to a more muted outlook”, with food service and non-food retail still under pressure.
However, those at JPMorgan Cazenove see positive risks to earnings forecasts and said that the balance sheet “should enable Bunzl to pay the 2019 final dividend that had been put on hold” as well as allowing it to restart its bolt-on acquisition strategy.
Provident reports in shadow of pandemic downturn
Wednesday will bring half-year results from doorstep lender Provident Financial Group PLC (LON:PFG), although the firm may be painting a mixed picture for investors as a result of the coronavirus pandemic.
With the company relying on non-standard, unsecured, consumer debt for most of its business, the economic downturn and resultant job losses may make recoveries more difficult from newly employed borrowers, however, at the same time, those facing financial distress may need to rely on more of Provident’s finance products, potentially leading to an uptick in demand and growth in its loan book.
The company’s long history may also make it more likely to withstand the storm than its younger rivals, potentially removing competitors in the long run.
Rolls short on bread
In sync with the battered airline sector, engine maker Rolls-Royce Holdings PLC (LON:RR.) has been laid low by restrictions on travel due to coronavirus and sizeable losses are expected for the first half of the year.
Last month the FTSE 100-listed company, shares in which are down almost two thirds this year, confirmed it was “in the early stages” of looking at ways of strengthening the balance sheet after an eye-watering £3bn free cash outflow in the first half as engine flying hours were down 50% because of global flight restrictions.
The recent half-year trading update showed progress had been made on boss Warren ‘Chopper’ East's restructuring programme, making the first of the 9,000 job cuts, with £300mln of cost reduction achieved out of a planned £700mn for the current year.
Rolls-Royce's first-half losses are forecast at £199mln by analysts at UBS, on revenues down 32% to £5.03bn.
The Swiss bank's analysts said key themes in the results will be updates on the balance sheet review, impairments and financial charges, together with flying hours trends and the impact on legacy programmes such as Airbus’s A330.
WPP investors brace for results following ad spending bloodbath
During the coronavirus pandemic, marketing spending has often been the first item on the chopping block for firms looking to cut costs, so investors in advertising giant WPP PLC (LON:WPP) are probably not expecting good news in the company’s interim figures on Thursday.
The firm has also been cutting its own costs, implementing hiring freezes, discretionary spending stoppages and salary cuts for senior management. WPP has planned to save around £700mln-£800mln, so the results will likely be eyed for how successful that strategy has been.
Analysts at UBS are predicting an 11.5% decline in organic growth for WPP in the first half alongside £225mln in cost savings.
Another area of interest will be whether the group provides any guidance for the rest of the year, as well as any comments on possible recovery in the advertising market.
Flutter could see wings clipped by lockdown
Paddy Power owner Flutter Entertainment PLC (LON:FLTR) will report its interim results on Thursday, giving investors a clearer picture of the damage the coronavirus lockdown has inflicted on the bookmaker during a pause in sporting events.
However, recent announcements may provide a more positive outlook, with the group raising £813mln in a placing in May as it reported pro-forma revenue had increased 10% in the second quarter, helped by strong growth from its new Stars Group acquisition.
With organised sport returning, investors will likely hope that this growth has accelerated or at least been maintained, as well as any news on how the company plans to use the proceeds of the cash injection.
The company said the cash will mainly be used to pay down debt and help retain its online clientele, although there may be some left over for other uses.
Investors may also eye on comments on the state of gambling markets around the world, with Flutter saying previously that one anticipated consequence of the pandemic will be that more US states will open up the gambling market to raise tax receipts, and so it is aiming to invest in additional ‘market access deals’ in individual US states and potentially in customer acquisition.
Macro matters
The coming week is scheduled to be very quiet in UK macro terms, though the US Federal Reserve-hosted Jackson Hole symposium, which takes place in cyberspace this year rather than the usual resort in Wyoming, USA, will include speeches from Bank of England governor Andrew Bailey and chief economist Andy Haldane, among others.
Fed top dog Jerome Powell’s speech on Thursday is expected to be the main event, especially as the symposium has been famously used as an opportunity for central bankers to signal major policy changes,
“With the Fed’s policy-setting Federal Open Market Committee (FOMC) thinking that they should wrap up their review of their monetary policy framework ‘in the near future’, as [last] Wednesday’s minutes showed, everyone will be waiting to see what bombshells Fed Chair Powell will drop,” said Marshall Gittler, analyst at BDSwiss.
With the market looking for a “big reveal”, which would then lead up to a formal change at the September 16 FOMC meeting, if Powell refrains from setting out a timetable or confirming that the Fed is headed toward average inflation targeting, “then the dollar is likely to rise”.
“On the other hand, if he does give some hints of policy changes to come…well, the dollar will no doubt react depending on what those changes are,” Gittler added.
The European Central Bank is also undergoing a review of its monetary policy framework, so there could be a big speech from Christine Lagarde or one of her colleagues, with the past week’s ECB meeting minutes also implying that some changes might be coming in September.
In terms of data points, for the UK the CBI’s August retail survey is on Tuesday and the Nationwide house price index on Friday, while there are US weekly initial jobless claims and durable goods orders among a plethora of international updates.
Significant announcements expected for week ending August 28:
Monday August 24:
Finals: Clipper Logistics PLC (LON:CLG), Studio Retail Group PLC (LON:STU)
Interims: Bunzl PLC (LON:BNZL), Henry Boot PLC (LON:BOOT)
Tuesday August 25:
Interims: James Fisher & Sons PLC (LON:FSJ), Apax Global Alpha Limited (LON:APAX), Arrow Global Group PLC (LON:ARW)
Wednesday August 26:
Finals: Creightons PLC (LON:CRL),
Interims: Provident Financial Group PLC (LON:PFG), Polymetal International PLC (LON:POLY), Pharos Energy PLC (LON:PHAR)
Economic data: US durable goods orders
Thursday August 27:
Trading announcements: Diploma PLC (LON:DPLM)
Interims: Rolls-Royce Holdings PLC (LON:RR.), WPP PLC (LON:WPP), Flutter Entertainment PLC (LON:FLTR), Anglo Pacific Group PLC (LON:APF), Grafton Group PLC (LON:GFTU), Macfarlane Group PLC (LON:MACF), Puretech Health PLC (LON:PRTC), OneSavings Bank PLC (LON:OSB)
FTSE 100 ex-dividends to knock 0.62 points off the index: Halma PLC, Persimmon PLC (LON:PSN)
Economic data: UK car production, US GDP, US jobless claims
Friday August 28:
Interims: Essentra PLC (LON:ESNT), Benchmark Holdings PLC (LON:BMK), Cathay international Holdings Ltd (LON:CTI), BBGI SICAV SA (LON:BBGI)
Economic data: US personal spending