Two of the highlight names in the City calendar for Tuesday will keep a sharpened point of focus on the UK’s tumultuous summer, albeit quite differently.
Unilever’s interim results will provide the market with good insight into how consumer brands are coping amidst the cost-of-living crisis with price competition squeezing margins.
It has been something of a sideshow period for Unilever shareholders punctuated with activism (leading to US billionaire Nelson Peltz joining the board), speculation over possible M&A and spin outs, a political ice cream row in Israel, and, more broadly investor appetite for defensive dividend-paying blue-chip shares.
Amongst the odd cluster of events, Unilever’s unpopular and quickly shot down tilt at Glaxo was a standout - and, according to CMC Markets analyst Michael Hewson, the company can be thankful for the failure.
“Sometimes in life timing is everything and Unilever CEO Alan Jope dodged a bullet earlier this year when GlaxoSmithKline rejected his £50bn offer for the consumer health care business as he attempted to engineer a change in fortunes for the Unilever share price,” the analyst said.
“Notwithstanding the fact it was a terrible idea, it was Jope’s good fortune that Glaxo didn’t snap his hand off. Most shareholders hated the idea, sending the shares to 5-year lows, and increasing the pressure on him further.
“Over the last two years the spreads business has gone, as has the tea business, with management under pressure to do more to improve margins and profitability. A steep rise in costs has hit its operating margins, some of which has been mitigated by the company raising prices.”
Jope is under pressure, Hewson said, and the consumer brands firm needs to move the story on – financial performance will help or hinder.
“Since the failure of the Glaxo bid the share price has recovered, back to the levels predating the bid, helped in some part by the appointment of activist investor Nelson Peltz to the board, who was instrumental in turning around Procter and Gamble,” the analyst said.
“Nonetheless rising costs are expected to be a challenge going forward, something that shareholders were warned about in the first quarter, with the board warning that input cost inflation is likely to push up costs to around €2.7bn in the second half of the year, up from €2.1bn in the first half.”
Easyjet
The orange budget airline follows Ryanair, which reported on Monday, and like the Irish firm traffic numbers are likely to be a key focus – along with 2022 outlook and a status check on the airline’s financial health in what continues to be a turbulent trading environment.
Previously, easyJet delivered 87% of capacity in the third quarter of its fiscal year 2022, versus pre-Covid levels, up from 67% in the second quarter.
The market consensus is that the budget airline will deliver £1.7bn of revenue for the quarter, a vast improvement on last year's equivalent turnover.
“easyJet remains in a challenging position with weak operational performance, rising capex for fleet renewal, high fuel prices and a worsening economic outlook,” Peel Hunt analyst Alexander Paterson said in a note.
Tuesday July 26
Finals: Games Workshop Group PLC (LSE:GAW), Gore Street Energy Storage Fund PLC (LSE:GSF), Trifast (LSE:TRI) PLC
Interims: Franchise Brands PLC (AIM:FRAN), Gresham Technologies plc (LSE:GHT), Unilever PLC (LSE:ULVR), Compass Group PLC (LSE:CPG), Bridgepoint PLC, Informa PLC (LSE:INF), LVMH PLC, Tyman (LSE:TYMN) PLC
Trading announcements: Greencore Group PLC (LSE:GNC), Medica Group PLC (LSE:MGP), easyJet PLC, Coca Cola PLC, Drax PLC
AGMs: AO World PLC (LSE:AO.), Brandshield Systems PLC, Bytes Technology Group PLC (LSE:BYIT, JSE:BYI), Dekel Agri-Vision plc (AIM:DKL), Firering Strategic Minerals PLC (AIM:FRG), Mitie Group PLC (LSE:MTO), Nanosynth Group PLC (AIM:NNN), NewRiver REIT PLC (LSE:NRR), Ninety One PLC (LSE:N91), OnTheMarket PLC (AIM:OTMP), Oracle Power PLC (AIM:ORCP), Shires Income plc (LSE:SHRS), Telecom Plus PLC (LSE:TEP), Vodafone Group PLC (LSE:VOD), Wizz Air Holdings PLC (AIM:WIZZ), Xeros Technology Group PLC (AIM:XSG)
Economic updates: House Price Index (US), Consumer Confidence (US), New Homes Sales (US)