On Thursday, the key piece of corporate news is likely to be a trading update from Primark owner AB Foods, however other notable firms such as AO World and Micro Focus are also expected to deliver results.
The company, like a number of others, is facing criticism of the bonuses it paid to top executives even as it benefited from taxpayer money during the pandemic. Advisory groups Glass Lewis and Institutional Shareholder Services (ISS) have already recommended investors to vote against the remuneration policy at the meeting, so traders will be watching to9 see how many shareholders follow their advice.
On the macro front, UK and US manufacturing PMIs will be making an appearance alongside the usual US weekly jobless claims numbers.
AB Foods eyes pent-up demand
Primark owner Associated British Foods PLC (LON:ABF) will deliver a quarterly trading update on Thursday that is likely to be closely eyed by investors to see how the retailer is recovering from lockdown.
While the group is on track for a year-on-year profit decline, the business seems to have held up relatively well despite the high street closures, although this alongside a lack of an online operation has hit revenues hard.
One of the company’s biggest strengths during the lockdown has been Primark’s inventory management, which has allowed it to avoid discounting heavily to shift stock like its rivals. With this in mind, shareholders will be looking to see if the company has taken advantage of the post-lockdown demand to shift its older clothes.
Margins will also be eyed to see if demand has been as strong as management has predicted, while over in the non-Primark grocery business the figures are likely to be facing tough comparisons from last year while rising US vegetable oil costs could potentially hold back profits.
AO arrives late with finals
The delay was a consequence of disruption caused by the COVID-19 pandemic on the audit processes.
In most other respects, however, the pandemic has been good to the online electricals retailer.
”Electrical retailer AO.com saw business soar during the pandemic as consumers poured money into IT and white goods for working from home setups. AO.com’s established digital platform was well placed to profit from the dramatic shift to online purchases during the pandemic, and 2 million new customers signed up,” noted Susannah Street at Hargreaves Lansdown.
Streeter is expecting to see evidence that the rapid growth trajectory is tailing off, but the company still expects double-digit percentage growth for the year ahead.’
“Group revenue for the first nine months surged by 66% and although there are some concerns purchases may simply have been brought forward, there were initial signs the company was plugged into continued momentum during the fourth quarter. What has also been encouraging is that the German business also turned profitable during the year. With bricks and mortar retailers now open, there will be a return to more traditional electrical retailers so we are likely to see evidence that the pace of new business is slowing; however, the buoyant property market could continue to be a driver for sales, with people moving house keen to buy brand new white goods. Working from home is also expected to linger for the long term, so there are likely to be fresh upgrades needed of workers IT systems which could also help benefit the company,” Streeter said.
Focus on Micro Focus divisions
FTSE 100 legacy software specialist Micro Focus PLC (LON:MCRO) is due to report interim results on Thursday 1 July, following a trading update in May where it reported a better-than-expected decline in sales of 5% with licences growing 10% year on year.
Underlying earnings (EBITDA) were said to be roughly US$500mln on revenues “in-line with current revenue consensus”, around 5% on a reported basis.
The focus in these results is going to be on the divisional performance and in particular if Security and Information Management have seen any improving trends, said analysts at UBS, and perhaps a more definitive outlook.
“With maintenance down 8% there are still challenges, with likely investor concerns greatest around ITOM [IT operations management].”
Significant announcements for Thursday July 1:
Economic data: UK manufacturing PMI, US jobless claims, US manufacturing PMI