The coming week will see a number of big hitters from London’s market deliver figures and updates, notably a trio of utility firms, insurance giant Aviva and publishing group Reach, owner of the Daily Mirror and Daily Express newspapers.
Meanwhile, the macroeconomic and political diary is likely to be dominated by a spending review, or ‘mini budget’, from Chancellor of the Exchequer Rishi Sunak on Wednesday which will outline the Treasury’s latest short and long-term tax and spending plans as it looks to refill its empty coffers caused by the pandemic-inspired economic meltdown.
Compass direction may be cloudy
At the end of September the FTSE 100 group said it was back to break even again following the reopening of many of its customers’ premises, such as canteens in school, hospitals and businesses, though most sports and leisure sites remain closed in Europe and North America.
However, with the prospect of more lockdowns not confirmed at the time, management acknowledged that further recovery in margins and revenues was unclear and it also took a £100mln impairment charge after an audit of contracts.
Analysts have forecast a big drop in pre-tax profit to £459mln from £1.5bn a year ago, which is seen rising to around £800mln for the new year along with a return to the dividend list.
After £2bn was raised in a share placing priced at 1,025p in May, liquidity at the September 30 year end was around £5bn, of which cash was £1.6bn.
The shares rallied to around 1,450p after the recent spate of positive vaccine news, before some of the new-found confidence ebbed away with some analysts saying investors had got ahead of themselves as “permanent scarring” from working from home could be a potential headwind for the company.
Unusual interims for Pets At Home
Pets At Home PLC (LON:PETS) is releasing its interims on Tuesday, which will reflect unusually strong sales after the retailer was allowed to trade during the lockdown, although the safety measures will weigh on margins.
According to Peel Hunt, the pet products seller is in great shape and the strong momentum is expected to have continued into the recent weeks.
“Winning market share, improving CRM and in a market that is growing strongly, its relative position has improved in the past couple of years,” analysts said.
“The multiple has, to a degree, caught up with the potential but it remains a core holding.”
Utility firms look to keep a level head
The week will see a trio of utility firms deliver interim results, starting with Pennon Group PLC (LON:PNN) on Tuesday followed by United Utilities Group PLC (LON:UU.) on Wednesday and Severn Trent PLC (LON:SVT) on Thursday.
For Pennon, investors may have been reassured by a trading update in September, when the company said it was on track to deliver results in line with management expectations, although it did also confirm a £10mln hit to its revenues from the coronavirus pandemic.
With that in mind, the outlook statement is likely to be the key area of interest with more lockdown measures being brought in since the end of the firm’s half-year. Pennon forecast cash and committed facilities well in excess of £3bn at September 30, so shareholders will be watching to see if this has changed.
Meanwhile, United Utilities said in a recent statement that trading has also been in line with its expectations, so investors will once again be checking its interims for any nasty surprises.
While cash collection is running to plan at the moment, United is predicting a rise in bad debt once government support schemes are wound down, although management have said cash has already been put aside to cover this eventuality.
With most short-term issues in hand, regulation is likely to be the key long-term focus, as well as the risk of lower water use by business customers as shops and other outlets are closed by new restrictions, which is expected to results in a 5% drop in revenue.
Finally, Severn Trent has been a pretty solid performer over the past year despite the pandemic, so investors will be hoping the interim figures have aligned well with the company’s forecast for the full year.
There will also be eyes on the company’s predicted hit from the pandemic, with the group having previously estimated an £80-£85mln revenue reduction due to lower consumption from businesses and a rise in bad debts as consumers struggle to pay their bills.
As always, the dividend will also be in focus, which the company has said it will increase in line with consumer price index (CPIH) inflation, which was around 1.5% at the start of the year.
Updates from Aviva
Aviva PLC’s (LON:AV.) trading update on Thursday should shed some light on how the insurer has been doing in the second half of the year as well as its outlook for the new financial period.
In August, the firm said uncertainty will persist in the near term meaning that growth and profitability targets will be harder to deliver, so the market will be looking for updates on that.
Investors will look for potential new sales after the recent deals aimed at strengthening the company’s liquidity, as part of its broader capital management and debt reduction effort.
This month the FTSE 100 completed the sale of its entire holding in an Indonesian joint venture, as announced in March, while in September it offloaded a majority stake in its Singapore subsidiary in a £1.6bn deal.
Britvic refreshed by Pepsi
Britvic PLC (LON:BVIC), the Robinson’s and Tango soft drinks group, will report full year results on Thursday, fresh from last month’s new bottling agreement with PepsiCo that lifted the shares to their highest point since early March.
The 20-year agreement is for the production, distribution, marketing and sales of Pepsi’s carbonated soft drink brands, including Pepsi, 7UP, Mountain Dew and Rockstar.
The FTSE 250-listed group also reassured on current trading, saying adjusted earnings (EBIT) for the full year 2020 are anticipated to be slightly ahead of market forecasts at the time, following better than expected trading across the peak summer period.
City analysts still estimate organic net sales growth will be down around 6.4%.
“In light of renewed lockdowns in GB and France, we think investor focus will be on current training in the off-trade channel and impact of on-premise shut down on Britvic's profits,” said UBS.
Can Reach reach new highs?
The stock has already doubled in a month after the good momentum created by the positive interims in September continued to be supported by the vaccine news.
“The refocusing away from Covid towards the release of the value inherent in the online audience should be welcome, but Reach does have a lot of ground to catch up,” said the broker.
“Meanwhile exceptionals, deferred consideration and the pension continues to absorb the well harvested cash.”
Investors will continue to monitor in the coming week if tough coronavirus restrictions in many countries are containing the spread of the virus, if at all, and there will be new data to judge how these restrictions are affecting economic activity.
Preliminary or ‘flash’ purchasing managers’ index surveys for the first weeks of November will be released on Monday for the manufacturing and services sectors.
These PMI numbers will be important as they will take into account the new restrictions imposed in many countries and an expected negative impact on economic activity.
The pound and UK domestic stocks may be susceptible to headlines emerging from Brexit negotiations, which resume virtually after one of the negotiators tested positive for COVID-19, while there may also be significant news emerging from a virtual G20 summit taking place this weekend.
“With just over a month to go until Christmas now, attention will remain on the Covid19 pandemic,” said analysts at Deutsche Bank, with the vaccine news from Pfizer and Moderna having given a positive boost in the past fortnight.
“With the widespread rollout still some time away, focus in the meantime will remain on rising case numbers in a number of key global regions and whether further restrictions are imposed as a result.”
Looking Stateside, on Tuesday the consumer confidence data will be closely examined, while on Thursday there will be a holiday for Thanksgiving, meaning Wall Street and other financial markets there will pretty much shut up shop for the day, though with pandemic restrictions in place many traditions will be put on hold.
Sunak to face frosty reception at spending review
Chancellor of the Exchequer Rishi Sunak is heading for a somewhat frosty reception when he delivers a spending review, also known as a ‘minim budget’ to the House of Commons on Wednesday, with the revelation that the Treasury is considering a public sector pay freeze having already caused outcry given many of the state’s employees have continued to work during the pandemic at high risk to their health.
The government may also have inadvertently poured salt in the wound by announcing a £16bn military spending package the day before, leaving may questioning why buying more weapons is coming at the expense of what many consider to be well-earned wage increases for state workers.
However, Sunak may be able to provide some bright spots in the review, notably any more details on the government’s green spending plans and boosting infrastructure expenditure.
But with the UK economy facing a gloomy outlook at it attempts to recover from the damage caused by the pandemic, Tory MPs are likely to be riled by any plans for tax increases, which are likely to focus on affluent Conservative heartlands in the South in order to ‘level up’ regions in the North and fill the gaping hole in the state’s bank account.
Multiple think-tanks have suggested that the Treasury will need to find around £40bn per year in extra tax to plug the gap left by the crisis, although there is considerable debate about where the hammer will fall hardest.
One thing that is unlikely to make an appearance in the statement is any mention of spending cuts or austerity, a brand that has yet to shake off its toxicity after it was implemented by the Tory-Lib Dem coalition a decade ago.
Any implication of spending cuts is likely to draw swift condemnation from the opposition Labour Party, provided it can look away from its infighting for long enough.
Significant announcements expected for week ending 27 November:
Monday November 23:
Interims: Cake Box Holdings PLC (LON:CBOX), Codemasters Group Holdings PLC (LON:CDM), LXI REIT PLC (LON:LXI), Mind Gym PLC (LON:MIND), Nextenergy Solar Fund Limited (LON:NESF), Northern Bear PLC (LON:NTBR), Sirius Real Estate Ltd (LON:SRE), Sysgroup PLC (LON:SYS), Thruvision Group plc (LON:THRU)
Economic data: UK flash PMIs, US flash PMIs
Tuesday November 24:
Interims: Pets at Home Group PLC (LON:PETS), Pennon Group PLC (LON:PNN), AO World PLC (LON:AO.), CML Microsystems Plc (LON:CML), Eckoh PLC (LON:ECK), IG Design Group PLC (LON:IGR), Record PLC (LON:REC), Severfield PLC (LON:SFR), Trifast PLC (LON:TRI), Cranswick PLC (LON:CWK),
Wednesday November 25:
UK spending review
Interims: United Utilities Group PLC (LON:UU.), Babcock International Group PLC (LON:BAB), De La Rue PLC (LON:DLAR), Alpha Financial Markets Consulting PLC (LON:AFM), D4t4 Solutions PLC (LON:D4T4), Helical PLC (LON:HLCL), HICL Infrastructure PLC (LON:HICL), Liontrust Asset Management PLC (LON:LIO), Shearwater Group PLC (LON:SWG)
Economic data: US GDP, US durable goods orders, US jobless claims, US personal spending
Thursday November 26:
Trading updates: Aviva PLC (LON:AV.)
Interims: Severn Trent PLC (LON:SVT), First Property Group PLC (LON:FPO), JLEN Environmental Assets Group Ltd (LON:JLEN), Motorpoint Group PLC (LON:MOTR), Newriver REIT PLC (LON:NRR), OTAQ PLC (LON:OTAQ), XPS Pensions Group PLC (LON:XPS)
Friday November 27: