The coming week is scheduled to see updates and results from a plethora of blue-chip brands, with Ryanair and easyJet representing the airline sector while tobacco group Imperial Brands, telecoms giant Vodafone and Royal Mail among the notable reporters.
However, other major brands are also in the pipeline including B&Q owner Kingfisher, publisher group Future and utility firm National Gird, while in the macro diary UK inflation data will be the headline news alongside new unemployment figures.
Airlines taxi to the results runway
Budget airlines Ryanair Holdings PLC (LON:RYA) and easyJet PLC (LON:EZJ) respectively report full-year results on Monday and half-year numbers on Thursday, with tough reading expected for investors in both due to the near-total shutdown of international travel in the pandemic, meaning cash burn will be one of the key issues for both companies.
Easyjet’s shares, after falling from around 1500p to below 500p last year, have rebounded above 1000p, while Ryanair’s at above €16 are higher than they were in early 2020 as investors anticipate it grabbing more market share in the fallout from the pandemic.
Ryanair Holdings PLC (LON:RYA) also had a nervous time recently when it was revealed that Boeing's 737 MAX aeroplanes were grounded again after technical problems were found, less than six months after being cleared to return to the skies following two fatal crashes which forced regulators to suspend their operation in March 2019. Ryanair is a major customer of Boeing and has dozens of these fuel-efficient planes on order.
While this latest issue was cleared up fairly quickly, Ryanair’s problems are far from over, with restrictions on foreign holidays still in place for most countries in Europe, with the UK’s ‘green list’ for quarantine free travel only including Portugal on the continent and unlikely summer beach vacation locations such as Iceland, Gibraltar and the Faroe Islands.
Ryanair said last month that it expects to report a full-year loss of €800-850mln, having carried 27.5mln passengers compared to 149mln, though it had more than €3.1bn of cash as of the end of March and 84% of the fleet unencumbered.
For the new year, boss Michael O’Leary was eyeing passenger volumes to be at the lower end of the 80-120mln range.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Ryanair was banking on a vaccine led recovery to save the summer season but the limited number of green light destinations on the holiday list so far will be highly disappointing. Although Ryanair is used to belt-tightening, it is unlikely it will be able to withstand a further squeeze on revenues, if bookings don’t resume briskly over coming months the company may be forced to return to the market to drum up more financial support.”
As for easyJet PLC (LON:EZJ) on Thursday, these interims follow a statement last month where it guided to a pre-tax loss of £690-730mln and said it had liquidity of roughly £2.9bn.
Broker Peel Hunt said it believes this amount of cash “should be more than sufficient, as long as travel restrictions are eased over the course of the spring and summer and are not reintroduced over the next couple of years at least”.
The FTSE 250-listed flier’s holidays business is “a key differentiator” to other airlines, the analysts said, but the UK’s progress on traffic light tiering, vaccine passports and PCR testing has been “disappointingly slow”.
“Whilst progress on costs has been encouraging, this is unlikely to be enough to offset the challenges that further delays will bring.”
Vodafone dials in with results
Vodafone PLC (LON:VOD) is not the sexy stock it was when it was sitting on a pile of Verizon Wireless shares but interest in the mobile phone networks operator has perked up recently.
Thursday’s fourth-quarter (Q4) and full-year (FY) results should give some clues whether the revived interest is justified.
“We see scope for a gradual re-rating in the stock as top-line trends continue improving,” said UBS.
The market is expecting fourth-quarter organic revenue growth of 0.6%, following on from growth of 0.4% in the third quarter and a 0.4% decline in the second quarter.
Analysts are braced for a 0.7% organic service revenue decline in Europe for the quarter after declines of 1.8% and 1.1% in the second and third quarters, respectively.
Full-year adjusted underlying earnings (EBITDA) are expected to show organic growth of up to 1%, with the decline in roaming revenues as the result of travel restrictions responsible for the decline.
Imperial Brands hopes to spark interest with interims
Investors in tobacco group Imperial Brands PLC (LON:IMB) are likely to be looking for reassurances in its half-year results on Tuesday as the company continues its portfolio transition.
The maker of Lambert & Butler has not seen its reduced-risk products do as well as its traditional items in recent years, so shareholders will likely be looking for any way the company plans to remedy this as the shift away from combustible products continues.
The company’s views of the proposed ban on menthol cigarettes in the US will also be eyed closely, as well as how the firm plans to offset any potential impact.
In a pre-close trading statement on March 30, Imperial said it expects its first-half earnings (EBIT) to grow by at least mid-single digits, so the numbers will be watched to see how they align with predictions.
Analysts at Barclays said that if this target is hit Imperial will be “comfortably on track to hit its FY21 guidance of low mid-single digit EBIT growth”.
Back to the Future
Magazine publisher Future PLC’s (LON:FUTR) interim results on Wednesday are likely to make for positive viewing given the company reported a strong performance in its Media division, which accounts for 70% of revenues, in the first four months of the year.
The firm has been boosted by a shift towards online advertising during the pandemic, so investors will be hoping that the trends will continue across the rest of the year and beyond.
There will likely be less fanfare for the magazine side of the business, which has seen ad revenues in both print and digital fall sharply. With this in mind, investors will be hoping the situation has not degenerated further.
Meanwhile, there will be some interest in the company’s shift towards its services offering, having acquired price comparison site GoCo in February, as well as whether it still expects its full-year profit to be “materially” ahead of previous market expectations.
Royal Mail posts final results
Final results from Royal Mail PLC (LON:RMG) on Thursday are expected to be a bumper affair as the company continues to benefit from the boom in ecommerce shopping sparked by the pandemic.
An upsurge in package demand, as well as a somewhat unexpected resurgence of letter writing, have helped lift the company’s fortunes, however, the infrastructure of its UK business remains behind due to under-investment so shareholders will be looking for any insight on how much cash needs to be spent to bring it up to scratch.
The international business is also expected to be a bright spot, with the company targeting 12% annual revenue growth over the next five years for its GLS segment.
National Grid to experience few shocks in finals
Full-year results from National Grid PLC (LON:NG.) are unlikely to set the pulses racing but shareholders will expect more details on the company’s “strategic portfolio repositioning”.
This follows March’s £7.8bn acquisition of UK-focused Western Power Distribution (WPD), which Berenberg reckons will enhance group earnings by over 15% once it beds in.
Repositioning the business with the WPD deal increases National Grid’s focus on electricity networks to around 70% of regulated asset value (RAV) and the UK to around 60% of group underlying earnings (EBIT).
As a utility company, National Grid has a reliable revenue stream with which to service its debt but nevertheless, analysts will be keeping an eye out for the debt position; Berenberg reckons it could grow to an eye-watering £37.9bn by March 2024.
Kingfisher flies in with update
Try to get a patio heater or some gizmo designed to make socialising in the garden a bit more palatable and you probably won’t be able to find one for love nor money, which bodes well for the fiscal first-quarter trading update from Kingfisher PLC (LON:KGF).
The DIY retailer, which owns the B&Q, Screwfix, Castorama and Brico Depot brands, has had a blindingly good pandemic, as householders have spent their time in lockdown improving their homes.
In March, Kingfisher reported a 7.2% rise in sales to £12.3bn in the year to end-January 2021, so that’s the sales growth rate that it has to beat to keep traders interested in its shares.
The UK led the improvement with revenues rising 11%% with France 5% ahead.
“In terms of taking advantage of the DIY boom during the pandemic, B&Q owner Kingfisher has nailed it. As people rolled up their sleeves and got stuck into home improvements during lockdowns, sales and profits surged with a 7.1% rise in like for like sales,” said Hargreaves Lansdown’s Susannah Streeter.
“With the working from home revolution unlikely to fully unravel and demand for home office space set to continue, it should keep sales brisk for DIY projects. We should also find out in this trading update if a surge in garden makeovers, ready for post lockdown outdoor social lives, has helped revenue streams. As more people leave furlough schemes and return to full time working once more, the DIY craze is likely to wane a little, although a buoyant housing market is likely to keep our passion for decoration relatively high,” she added.
“The forecast of a brighter economic outlook with growth prospects higher also bodes well for the company, given that people may have more money in the spending pot to splash on building projects.,” Streeter concluded.
Macro matters
Inflation has been the bee in the market’s bonnet in recent weeks and is expected to remain the case for some months more.
There are no major central bank meetings in the week ahead, but there will be consumer price inflation numbers for the UK and others, plus preliminary May purchasing managers’ indices (PMIs) for the major industrial economies on Friday.
UK CPI was 0.7% in March and 1.0% according to the CPIH index, which includes housing costs.
For the UK there’s also house prices from Rightmove on Monday, jobs numbers on Wednesday and retail sales data on Friday.
With the PMIs expected to show small declines on the manufacturing side but continued increases for services, further increases on the latter side would be welcome, especially in Germany, said market analyst Marshall Gittler at BDSwiss.
He added: “[PMI] figures suggesting a continued robust expansion could be taken to be further confirmation of the “demand-pull” inflation story, which might be seen as negative for the markets.”
On UK jobs numbers, the Bank of England has just cut its forecast for peak unemployment in the wake of the pandemic to 5.5%, compared to the latest reading of 4.9% for February.
“The bad news is that the furlough scheme is still needed to support a lot of workers and the claimant count, which covers those who are not receiving just unemployment benefit but other assistance such as Universal Credit, has rocketed to 2.7mln although at least even that number has begun to flatten out,” noted analysts at AJ Bell.
While wage growth is outpacing inflation, which might seem like good news if you have a job and have not been furloughed, this feeds back into economists’ nervousness about increased commodity and factory gate prices.
Significant announcements expected for week ending 21 May:
Monday May 17:
Trading announcements: Vistry Group PLC (LON:VTY)
Finals: Ryanair Holdings PLC (LON:RYA), Petropavlovsk PLC (LON:POG)
Interims: Diploma PLC (LON:DPLM), Cerillion PLC (LON:CER), Hollywood Bowl Group PLC (LON:BOWL)
Tuesday May 18:
Trading announcements: TBC Bank Group PLC (LON:TBCG)
Finals: Vodafone Group PLC (LON:VOD), Land Securities Group PLC (LON:LAND), Assura PLC (LON:AGR), First Derivatives PLC (LON:FDP), Homeserve PLC (LON:HSV), McKay Securities PLC (LON:MCKS), Minds + Machines Group Ltd (LON:MMX), Sanderson Design Group PLC (LON:SDG), Cranswick PLC (LON:CWK), DCC PLC (LON:DCC)
Interims: Imperial Brands PLC (LON:IMB), UDG Healthcare PLC (LON:UDG), Benchmark Holdings PLC (LON:BMK), Hyve Group PLC (LON:HYVE), Sureserve Group Plc (LON:SUR), Watkin Jones PLC (LON:WJG), Britvic PLC (LON:BVIC), Topps Tiles PLC (LON:TPT), Shoe Zone PLC (LON:SHOE)
Economic data: UK unemployment
Wednesday May 19:
Trading announcements: Regional REIT Ltd (LON:RGL), Coats Group PLC (LON:COA)
Finals: Experian PLC (LON:EXPN), Great Portland Estates PLC (LON:GPOR), Ninety One PLC (LON:N91), Premier Foods PLC (LON:PFD), Severn Trent PLC (LON:SVT)
Interims: Future PLC (LON:FUTR), Marston’s PLC (LON:MARS)
Economic data: UK inflation, US Fed minutes
Thursday May 20:
Trading announcements: Kingfisher PLC (LON:KGF), Watches of Switzerland Group PLC (LON:WOSG)
Finals: Royal Mail PLC (LON:RMG), National Grid PLC (LON:NG.), QinetiQ Group PLC (LON:QQ.), Young’s and Co Brewery (LON:YNGA), N Brown Group PLC (LON:BWNG)
Interims: easyJet PLC (LON:EZJ), Euromoney Institutional Investor PLC (LON:ERM), Nexus Infrastructure PLC (LON:NEXS)
FTSE 100 ex-dividends to knock 9.28 points off the index: Tesco PLC (LON:TSCO), GlaxoSmithKline PLC (LON:GSK), Unilever PLC (LON:ULVR), Bunzl PLC (LON:BNZL), Pershing Square Holdings Ltd (LON:PSH)
Economic data: US jobless claims
Friday May 21:
Trading announcements: Close Brothers Group PLC (LON:CBG)
Finals: Investec PLC (LON:INVP)
Interims: Electra Private Equity PLC (LON:ELTA)
Economic data: UK consumer confidence, UK retail sales, UK flash PMIs, US flash PMIs