The coming week sees a step up in reporting activity from the FTSE 100 and 250 companies, just as financial markets are wobbling again on concerns about monetary policy tightening, on which point we will also hear from the US Federal Reserve and the Bank of England in what is also a busy week of central bank action.
Results and trading updates during the week include retailers Tesco, Boohoo, Halfords, WH Smith (and possibly JD Sports Fashion); housing market plays Bellway, Crest Nicholson and OnTheMarket; insights into key parts of the US economy from Ashtead, Ferguson and Halma; along with Whitbread, Games Workshop and many more.
MONDAY
With the company diary not getting truly into gear until Tuesday, UK gross domestic product (GDP) monthly numbers might be the main event.
A sluggish 0.1% month-on-month increase is expected for April, though this is a marginal rebound from the 0.1% fall in March and a flat February.
“We expect only the services sector to grow in April, with construction activity and industrial production falling marginally, adding to the trend of sluggish growth data seen over the last couple of months,” said Sanjay Raja, Deutsche Bank’s chief UK economist.
TUESDAY
On Tuesday, two FTSE 100 companies, Ashtead and Ferguson, will give a good insight into the nuts and bolts of the important US sectors or infrastructure and home construction, while the UK housing sector will be taken care of with numbers from housebuilders Bellway and Crest Nicholson and online property group OnTheMarket.
Shares in Ashtead PLC are down by a third from their November peak as investor concern about the effects of surging energy and commodity prices on the US economy override the upgraded earnings guidance at the equipment hire group’s past three updates and ongoing US$1bn share buyback.
Ashtead generates more than 80% of its sales and profits in the US via its Sunbelt construction equipment and plant hire arm.
Revenues growth has waxed and waned so far this year, up 21% in the first quarter, 15% in the second and 23% in the third, with management looking for full-year growth of 19% to 21%.
For the new financial year to April 2023, the current market consensus is for 13% sales growth to $8.9bn, with profit before tax to rise 16% to US$2.1bn.
Attention will also be on Ashtead’s investment plans, said analysts at AJ Bell: “if management is feeling bullish on the outlook, then it will buy more kit to rent out.”
Ashtead spent US$938mln on nineteen bolt-on acquisitions in the first three quarters, while capital investment almost tripled to US$1.7bn, with the budget for capex lifted to $2.4-2.5bn.
For Ferguson, a US-focused supplier of plumbing equipment, analysts at UBS expect third-quarter sales of to be up 12.9% to US$6.8bn and underlying profits (EBITA) up 8.9% to US$614mln.
“Key will be outlook and trading into Q4 against the backdrop of a slowing US housing market.”
As for the UK builders, we last heard from them in March, when Bellway PLC (LSE:BWY) was bullish, reporting a strong forward sales position of 7,491 homes and £2.2bn and indicated that it expected volumes for the year to July to be 11,100 at an average selling price of £305,000.
Volume growth for 2023 was pared back by around 200 units, but more than offset by price inflation.
For its part, Crest Nicholson PLC (LSE:CRST) said it had continued to see good levels of demand and a sales rate of 0.98 per week, from 0.80 a year earlier, with its order book 84% covered for full-year revenue, and selling price increases continuing to offset build cost pressure.
With Bellway shares trading at a 23% discount to tangible net assets, “the case for excess capital returns via a buyback is beginning to look extremely compelling,” said broker Peel Hunt.
As for Crest, the broker said: “The interims will likely be playing a familiar tune of solid levels of demand, strong order books, and selling price increases ahead of build cost inflation. Given the growth strategy, the strength of the land marketis probably a cause for concern, hence the chance of smaller regional bolt-ons looks increasingly likely in our view.”
WEDNESDAY
Interest rate updates are due next week from both the US Federal Reserve and Bank of England and rises are firmly on the minds of both central banks.
The Fed is due to announce its rate decision on Wednesday having already signalled it is keen on a 0.5% rise to its Fed funds rate.
(Read more on the rate rises here)
In company news, the major background theme will be the conflicting forces of the rising cost of living and the resurgent demand for travel as hotel operator Whitbread PLC (LSE:WTB) and retailer WH Smith PLC (LSE:SMWH), whose locations are heavily skewed to airports and stations.
Barclays estimated that the first quarter saw an average of 19% growth in revenue per available room compared to 2019, with the latest week seeing 26.7% – both well ahead of consensus expectations.
As for WH Smith, like Whitbread is also previously struggled to overcome challenges associated with Omicron, but more recently has reported an uptick in trading at its many outlets in airports and train stations.
(Read the full Whitbread and WH Smith preview here.)
THURSDAY
The Bank of England has also been on a steady upward path for months with the increase in the base rate by 25bps to 1% during its May 2022 meeting the fourth rise in a row.
Another rise is very likely this month to be followed by further hikes by the Bank’s monetary policy committee (MPC) in August, September, November and December when the base rate will hit 2.25%.
But with the economy starting to stutter as the highest inflation in the G10 squeezes household and corporate incomes along with a further round of tax increases, the MPC has to “tread a fine line between fighting inflation and kicking the already-reeling economy down the stairs”, says market analyst Marshall Gittler at BDSwiss.
(Read more on the UK and US central bank dilemmas here)
In company news, there are updates from online fast-fashion retailer Boohoo and health and safety technology specialist Halma, among others.
A near 80% drop in its share price over the past year tells you all need to know about current expectations for Boohoo Group PLC (AIM:BOO), as the favourite for short-sellers has already flagged first-quarter sales will be down year-on-year.
Peel Hunt predicts the fall will be 9% but adds there are glimmers of hope as consumers are “rebuilding their wardrobes”, even with inflationary pressures.
This means Boohoo brands like Coast and Karen Millen are likely to be flying but with “huge” comparatives numbers from a year ago, UK sales are likely to be down by mid single-digit levels, and the US by double digits.
“The unusually high mix of dresses, which bring higher returns rates, is likely to remain a factor well into autumn.”
Over at Halma PLC (LSE:HLMA), a track record of increasing annual dividends for 42 consecutive years makes it one of the ‘dividend aristocrats’ of investor dreams.
It remains one of 17 FTSE 100 firms that have managed to increase their annual dividend each and every year for at least a decade, according to analysis by AJ Bell.
Analysts are forecasting a pay-out of 19p per share, up 8%, from adjusted profits before tax up 10% to £307mln.
As health and safety is a big driver, with its products ranging through hazard detection and life protection systems, locks and devices to keep staff, clients and customers safe, the group has fairly strong pricing power.
Investors will still want to hear what management says about the current trading outlook, as well as the prospect for more acquisitions, with the City consensus expecting guidance for a 10% increase in adjusted PBT to £339mln.
FRIDAY
Friday sees two well-known names from the UK retail sector dominate proceedings: Tesco PLC (LSE:TSCO) and Halfords Group PLC (LSE:HFD).
Analysts at Barclays predict a 1.8% decline in like-for-like sales for Tesco, albeit this would represent a gain of about 7.3% on pre-Covid levels.
As for Halfords, it was back in January when we last heard from the bike and car parts peddler, when there were signs that strong cycling sales were shifting down a few gears.
Analysts were in disagreement over whether the prospects are good or bad for Halfords.
(Read the full preview on the pair here.)
Significant announcements for the week 13-17 June 2022
Monday 13 June:
Finals: BP Marsh & Partners (AIM:BPM), GB Group (LSE:GBG), Sirius Real Estate Ltd, Molten Ventures PLC (LSE:GROW), Volex
AGMs: Mirriad Advertising Ltd
Economic announcements: Balance of trade (UK), GDP (UK)
Tuesday 14 June:
Trading announcements: Ashtead Group PLC (LSE:AHT), Bellway PLC, Ferguson PLC (LSE:FERG), Games Workshop PLC
Interims: Crest Nicholson Holdings PLC, Foresight Sustainable Forestry Company PLC, Paragon Banking Group PLC (LSE:PAG)
Finals: CML Microsystems Plc (LSE:CML), DiscoverIE Group PLC, FirstGroup PLC (LSE:FGP), Iomart Group, OnTheMarket PLC (AIM:OTMP), Oxford Instruments PLC (AIM:OXIG), Palace Capital PLC (LSE:PCA), Vianet Group (AIM:VNET) PLC
AGMs: Andrew Sykes Group PLC, Coro Energy PLC (AIM:CORO), Everyman Media Group PLC (AIM:EMAN), Fair Oaks Income Ltd, IP Group PLC (LSE:IPO)
Economic announcements: Unemployment Rate (UK), Claimant Count (UK), PPI (US)
Wednesday 15 June:
Trading announcements: WH Smith PLC, Origin Enterprises PLC, Whitbread PLC
Interims: IDOX PLC (AIM:IDOX)
Finals: JD Sports Fashion PLC (LSE:JD.), Allied Minds (LSE:ALM) PLC, Castings PLC (LSE:CGS), Severfield PLC, Tatton Asset Management PLC (AIM:TAM), JPMorgan European Smaller Companies Trust
AGMs: Foxtons (LSE:FOXT) Group PLC, Sourcebio International PLC, Foresight Solar Fund Ltd (LSE:FSFL), 888 Holdings, Angling Dirert, Ferrexpo PLC (LSE:FXPO), Panther Securities PLC (LSE:PNS), Shanta Gold
Economic announcements: Retail sales (US), Federal Reserve decision (US)
Thursday 16 June:
Trading announcements: Boohoo Group PLC, N Brown Group PLC (AIM:BWNG)
Finals: Biffa PLC (LSE:BIFF), Halma PLC, Best of the Best PLC (AIM:BOTB), Syncona Ltd
AGMs: Evraz PLC (LSE:EVR), Anpario PLC (LSE:ANP), AEX Gold Inc (AIM:AEXG, TSX-V:AEX), Bisichi PLC, Informa PLC (LSE:INF), IAG, S4 Capital PLC (LSE:SFOR)
Econ announcements: Bank of England decision, Initial Jobless Claims (US)
Friday 17 June:
Trading announcements: Tesco PLC
Finals: Halfords Group PLC
AGMs: Directa Plus PLC (AIM:DCTA, OTC:DTPKF), Tesco PLC, City of London Group PLC (LSE:CIN), EnQuest PLC, Octopus Renewables Infrastructure Trust PLC