A dash of FTSE 100 news from the likes of Tesco, Imperial Brands and GVC Holdings may dominate the business headlines in the coming week, while there’s some medium and smaller names well worth watching out for too.
It’s a quiet week in terms of macroeconomic data, but there’s some important UK data with the services and construction PMI surveys at the start of the week and finishing up with GDP and industrial production.
Tesco begins Murphy dynasty
Of the three new FTSE 100 bosses having their introduction to the market for the first, it’s perhaps arguable whether the most pressure is on Tesco PLC’s (LON:TSCO) debutant Ken Murphy.
The Irishman, who will oversee half-year results on Wednesday just days after taking over the role, is perhaps atop one of the most prominent names in the UK corporate workd but at least has a fairly steady tiller to take from his predecessor Dave Lewis.
The key focus for the market will be on the outlook, any hints of a strategic shift from Murphy, plus confirmation that the sales of its Asia businesses and the resulting £5bn special dividend remain on track.
Guidance for the full year is likely to remain for flat UK retail profits, reflecting the uncertainty of COVID-19 effects, analysts at Berenberg said.
“While it is likely too soon for Tesco to unveil the strategy of the new CEO, we believe the group will provide insight into the evolving equity story, focusing on leveraging its unrivalled UK retail distribution network, accelerated capital returns and technology,” said Berenberg.
Sales, as for all supermarkets this year, are likely to be strong – and online especially as shown by Tesco’s recently adding 16,000 online jobs – and the cost headwinds from the coronavirus pandemic that were flagged by Lewis are expected to be abating, many analysts think.
For the second quarter, analysts at UBS forecast 6.3% growth in UK retail like-for-like sales, excluding fuel and the Booker wholesale arm.
For the first half as a whole, UBS has pencilled in group revenue of £28.6bn and underlying profit (EBIT) of £898mln, held back by a £245mln loss from Tesco bank.
But the share price of Tesco and its listed rivals remains an issue, with all three down more than 11% over the past year, amid fears about a step-up in grocery market competition as Marks & Spencer teams up with Ocado, Aldi starts to offer click-and-collect and delivery services and Amazon prepares to offer delivery services to its Prime customers.
How will the new Imperial empire begin?
Imperial Brands PLC (LON:IMB) makes a year-end update on Thursday with shareholders and analysts thinking about its near 10% dividend yield and how sustainable it is under new chief executive officer Stefan Bomhard.
Bomhard, who joined three months earlier than Tesco’s Murphy, was not climbing aboard a steady ship, taking over after a tough year for the tobacco giant that included a pair of profit warnings, a dividend cut and the scrapping of its long-time dividend growth target, not to mention the stubbing out of former boss Alison Cooper.
Investors will hope Bomhard, who joins from executive roles at car dealer Inchcape, Bacardi, Cadbury and Unilever, will be able to confirm the guidance at May’s first-half results, of market share gains in tobacco but flat revenue growth at best, less than the originally hoped 50% growth in next-generation products and a single-digit percentage fall in adjusted earnings per share (EPS).
The current analysts’ consensus forecast is looking for adjusted EPS of 255.1p, down 7% from 273.7p a year ago.
Analysts at Liberum noted that Bomhard had led “transformation change” at Inchcape and contributed to the cultural change, including disposing of a large business, “which may foreshadow Imperial's reopening of the disposal programme”.
One disposal that has already been agreed, but delayed, is a proposed €1.2bn sale of the premium cigars business.
“This cash infusion could help the company reduce its reported first-half £14.4 billion net debt pile and support the (reduced) dividend payment,” said Russ Mould at AJ Bell.
“Even then, a forward dividend yield of 9.7% suggests that the market is far from convinced Imperial Brands’ future payments are entirely safe, as investors are demanding this huge yield to compensate themselves for the capital risks associated with owning the equity.”
Recently, analysts at RBC Capital Markets suggested Imperial could, if it was minded, buy back its whole current market value in seven years.
GVC may be seen in new light after Germany changes, William Hill deal
Over at Ladbrokes owner GVC Holdings PLC (LON:GVC), new chief executive Shay Segev has some pluses and minuses.
In the past week, the group got some mixed news from Germany as the country’s 16 federal states provides clarity on their rules for online gaming, which will reduce GVC’s estimated group EBITDA for next year by roughly £70mln.
The changes included the countrywide switching off blackjack and roulette games and introducing new ‘responsible gaming’ rules such as deposit limits, though states will now able to bring back licensing individually as they see fit.
Analysts at Peel Hunt said Germany becomes a smaller part of the group, around 8% of online net gaming revenue, but “with the growth potential of a leading brand in a major market” and allowing investors to focus on potential upside from its US joint venture with MGM.
Analyst Nicholas Hyett at Hargreaves Lansdown said: “Casino giant Caesar’s’ £2.9bn offer for rival bookmaker William Hill has brought into sharp focus GVC’s joint venture with MGM. While US sports betting accounts for a fraction of GVC’s total revenues there is clearly huge potential in the emerging market across the Atlantic.”
For the current year EBITDA guidance is for £720-740mln, though competitors have indicated trading has been strong since then and some shareholders will be hoping new boss Segev will rejig guidance in Thursday’s third-quarter update.
Interims on Restaurant Group’s table
On the other side of the coin of the boom enjoyed by Tesco’s and other supermarkets during lockdown, was the hospitality industry.
Pub chain JD Wetherspoon PLC (LON:JDW) has delayed its numbers that were due this week but Tuesday will offer an insight as Wagamama owner Restaurant Group PLC (LON:RTN) serves up interim results.
The hospitality group should now have reopened almost 90% of its estate, according to broker Peel Hunt, which should have benefited significantly from the 15% VAT cut and the Eat Out To Help Out scheme.
The new trading restrictions should not impact the group materially, as less than 2% of sales are after 10pm and all sales are based on table service, while analysts estimate the VAT cut extension until the end of March to be worth an extra £15mln of profit.
Investors will be keen to hear how like-for-like sales performed in September, and how management’s debt reduction has been going since the estate reopened, as well as prospects for profit margins in the year ahead.
CMC upgrade factory
On Thursday, a company that has had a rather better time of it this year, CMC Markets PLC (LON:CMCX), which is releasing a trading update just over a month after raising market expectations for the second time since the start of the current financial year.
Investors are wondering if the trading platform operator is about to make it three times, having experienced strong activity throughout the pandemic.
The higher revenue performance was driven by existing clients trading more as well as the platform continuing to attract new clients.
However, it led to an increase in variable operating costs, predominantly driven by higher client onboarding costs and the more efficient acquisition of new clients.
“At this juncture, there is every chance that full-year numbers, already having been significantly upgraded, could prove conservative, as volatility remains elevated,” said broker Peel Hunt. “Looking beyond this year, there is still a huge opportunity for CMC to leverage the platform and drive incremental revenues.”
Significant announcements expected for week ending 9 October:
Monday 5 October:
Finals: Quadrise Fuels International PLC (LON:QFI)
Economic data: UK services PMI, US services PMI
Tuesday 6 October:
Trading announcements: Ferrexpo PLC (LON:FXPO), Gooch & Housego PLC (LON:GHH), Impax Asset Management PLC (LON:IMPX)
Finals: YouGov PLC (LON:YOU), Smartspace Software PLC (LON:SMRT)
Interims: Harworth Group PLC (LON:HWG), Inspiration Healthcare Group PLC (LON:IHC), Restaurant Group PLC (LON:RTN)
Economic data: UK construction PMI, US balance of trade
Wednesday 7 October:
Interims: Tesco PLC (LON:TSCO), Vertu Motors PLC (LON:VTU)
Trading announcements: Sirius Real Estate Limited (LON:SRE)
Economic data: UK house prices, US Fed minutes
Thursday 8 October:
Trading announcements: Imperial Brands PLC (LON:IMB), Countryside Properties PLC (LON:CSP), CMC Markets PLC (LON:CMCX), Electrocomponents PLC (LON:ECM), Motorpoint Group PLC (LON:MOTR), Robert Walters PLC (LON:RWA)
Interims: Phoenix Global Resources PLC (LON:PGR)
FTSE 100 ex-dividends to knock 0.56 points off the index: Spirax-Sarco Engineering PLC (LON:SPX), WPP PLC (LON:WPP)
Economic data: US jobless claims
Friday 9 October:
Economic data: UK trade balance, UK GDP, UK production