Housebuliders step up to the podium in busy week of corporate earnings

By Renae Dyer / February 23, 2018 / www.proactiveinvestors.co.uk / Article Link

Full year results from the UK's major lenders are out of the way but another busy week of corporate earnings awaits.

The attention will switch from banks to housebuilders with Taylor Wimpey PLC (LON:TW), Persimmon PLC (LON:PSN) and Bovis Homes PLC (LON:BVS) among the raft of companies out with annual results. 

The property market has slowed since the Brexit vote but housebuilders have insisted that low interest rates and government schemes have continued to support demand. 

Elsewhere, GKN PLC (LON:GKN) will be under the microscope when it unveils its finals as it fends off a hostile bid from Melrose Industries PLC (LON:MRO).

Troubled outsourcer Capita PLC (LON:CPI) also reports its full year earnings along with struggling lender Provident Financial PLC(LON:PFG), Primark owner Associated British Foods plc (LON:ABF) and WPP PLC (LON:WPP), to name a few of many.

Housebuilder updates to continue from Persimmon and Taylor Wimpey

Barratt Developments PLC (LON:BDEV) kicked off the trading update season for house-builders with upbeat comments recently about consumer demand which bodes well for its peers reporting in the coming week.

Persimmon is first out of the traps on Tuesday, having already tipped the wink that revenues in 2017 were ?3.42bn, driven by a 6% increase in volumes and a 3% rise in the average selling price.

The market is expecting profit before tax of ?972mln.

"While investors expect profitability to have risen well too, we know that housebuilders are facing increasing costs related to finding skilled labour and increased material prices," said retail investor-focused broker, The Share Centre.

"The group has strong cash balances for which investors will expect more returned via increased dividends and capital returns. Investors will also eagerly await the size of the forward order book and footfall to showrooms in the latest few weeks given the rising interest rate (although modest) environment faced in the UK," it added.

Taylor Wimpey releases its full-year results on Wednesday, and it has also released many of the big numbers investors would otherwise be focused on.

Volumes were up 5% year-on-year and the average selling price was 4% higher. Analysts calculate that should lead to revenues of around ?3.95bn and profit before tax of ?818mln.

Thursday sees Bovis release its prelims, and although it recently announced a 7% increase in its average selling price to ?272,000, volumes were down 8% year-on-year.

Liberum Capital Markets is forecasting an operating of margin of 12.8%, down from 15.2% the year before, reflecting the company's investment in improving build quality and service levels.

GKN continues its fight against hostile bid

GKN last month rejected a second takeover bid from Melrose, saying it "fundamentally unvalued" the company and recommended shareholders vote against the offer.

Melrose has taken its bid hostile, arguing that the real value uplift from the proposed acquisition will come from creating an enlarged business worth ?11bn. 

In an effort to defend itself against the bid, GKN has appointed Anne Stevens as its new chief executive to lead its so-called 'Project Boost' strategy to improve its financial performance.

As part of the strategy, the engineer will split its aerospace and automotive divisions into two and plans to return ?2.5bn to shareholders over the next three years.

Investors will be keen to hear more on this strategy at GKN's full year results on Tuesday to determine whether they should vote for or against the Melrose bid.

"The Project Boost strategy may only be weeks old, but this is GKN's opportunity to convince shareholders it's serious about making the necessary changes," said George Salmon, equity analyst at Hargreaves Lansdown.

Investors hope for Capita recovery story

Capita posts its finals on Thursday amid concerns it could face a sIMIlar - if not worse - fate than collapsed contractor Carillion PLC (LON:CLLN).

Last month the outsourcer issued a profit warning and announced plans for a ?700mln rights issue and to scrap its dividend.

Jonathan Lewis, who started as Capita's chief executive two months ago, said the company was "too complex" and "too widely spread across multiple markets and services" so needed to sell non-core parts of the business. Capita plans to use the proceeds of asset disposals to pay down net debt, which stands at ?1.15bn.

The announcement came in the wake of the collapse of fellow contractor Carillion earlier this month.

A potential collapse of Capita could create an even more of a headache for the public sector than Carillion since it is the biggest supplier of local government services in the UK, according to Tussell data.

Analysts believe the company is taking the right steps to turn around the business but think it is too soon to tell if the plan will work.

"Capita could be an interesting recovery story but it is too opaque to model with conviction, management guidance has been unreliable, and perpetual UK political turmoil continues to weigh on the revenue outlook," said Jefferies.

Primark growth could offset sugar margin issues for AB Foods

Associated British Foods will issue a trading update on Monday, and analysts at French broker Kepler Cheuvreux expect a statement that is similar to the firm's January update, reiterating that it expects progress in adjusted operating profit and adjusted earnings for the full year.

Back then the Primark clothing retailer to Twinings tea and Silver Spoon sugar food conglomerate said its sales were 3% higher in the first 16 weeks of the year -or 4% constant currency - with lower sugar prices dampening revenues, and Kepler's analysts expect the FTSE 100-listed firm to again flag lower margins in the sugar business.

Primark sales, meanwhile, were up 9% in the first 16 weeks of the year, with 7% growth in constant currency, disappointing some amid a slower pace of store expansion than expected.

But, the Kepler analysts said: "We see some potential growth acceleration given its commitment to expand store space by almost 9% this financial year while it could be more positive on margin at Primark given weakness of the dollar."

WPP sales under pressure

Advertising and public relations giant WPP PLC (LON:WPP) is likely to see a sales decrease for 2017 when it reports full-year results on Thursday, with the company having forecast "broadly flat" revenue.

Analysts expect a net sales decrease of 0.6% for the full-year, with flat underlying margins at 16.9%.

For 2018, WPP's management has indicated that a similar flat trajectory for margins would be a good working assumption.

The FTSE 100-listed firm cut its growth forecasts three times in the past year following a knock-on effect from shrinking client budgets and what it says are changes in spending patterns among big companies.

However, WPP also said in October that the uncertainty following the Brexit vote has already bought a temporary benefit to its business over the last year.

Advertising outlook also key for ITV

Production performance has been strong for broadcaster ITV plc (LON:ITV) recently, but advertising still be the main focus when the issues will reports its full-year results on Wednesday.

Investment research analysts at The Share Centre think that while the production business has been leading the way for the FTSE 100-listed group, investors will still be keen to hear the outlook for advertising revenue for this year and hope that the forecast 1% increase over the fourth quarter has been achieved.

Investors will also be hoping that the football World Cup later in the year will give the group a boost.

ITV shares slumped in November last year after the commercial broadcaster reported a decline in third quarter net advertising revenue that was worse than analysts had expected.

Clarity needed on management and M&A from LSE

London Stock Exchange (LON:LSE) will report full year results on Friday and analysts at Deutche Bank expect a solid quarterly performance.

However, despite the positive expectations, the German bank's analysts see LSE's operating performance continuing to be overshadowed by questions around the bourse operator's new management as well as any M&A discussions following last year's collapsed takeover by Deutsche Boerse.

The FTSE 100-listed firm's long-time boss, Xavier Rolet left in November 2017 at the board's request while group's chairman Donald Brydon decided to stand down in 2019 after a shareholder called for his resignation over the ousting of Rolet.

More clarity will be sought by investors on the new team's future direction although quarterly progress will be welcomed.

Things can only get better for Provident Financial

Door-step lender Provident Financial must be hoping new chief executive officer (CEO) Malcolm Le May is less accident prone than his predecessor.

Le May joined the company as chairman in November of last year but took over as CEO after the second profit warning did for the unfortunately named Peter Crook in August.

Stuart Sinclair took over as interim chairman and is conducting the search for a permanent person to fill the big chair.

The troubled company has been hit by unresolved problems at its door-to-door lending business, with the group's woes compounded by Financial Conduct Authority (FCA) investigations into two of its units.

The group said at the beginning of February that since its trading update on January 16, its home credit division had continued to make good operational progress; admittedly, that barely covers a two week period but Provident shareholders will take any good news they can get at the moment.

"My key objective is to execute a turnaround of the group," Le May said, when he got the CEO gig.

"We will re-establish a stronger customer-focused business; conclude with our regulators the issues surrounding Vanquis Bank and Moneybarn; continue the progress being made in our Home Credit business and restore it as the pre-eminent business in its market; and ensure our businesses collaborate for the benefit of our customers and our shareholders," he pledged.

 

Significant events expected:

Monday February 26:

Trading updates: Associated British Foods PLC (LON:ABF)

Finals: Bunzl PLC (LON:BNZL), ), Hammerson PLC (LON:HMSO), Ascential PLC (LON:ASCL), Dialight PLC (LON:DIA), Keller Group PLC (LON:KLR), Quartix Holdings plc (LON:QTX), RTC Group plc (LON:RTC), Senior PLC (LON:SNR)

Interims: Avation PLC (LON:AVAP), Dechra Pharmaceuticals PLC (LON:DPH), Sylvania Platinum Ltd. (LON:SLP), Town Centre Securities PLC (LON:TOWN)

Economic data: Nationwide UK house price index; BBA UK mortgage lending figures; US new home sales

Tuesday February 27:

Finals: Standard Chartered PLC (LON:STAN), Croda International PLC (LON:CRDA), Dalata Hotel Group Plc (LON:DAL),  Derwent London PLC (LON:DLN), Direct Line Insurance Group PLC (LON:DLG), Drax Group PLC (LON:DRX), FBD Holdings PLC (LON:FBH), Fresnillo PLC (LON:FRES), GKN PLC (LON:GKN), Greggs plc (LON:GRG), Inchcape PLC (LON:INCH),  Johnson Service Group plc (LON: JSG), Jupiter Fund Management PLC (LON:JUP), Meggitt plc (LON:MGGT), Persimmon PLC (LON:PSN), Provident Financial Group PLC (LON:PFG), Virgin Money Group PLC (LON:VM.)

Interims: Bluefield Solar Income Fund Limited (LON:BSIF), Clinigen Group PLC (LON:CLIN), DotDigital Group PLC (LON:DOTD), Swallowfield plc (LON:SWL)

Economic data: US durable goods orders; US international trade in goods; US FHFA house price index 

Wednesday February 28:

Finals: Admiral Group PLC (LON:ADM), Bakkavor Group PLC (LON:BAKK), Foxtons Group PLC (LON:FOXT),  Informa PLC (LON:INF), ITV PLC (LON:ITV), GoCompare.com (LON:GOCO), St James's Place PLC (LON:STJ), Shield Therapeutics PLC (LON:STX), Tarsus Group PLC (LON:TRS), Taylor Wimpey PLC (LON:TW.) Travis Perkins PLC (LON:TPK), UBM PLC (LON:UBM), Weir PLC (LON:WEIR)

Interims: Avingtrans PLC (LON:AVG), Ricardo plc (LON:RCDO)

Economic data: BRC UK shop price index; GfK UK consumer confidence; US preliminary Q4 GDP; US Chicago PMI; US pending home sales; Fed chairman Jerome Powell speech

Thursday March 1:

Finals: Melrose PLC (LON:MRO), Allied Irish Banks PLC (LON:ALBK), Bovis Homes Group PLC (LON:BVS), Cobham PLC (LON:COB), Costain Group PLC (LON:COST), Capita PLC (LON:CPI), CRH PLC (LON:CRH), Grafton Group PLC (LON:GFTU), Hastings Group Holdings PLC (LON:HSTG), Hunting Plc (LON:HTG), Howden Joinery Group PLC (LON:HWDN), Laird PLC (LON:LRD), Merlin Entertainments PLC (LON:MERL), National Express Group PLC (LON:NEX), Nichols plc (LON:NICL), RPS Group PLC (LON:RPS), Rentokil Initial PLC (LON:RTO), Robert Walters PLC (LON:RWA), STV Group PLC (LON:STVG), Synthomer PLC (LON:SYNT),  Vesuvius Plc (LON:VSVS), WPP PLC (LON:WPP), XP Power Ltd. (LON:XPP)

Interims: Haydale Graphene PLC (LON:HAYD), Redde Plc (LON:RED)

FTSE 100 ex-dividends: easyJet PLC (LON:EZJ), Rio Tinto PLC (LON:RIO)

Economic data: UK manufacturing PMI; UK consumer credit, mortgage approvals; US weekly jobless claims; US personal income, outlays; US construction spending; US ISM manufacturing; US PMI manufacturing

Friday March 2:

Finals: Essentra PLC (LON:ESNT), IMI PLC (LON:IMI), London Stock Exchange PLC (LON:LSE), Mondii PLC (LON:MNDI), Spire Healthcare Group PLC (LON:SPI)

Interims: Revolution Bars Group PLC (LON:RBG)

Economic data: UK construction PMI; University of Michigan consumer sentiment index

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