The coming week brings updates from several closely followed London stocks, including Ocado, Deliveroo, Wetherspoons, Ferguson and Cineworld, though the headlines are more likely to be dominated by geopolitical developments and expected interest rate rises from the central banks in Washington and London.
MONDAY
The week begins in London with results from two very different newcomers to the market.
Stelrad Group PLC (LSE:SRAD), a specialist manufacturer and distributor of steel panel radiators, floated in November and in January it said its UK performance in Europe had strengthened, driven by demand from the replacement market, residential new build and commercial sectors.
It said it was “managing” steel price increases and so expected full year earnings underlying (EBITDA) to be slightly ahead of its previous outlook and entering 2022 with “strong momentum”.
With recent events in Ukraine, the outlook for 2022 is likely to have been revised somewhat.
The other new arrival Hostmore PLC (LSE:MORE) is not altogether new to some investors, with the TGI Fridays (or just Fridays as it prefers now) and 63rd + 1st casual dining group having been spun out of Electra Private Equity PLC in November.
As of a new year update, when it reported operating 88 restaurants, Hostmore reported trading for in December was ahead of expectations, while trading in January had been “more in line with expectations and reflects what is usually a quieter period post the festive season”.
On the outlook at the time, the board expressed confidence in its prospects despite uncertainty over Covid-19 together with inflation and utility prices.
Tuesday
Informa PLC (LSE:INF), the FTSE 100-listed events and exhibitions organiser, saw its shares lose over 17% since the war in Ukraine, as investors expect fewer people to travel to trade shows in coming months as well as resulting domino effects.
The company said in November it expects revenue of around £1.8bn and adjusted operating profit of £375mln for the past “transitional year”, for which it will publish results on Tuesday.
In December Informa announced a three-year plan to “create a more focused, higher growth business” and return revenues above 2019 levels (pro forma allowing for divestments) by the end of 2024, whilst returning “significant capital” to shareholders in 2022.
Analysts at UBS think revenues for 2021 will be at the bottom end of the guidance range, given the delay to China’s re-opening.
Guidance for the new financial year was also given for underlying earnings excluding-Informa Intelligence, of £420-440mln, based on a sterling-dollar rate of 1.35.
Top things to look out for, according to UBS, are management’s messages on cost flexibility if global macroeconomics deteriorates; commitment to capital returns; current trading, especially Asia.
Elsewhere, half-year results from Ferguson should reflect a buoyant US housing market, but commodities-induced price rises could clip the group’s wings this year.
Home ownership accelerated last year alongside house prices as US buyers spent extra income and moved out of cities.
But Ferguson’s shares are down more than 17% this year amid fears rising prices will pull consumers out of the housing market.
UBS projects sales in the first half of 2021 to rise 24.7% to US$13.05bn, driving profit before tax of US$1.26bn and diluted earnings per share of
For the full 2022 financial year, UBS predicts EBITDA of US$2.49bn, with dampened 6.3% organic growth in the second half of the year.
For more of a UK focus, DFS Furniture PLC (LSE:DFS) also has interim results already released a trading update on its first-half performance earlier this year, with gross sales up 10%, the profit line will be the key on Tuesday, with the market expecting a little below management’s guidance of £85mln.
Also, we might get an impression of “how first half performance might shape the year”, said UBS
“Investors are cautious on home improvement names, as concerns around a pullback in discretionary spend rise with rising living costs for the UK consumer,” the analysts added.
Despite a strong run over Christmas, DFS did not change its outlook for the year, but UBS noted that the company is holding a capital markets day that “could provide a stimulus”.
WEDNESDAY
Food and drink will be a theme on Wednesday with Fevertree and Restaurant Group reporting, while wider market attention will be on the Federal Reserve’s widely expected rate hike.
The Fed’s rate-setting body, the Federal Open Market Committee (FOMC), meets on Tuesday and Wednesday and chairman Jerome Powell has already said he will be recommending a 0.25% hike in rates, the first rate hike since December 2018.
With the market ascribing a 98% probability on this happening, the main questions that will need to be answered, said market analyst Marshall Gittler at BDSwiss, are:
1. How many more rate hikes after this?
2. When will they start reducing the size of their balance sheet?
3. How much will they reduce it by each month?
Currently, the market is expecting seven rate hikes of 25 basis points each this year, bringing the Fed funds rate to 1.75%-2.0%.
Alongside the rates announcement, the Fed will release its latest economic projections, of which Gittler says the particular concern will be the forecast for inflation, as well as the notorious “dot plot” where each FOMC member forecasts where he or she expects the fed funds rate to wind up at the end of each year.
“As it stands now the market is more aggressive than the Committee for this year and next year but expects the Fed to have to ease in 2024. This is contrary to the Fed’s hope that it can engineer the fabled 'soft landing' and pilot the economy toward equilibrium. Hah! It hasn’t happened yet, but maybe it will this time. As we all know, past performance is no guarantee of future performance.”
Earlier on Wednesday, Fevertree Drinks (AIM:FEVR) PLC will announce full year results where the reopening of restaurants and bars in the past year are expected to have provided the perfect tonic to drive second-half growth.
The carbonated drinks maker was able to supplement lost income from hospitality’s closure with a surge in supermarket purchases of spirits and complementary mixers, but the relaxation following the rollout of vaccines should have brought the company back to its potential.
Profits of £61mln are expected by markets following a January trading update indicating double digit growth across most of its markets, including 33% increase to revenue in the expanding US market.
But as restrictions lift, a more insidious obstacle is imminent in the face of rising inflation and slowing growth.
Fevertree will have to contend with increased logistics costs as oil prices hit 14-year highs, adding to a likely inevitable price rise at a time when inflation is expected to top 8% in the UK and US.
The resilience of discretionary spending will be tested, and accordingly Fevertree’s sales as households make tougher decisions on consumption.
But to date, alcohol inflation has tended to largely undercut wider inflation, with alcohol and tobacco RPI at 0.8% in January compared with overall RPI of 7.8%. Nevertheless, cost increases for Fevertree will be hard for owners to ignore.
“The US remains a key are for expansion, but logistical challenges have proven a bugbear so far. New bottling partnerships in the US are key for easing some of the pain points. It’s expected that a second site will ramp up production in the first half and so there should be an update in this area,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
Restaurant Group PLC (LSE:RTN) will serve up full-year results on Wednesday where it has already said adjusted underlying earnings (EBITDA) will be at the top of its prior guidance for between £73-£79mln, before the introduction of ‘Plan B’ restrictions.
The owner of Wagamama experienced a tough final quarter, due to the spread of the Omicron variant, but management believes it bypassed these issues thanks to cost control and strong trading.
Like-for-like sales growth had slowed from October to December in its flagship restaurant, from 11% 1%.
Its other brands, such as leisure, pubs and concessions also experienced a decline in sales growth.
Looking ahead, the company said it expected recovery to grow at a slower pace as consumer confidence returned to the market, so the results could potentially offer some forward-looking statements into 2022 performance so far.
THURSDAY
Company news includes Ocado, Cineworld and Deliveroo but the day should be dominated by the Bank of England’s interest rate decision.
As with its US cousins, there does not seem to be much doubt that the chaps and chapesses of Threadneedle Street will carry out a 25bps raise at its Thursday meeting its third hike in as many months.
This will take its Bank Rate to 0.75%, the same level it was before the coronavirus pandemic, with the market expecting this to be followed by 50-75bps of further hikes in coming months.
“Policymakers have made it abundantly clear that they want to get some pre-emptive tightening done to mitigate against their concerns about higher inflation rates becoming more sustained,” said economist James Knightley at ING.
At the last meeting, four of the nine members of the Monetary Policy Committee (MPC) voted for a 50bps hike.
But Knightley said the remainder of the committee indicated that they worried such a move would simply add further fuel to market interest rate expectations.
“Our own view is that after a couple more hikes, the committee is likely to pause and put greater emphasis on the deteriorating growth backdrop. After all, such a sharp rise in oil and gas prices is more likely to be medium-term disinflationary, even if it keeps headline inflation rates higher this year.”
Ocado Group PLC (LSE:OCDO)’s latest trading update on Thursday comes after a bit of good news for the robot-powered grocery delivery business.
An international patent court ruled against 'robot wars' rival AutoStore on all claims in a case the Norwegian company brought against Ocado in a battle over who owns the IP for their automated warehouse pickers.
Recent results for the FTSE 100 group reflected heavy investment currently underway with annual revenues up 7% at £2.5bn but underlying profits dipping to £61mln, though more pertinently cash burn went up to £680mln with a further £800mln earmarked for this year.
The company says it can afford its spending even with new deals such as the recent link up with Groupe Casino, but others are not convinced and the comments about spending and cash will be closely watched next week.
Cineworld PLC, owner of around 800 global cinemas, has had more than a fair share of recovery hopes dashed over the past year as Covid has refused to lie down.
The latest in a list of heavy blows was ejection from the FTSE250 in the latest reshuffle, but Thursday’s annual results update offers another opportunity to press the reset button.
Cinema attendances have been strong and fears that lockdown would kickstart a permanent shift to streaming seem to have been overblown.
Revenues were back up to 88% of pre-pandemic levels by the end of 2021, Cineworld said in January which was some encouragement but that has to continue given the US$8.4bn of debt it has accrued.
It is also still locked in a legal battle with Canadian rival Cineplex (TSX:CGX) over the collapse of their planned merger when Covid struck and here the UK business might be on the hook for C$1.2bn in damages after the most recent ruling.
“While revenue is forecast to have more than doubled in the year, it won’t have been enough to stop the business from making a loss. In fact, Cineworld isn’t forecast to return to profit until 2023,” said wealth platform AJ Bell.
Deliveroo PLC (LSE:ROO) will publish its full-year 2021 results on Thursday 17 March, with its shares down 45% since the start of the year.
The restaurant delivery provider said in its fourth-quarter results that its international gross transactional value (GTV) was up 36% year-on-year for the quarter, with 70% growth for the year at constant currency rates.
Gross profit margin growth of 7.5% to 7.75% was expected for the year.
A week ahead of Thursday’s results, Barclays stuck a 165p price target on the delivery group’s shares today – a 45% premium to the market price – but the analysts refused to give a ‘buy’ rating.
“We like many parts of the Deliveroo story: grocery positioning, Plus subscription, London market share, sustainability of post-pandemic growth, incentivised founder-led team and the broader customer proposition,” they said.
But the analysts said “clear catalysts are needed to push 'concept' stocks right now”.
Especially so for Deliveroo, as fellow ‘gig economy’ employer Hermes said Friday it will be the first in the UK logistics industry to offer pensions to staff, which could have a substantial impact on companies like Deliveroo if they have to follow suit.
FRIDAY
The half-year report from pubs group JD Wetherspoon Plc (LSE:JDW) will, if we are lucky, have some details on current trading in between the ranting from chairman Tim Martin.
According to the company's most recent trading statement, in the 25 weeks to 16 January 2022, like-for-like sales decreased by 11.7% and total sales by 13.3%, compared to the similar period in financial year 2020 so Martin has plenty to be apoplectic about.
Sales in the second quarter were affected by the ‘Plan B’ restrictions announced by the government in December so the opinion-peddling founder of ‘Spoons will probably be happy that these restrictions ended on 27 January even if he might suggest in his subtle and delicate manner that they should not have been introduced in the first place.
Investors will be keen see how much business picked up once the restrictions were lifted.
The ending of previous lockdowns has seen the release of pent-up demand but there is a danger that as the British public gets used to drinking at home – Martin has a view about that as well, you’ll be surprised to hear – and as beer prices rise, the expected pick-up might not be as hearty as publicans hoped.
Significant announcements expected in the week of 14-18 March 2022
Monday 14 March:
Finals: Stelrad Group PLC, Hostmore PLC, Phoenix Group Holdings PLC (LSE:PHNX), Bodycote PLC,
Interims: Craneware PLC, Fonix Mobile PLC (AIM:FNX), Nightcap PLC (AIM:NGHT)
AGMs: Helium One Global Ltd (AIM:HE1, OTCQB:HLOGF)
Tuesday 15 March:
Finals: Informa PLC, Ultra Electronic Holdings, TP ICAP Group, Genel Energy PLC (LSE:GENL, OTC:GEGYY), Aptitude Software Group PLC, Genuit Group PLC (LSE:GEN), Petrofac, Gresham House, Old Mutual Ltd, Smart Metering Systems PLC (AIM:SMS), TI Fluid Systems PLC (LSE:TIFS), Tissue Regenix Group PLC (AIM:TRX, OTC:TSSNF)
Interims: DFS Furniture PLC, Virgin Wines UK PLC (AIM:VINO), Ferguson PLC (LSE:FERG), Litigation Capital Management Ltd (AIM:LIT), Close Brothers Group PLC (LSE:CBG)
AGMs: BlackRock Energy PLC
Economic announcements: Producer Price Index (US)
Wednesday 16 March:
Trading announcements: IG Group PLC
Finals: Ferrexpo PLC (LSE:FXPO), Fevertree Drinks PLC, 4imprint Group Plc (AQSE:FOUR), Advanced Medical Solutions Group (AIM:AMS) PLC, Centaur Media (AIM:CAU) PLC, CLS Holdings Plc (LSE:CLI), Computacenter PLC (LSE:CCC), IP Group PLC (LSE:IPO), Pharos Energy (LSE:PHAR) plc, Restaurant Group, RPS Group (LSE:RPS) plc, Science In Sport plc, Centamin
AGMs: Safestore Holdings (LSE:SAFE), IDOX PLC (AIM:IDOX)
Economic announcements: Federal Reserve policy decision (US), Consumer Price Index (UK), Import and export price indices (US), Retail Sales (US), Crude Oil Inventories (US)
Thursday 17 March:
Trading announcements: Ocado Group plc
Finals: Cineworld Group PLC (LSE:CINE), Deliveroo plc, Trainline PLC (LSE:TRN), Ceres Power Holdings, Emis Group Plc, Empresaria Group, Harbour Energy (LSE:HBR) plc, Helios Towers PLC (LSE:HTWS), Marshalls (LSE:MSLH) Plc, PensionBee Group PLC (LSE:PBEE), Portmeirion (AIM:PMP) Group PLC, Tribal Group
AGMs: Autins Group PLC (AIM:AUTG)
Economic announcements: Bank of England policy decision (UK), Initial Jobless Claims (US), Retail Sales (US), Transglobe Energy Corp (finals)
Friday 18 March:
Trading announcement: Investec PLC (LSE:INVP)
Finals: ContourGlobal PLC (LSE:GLO), Eurocell PLC (LSE:ECEL), S4 Capital PLC (LSE:SFOR)
Interims: J D Wetherspoon plc
AGMs: Caracal Gold PLC (LSE:GCAT), Chenavari Toro Income Fund Ltd (LSE:TORG)
Economic announcement: GFK Consumer Confidence