The week ahead is significant in the City and across England and Wales as it’s the last one before pubs, restaurants, cafes and other venues are allowed to open their doors for the first time after the latest national lockdown.
Before then, investors will have plenty to get their teeth into in the coming days, with results from BT, Burberry, Disney, Greggs, Morrisons, National Express, Sage and TUI.
Morrisons growing market share
It has, however, made a decent fist of things in 2021 with the latest industry data showing sales in the 12 weeks to April 19 up 7.2% year-on-year, meaning its market share rose 0.1 percentage points to 10.0%, a couple of points ahead of Aldi.
Tuesday’s first-quarter trading update, therefore, could be a cheery one.
Analysts have pencilled in a figure of 1.6% for year-on-year like-for-like sales growth for the first quarter.
The company was a late mover into the online sector but has taken a couple of short-cuts with its hook-ups with Ocado and Amazon and the market will be keen for news on how these relationship are developing.
TUI hopes for clearer skies after pandemic storm
As the world’s largest travel and tour operator, the pandemic has ravaged TUI AG (LON:TUI) alongside the rest of the industry, so the company’s half-year results on Wednesday are unlikely to make for pleasant reading.
Despite having made steep cuts to its spending to weather the storm, the company still reported a massive €699mln loss in its first quarter as revenues plunged almost 90% as resorts remained shuttered in its key markets over the winter season.
With this in mind, investors will be looking for any signs of light in the gloom, most importantly the widely anticipated easing of some travel restrictions for the summer period that will finally allow holidaymakers to take trips abroad.
Information on booking numbers and reservations will be of key importance, as well as more updates on its cash position and how its plans to spend any leftover bailout cash.
Ignacio’s at the wheel
Ignacio Garat, the group’s chief executive officer, has initiated “a wide-ranging business review to identify areas where we can improve our existing businesses and unleash the potential for sustainable growth”.
The company’s full-year results statement made great play of the company being the first public transport operator to become a Living Wage Foundation accredited employer so it would be disappointing were the review to conclude that redundancies are necessary.
The review was only announced it mid-March so it might in any case be too early for the company to reveal its thoughts on its new strategic direction but Garat has hinted it will include a greater focus on matters digital to improve performance, both operationally and commercially.
BT, a perennial champion in the European Super League of Debt
For the fourth quarter, the consensus forecasts are for revenue of £5.29bn (down 6.1% year-on-year) and underlying earnings (EBITDA) of £1.83bn.
For the full-year, the City’s scribblers have pencilled in a 6.4% decline in revenue to £21.37bn and EBITDA of £7.43bn, equating to earnings per share of 18.7p.
Net debt excluding lease liabilities is expected to clock in at £11.51bn, with normalised cash flow during the fourth quarter estimated at £520mln.
The telecoms giant recently confirmed that it is in talks over the future of its BT Sport division but was otherwise tight-lipped. The City will be interested to see whether there is an additional focus on this part of the business in the results commentary.
Burberry takes to the catwalk
Like-for-like retail sales for the fourth quarter are estimated to rise between 28% and 32% compared with the same period last year, while full-year group revenue is forecast to decline between 10% and 11%, with adjusted operating margin to be in the range of 15.5% to 16.5%.
As of January, the trench coat designer still had 15% of stores closed while 36% were operating with reduced hours or under regional restrictions. Given recent post-lockdown reopenings in several countries, investors will be hoping trading activity has picked up further.
However, there is a potentially large snag in the form of an ongoing public relations fracas in China, one of the company’s core markets, over the recent spat between the country’s communist government and several western administrations over allegations of human rights abuses in the province of Xinjiang.
The FTSE 100 company lost its Chinese brand ambassador, actress Zhou Dongyu, while its famous beige tartan was scrubbed from a popular video game as part of Chinese backlash against one of the members of the Better Cotton Initiative, which said in October it was suspending its approval of cotton sourced from Xinjiang.
Greggs eyes reopening
With the pandemic having forced most of its bakeries to close, a trading update from Greggs PLC (LON:GRG) is likely to be eyed for how the group has performed since April 12, when a relaxation of lockdown restrictions in the UK allowed it to reopen most of its stores.
In terms of the rest of the period, the roll out of a click and collect service alongside a delivery partnership with Just Eat is likely to have helped offset some of its losses, however with customer trends having shifted even further online during the lockdown, investors may be concerned whether the group can continue to deliver the same levels of success if high street footfall fails to recover to pre-COVID levels.
With this is mind, the company’s store opening programme will likely come into focus on Thursday, as well as whether it is planning new additions to its offering to lure in more customers following the success of its vegan sausage roll.
Balfour bathing in cash
This came not long after guidance issued in March revealed earnings based businesses returning to the level of profitability seen in 2019.
The civil engineer and contractor said it would boost the size of a planned share buyback in 2021 and introduce a more generous dividend policy after a steady recovery in activity through the second half of 2020 led to strong cash generation, after a first-half loss.
Orders at the year-end had risen to a new record of £16.4bn from £14.3bn twelve months earlier despite the continuing COVID-19 restrictions, with net cash at the year-end of £527mln.
Usually there is a short trading update alongside the AGM.
Is the force with Disney?
Ahead of Friday trading, Walt Disney Co (NYSE:DIS) will release quarterly earnings overnight, at the same time as others including AirBnB and Alibaba.
Led by its Star Wars franchise, the stock had been on the charge since the global financial crisis, up over 350% from 2009 to the start of 2019, but has grabbed more investors’ attention with the launch and success of its Disney+ streaming service almost 18 months ago.
The service reached almost 95mln subscribers in January and managed to report an underlying profit in the first quarter, offering a glint of light in what have otherwise been some pretty dark times for the media giant’s cinema and theme park business, as analyst Nicholas Hyett at Hargeaves Lansdown observed.
As well as visitor numbers in the theme parks division looking set to remain well below normal, the ongoing switch to streaming also does not bode well for the group’s ABC broadcast network or cable outlets like ESPN, he added.
“Restructuring related to the pandemic should decline going forwards, potentially boosting results through the rest of the year,” Hyett said.
“But the real focus in these results will be on the strength of recovery in Parks and to a lesser degree on continued growth in Disney+. We don’t think either will show transformational progress this time round, but direction of travel is key.”
Software group Sage Group PLC (LON:SGE) reports half-year numbers on what is expected to be a quiet Friday in the City diary.
Sage’s story in recent years has been about moving away from licence sales and professional services and converting its customers to cloud-based services, with an update in January giving management a chance to emphasise how its priority is to grow recurring revenues.
For the final three months of 2020, the first quarter of the FTSE 100 company’s financial year, it reported an 11.3% rise in subscriptions helped generate a 4.7% rise recurring revenues, offsetting a 24% decline in ‘legacy’ revenues.
“Expectations have been lowered sufficiently,” said UBS at the time, with the prioritisation of recurring revenue growth “is in tune with investors’ priorities”.
However, the UBS analysts still have “medium-term structural concerns” around competitive pressures, while also seeing potential headwinds to earnings from further disposals of non-core assets.
Sage has been a rollercoaster stock in recent years, zooming up above 800s and down to the 500s, with recent levels in the mid-600s posing investors a big question of which way it will swing next.
UK data next week starts with Halifax house prices on Monday, then BRC retail sales on Tuesday morning, with Wednesday bringing a first-quarter GDP update alongside industrial and services numbers.
But with inflation being a hot topic in markets, as commodity prices teeter as multi-year highs, companies flag rising cost pressures and US Treasury Secretary Janet Yellen backs away from her suggestions that American interest rates may need to rise at some stage in response, traders will be paying close attention to Chinese and US inflation consumer figures on Tuesday and Wednesday respectively, and factory gate prices on Tuesday and Thursday.
Producer price increased 4.3% in the US in March and 2.6% in China.
“This is important as inflation traditionally starts with raw materials (and iron ore, copper, palladium, soybeans and corn all trade at all-time or multi-year highs), then shows up in factory gate prices and then finally in consumer prices, as companies pass on the costs to buyers to try and protect their own margins,” pointed out analysts at AJ Bell.
“Consumer prices are yet to show the same rate of increase, but their trajectory looks similar for now.”
While US Federal Reserve officials have dismissed rises in inflation as transitory, attributing them to the effect created by the pandemic, bond yields are slowly rising from their rock bottom base.
Any sign of inflation making a break for it could send markets into a real tizzy, with a big impact on share prices.
Significant announcements expected for week ending 14 May:
Monday May 10:
Trading announcements: HG Capital Trust PLC (LON:HGT)
Economic data: UK house prices
Tuesday May 11:
Interims: Treatt PLC (LON:TET)
Wednesday May 12:
Economic data: UK GDP, UK trade balance, US inflation
Thursday May 13:
Economic data: US jobless claims, US PPI
Friday May 14:
Interims: Sage Group PLC (LON:SGE)
Economic data: US retail sales, US production