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Berkeley interims mark quieter corporate diary for coming week; US non-farms dominate macro calendar

November 28, 2020

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With December beginning and the festive mood likely to escalate in the City and its (now mostly remote) workforce, the corporate diary is also slightly quieter in terms of results and updates.

Investors will likely focus on a smattering of big and mid-cap firms over the week including housebuilder Berkeley, breathing equipment maker Avon Rubber and publishing giant Future.

The macro calendar has a bit more activity going on, with the all-important US non-farm payrolls to dominate on Friday. Earlier in the week, investors are likely focus on a variety of PMI readings from both the UK and the US.

Meanwhile, investors may also be keeping an eye on the latest reshuffle of both the FTSE 100 and FTSE 250 indices.

Avon Rubber expects profit bounce

Wednesday will bring full-year results from Avon Rubber PLC (LON:AVON), with the FTSE 250 maker of respiratory protection systems heading into 2021 as a more focused entity following the sale of its dairy and milking equipment business.

The company has had a strong run in 2020, boosted by several contract wins as well as a GBP100mln acquisition of US helmet specialist Team Wendy, which analysts thing nicely compliments the group’s existing capabilities of making respirators for soldiers and first responders.

As a result, expectations from investors are likely to be high when the firm unveils its figures, with forecasts predicting an adjusted pre-tax profit of GBP38.8mln, up from GBP31.4mln in 2019. Any guidance for the coming year will also be watched closely as analysts are already predicting a profit for the coming year of just over GBP50mln.

As always, the dividend will also be in focus, with Avon having yet to break a decade long streak of hiking its annual divi. The interim payment rose 30% to 9.02p per share, while the final payment is predicted to increase 38% to 28.7p.

Are Future’s finals going to be a page-turner?

Also on Wednesday, Future PLC (LON:FUTR) is releasing its finals, which should not come as a surprise after the media company confirmed a strong performance in the second half driven by robust audience growth, leading to good growth rates in both ecommerce and digital advertising.

Newsstand sales have also been better than expected, so Peel Hunt increased its profit before tax estimate by 10% to GBP81.6mln on the flurry of good news, nearing the GBP82mln consensus.

The market wants to know how the first quarter has been so far.

“We expect Future to be beneficiaries of the second lockdown with stronger than expected ecommerce and digital ads due to more consumers purchasing online for Black Friday and also the pre-Christmas period,” analysts at Peel Hunt said, noting there is a cautious outlook for magazines.

Countryside eyed for outlook

Countryside Properties PLC (LON:CSP) full-year results on Wednesday should not have too many surprises, having shown investors around its headline numbers in mid-October.

The pre-close trading update revealed 4,053 completed house sales, down 29% year on year, with operating profit guided to around GBP54m, which was pretty much what the City expected.

Management’s view on the new financial year will be the main area of interest, as the outlook statement was fairly curt.

Analysts at Peel Hunt said they will be paying particular attention to the phasing of sites, with the order book up 15% at GBP1.4bn and reservation rates having been strong since the housing market was allowed to reopen after the first lockdown but likely to unwind in the second half of next year as more stock becomes available.

Also, is there more of an indication of what management plan to do with the GBP250mln raised in July?

AJ Bell aims to cash in on volatile 2020

Thursday will see FTSE 250 investment platform AJ Bell PLC (LON:AJB) report final results, although some of the headline figures have already been delivered by the company in a year end trading update late last month.

The company has reported that customer numbers grew 27% and net inflows by 28% in the year to the end of September, driven by an acceleration in direct-to-consumer growth, while assets under administration rose 11% to GBP49.7bn by the end of the financial year, with total assets under administration up 8% to GBP56.5bn.

With the year looking like a strong one, the outlook for its current year is likely to take focus, particularly as the volatility of 2020 is unlikely to be replicated in 2021 as the coronavirus pandemic shows signs of entering its final stages amid recent vaccine news.

One area of focus may be the development and reception of new products, with chief executive Andy Bell having previously highlighted a new streamlined pension product that he said has been very popular with financial advisers and the more recent launch of a cash savings ‘hub’ for retail investors.

Build up to Berkeley’s interims

Berkeley Group Holdings PLC (LON:BKG) is releasing its half-year results on Friday, where analysts at UBS expect revenue to decline by 6% to GBP872mln, with profit before tax of around GBP212mln from last year’s GBP278mln.

The figure is in line with recent guidance of splitting profits 40-60 across the two halves, meaning the full-year profit should come in at GBP500mln.

Interim operating margin is estimated to be 23.5%, down from 27.5% last year, while cash net should be over GBP1bn.

The market is also waiting to hear updates on recent trading conditions as well as on land acquisitions, considering the FTSE 100 company recently signalled it is progressing more opportunities.

Investors are looking to here whether the firm looks to revive its plan to return GBP455mln in cash to shareholders, which could return around GBP2bn to investors in cash and dividends by 2025.

“Berkeley’s shares are, at the time of recording, trading at their highest level since March, although they are still down by a fifth from their early 2020 peaks,” analysts at AJ Bell noted.

“That slide owes much to the pandemic and prevailing economic uncertainty, despite Government initiatives to support the house building industry, including the latest extension of the Help To Buy scheme and a holiday on stamp duty land tax on the first GBP500,000 on the purchase of a property until 31 March 2021.”

“However, September’s trading statement offered some grounds for encouragement and support to the share price recovery seen since the height of the market-wide panic in March.”

Macro matters

There is plenty of economic data due out in the coming week, concluding with the US non-farm payrolls report that always grabs the market’s attention.

Brexit will also remain in the spotlight, with just a month until the end of the transition period on December 31.

The start of December also brings a new round of purchasing managers’ index surveys, with the manufacturing PMIs for major economies released on Tuesday, services on Thursday and construction on Friday.

US Federal Reserve chair Jerome Powell and European Central Bank president Christine Lagarde will both be speaking through the week as well.

Deutsche Bank said the week’s data will “set the tone moving into year end”, with, preliminary readings showing a noticeable deterioration in Europe as much of the continent headed into renewed lockdowns.

FTSE does the (re)shuffle

The close of trading on Wednesday will also bring the latest quarterly reshuffle of the FTSE 100 index, with some analysts predicting that Homeserve PLC (LON:HSV) could be the latest firm to see itself booted out of the blue-chips.

“Homeserve’s star shone brightly during the early stage of the pandemic which pushed it into the FTSE 100 limelight. With so many people at home to use and break appliances, demand for repairs and renovations amongst its growing customer base rose. But with mass vaccine rollouts on the horizon, its appeal has dimmed, with expectations the stay at home trend will be on the wane”, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown

In terms of potential joiners, hedge fund manager Pershing Square Holdings Ltd (LON:PSH) and engineering firm Weir Group PLC (LON:WEIR) have been tipped as prime candidates to replace Homeserve.

Meanwhile, further down in the FTSE 250 shopping centre owner Hammerson PLC (LON:HMSO) is also expected to be relegated.

“Hammerson was already dragging its feet, even before the pandemic took hold, weighed down by its bricks and mortar retail portfolio. With lockdowns closing its shopping centres and the shift to digital accelerating during the crisis, it hurt Hammerson hard, pushing it to the brink of collapse. That was avoided through a GBP552 million rights issue, but the owner of London’s Brent Cross centre and Birmingham’s Bullring, isn’t likely to avoid relegation from the FTSE 250″, Streeter said.

“Although the vaccine breakthroughs have helped the shares make an abrupt turn upwards, stark worries remain about whether footfall will return to pre-pandemic levels, or whether the way we shop has changed forever. It struggled to collect rents in the Autumn and plans under government consideration to scrap tax free shopping for overseas visitors could be another blow, given that its venues like Bicester shopping centre are highly reliant on international tourists.’, she added.