The coming week will see updates from both ends of the fashion sector with trading updates expected from both ASOS and Burberry.
Meanwhile, the macro calendar will be dominated by UK employment data and inflation figures, while the US will also be delivering inflation data alongside retail sales numbers.
EMIS logs in with update
A half-year trading statement from patient record software firm EMIS Group plc (LON:EMIS) on Tuesday is likely to see the firm holding up well during the pandemic, however, shareholders will be hoping the firm can operate easier going forward as pressure eases on the NHS.
There will also be interest in how the firm can capitalise on its recent product developments and the rollout of its EMIS-X platform.
Investors may also be keeping an eye out for any details on how the group plans to spend the GBP50mln it has in the bank.
Barratt builds on favourable housing market
The update is expected to provide insight into completions, pricing, reservations and the order book, as well as the land bank and net cash position.
“Analysts and shareholders will doubtless be looking for upbeat commentary, especially given ongoing Government support for the market, via Help-to-Buy and 95% loan-to-value mortgage guarantees, the ongoing shortage of supply relative to demand and an apparent shift toward bigger housing, as those who can afford to do so look for properties that are better suited to working from home,” observed AJ Bell’s Russ Mould.
“Barratt continues to generate copious amounts of cash and return much of it to shareholders (perhaps raising questions about whether Government programmes for housing are swiftly passing straight through to financial investors),” Mould suggested.
Others would say there is no “perhaps” about the transfer of taxpayers’ money to the bottom line of housebuilders.
The stamp duty holiday boost is soon to be withdrawn but “Help to Buy” is still with us, doing the opposite of what it is meant to do by driving up property prices, and the only fly in the ointment seems to be rising raw material prices.
ASOS takes to the catwalk
However, the fast fashion firm warned that the tailwind it experienced during lockdown could slow as the relaxation of restrictions opens up high streets again, leaving customers less dependent on its online offering.
While few details are expected on profits, sales trends will be eyed closely in North America as well as the performance of the firm’s core UK market.
However, while lockdown may revive competition, the return of parties and social events could offset any declines.
Also in focus will be any details on the company’s profit outlook for the full year.
Experian eyed for US recovery news
Credit data firm Experian PLC’s (LON:EXPN) trading update on Thursday will be eyed for any information on how the US economic recovery is progressing.
The expectation is that the firm’s consumer division will be the key driver of top-line growth, however, any comments on which areas of the US are holding up best will be taken in context with how the pandemic is spreading in different parts of the country.
Severn Trent washes up with trading update
Severn Trent PLC (LON:SVT) is in the diary with a trading statement on what looks like a fairly busy Thursday.
We last heard from the water company in May when it reported results and much of the sector announced investments under the government’s Green Recovery programme, with the FTSE 100 utility tapping shareholders for GBP250mln to help fund its six projects.
SVT’s results for the year to end-March 2021 showed a 17% fall in underlying profits due to new tariffs, the net impact of the pandemic on consumption and investment in its services.
Lower water demand from businesses was partially offset by an increase in demand from households last year, resulting in a GBP50mln reduction in revenue.
This should be recoverable in the future, said analysts at Hargreaves Lansdown, with trends moving back towards normal with the reopening of the economy and management’s comments in this update expected to help investor understanding.
For its sustainability credentials, SVT may hopefully also explain why the scale of the water industry illegally discharging sewage is so bad and what plans there are to improve it.
A recent study found water companies’ illegal sewage discharges were 10 times worse than the Environment Agency (EA) estimates, with the growing outcry over sewage discharges into rivers leading to the EA publishing full details of the scale of the problem earlier this year.
Burberry eyed for successor news
Burberry Group PLC (LON:BRBY) will give a fiscal first-quarter trading update on Friday, with many investors still reeling from the news that Marco Gobbetti is to quit as chief executive officer at the end of 2021.
The announcement was made at the end of June and a search for a successor is underway but it is way too soon for any news on that front.
In the final quarter of the previous fiscal year, the luxury fashion firm’s stores posted a 5% fall in like-for-like sales compared to the corresponding quarter of 2019, i.e. pre-pandemic.
The recovery seems to be strongest in mainland China, Korea and the US, Burberry said.
Its name is Rio and it dances on ancient artefacts
Talking of environmental, social and governance (ESG) issues, Rio Tinto PLC (LON:RIO), destroyer of 46,000-year-old Aboriginal sites and thrower of 18,000-year-old artefacts in rubbish heaps, has a trading statement on Friday.
The company, which among a host of board changes in recent months has appointed a former regional aboriginal affairs minister a non-executive director, has faced calls for a “reckoning with the past” in reference to unnamed “past actions” referenced by another director recently – and with environmental activists getting eye-opening results at oil giants like Shell and Exxon, it surely won’t be long before their crosswires swing over to the major miners.
Many investors will, however, be more focused on potential windfalls from Rio and its peers, with UBS recently forecasting a return of about US$26bn from the FTSE 100 mining giants to shareholders this summer.
In terms of operations, UBS predicted that Rio Tinto’s shipments will drop about 12% and for the full year is “at risk of falling short of the mid-point” after a weak second quarter.
Hays eyes jobs market rebound
Page’s second-quarter gross profits were up 2% on the same quarter of 2019 and the company hiked its full-year profit forecast by 25 – 30%, which bodes well for Hays Group PLC (LON:HAS), which reports on Thursday.
In April’s fiscal third-quarter update, Hays revealed like-for-like net fees were down 10% year-on-year, with fees for permanent placements down 13% while those for temps were off by 7%.
The UK & Ireland – down 14% – was the worst-performing region while Germany, down 5%, was the relative bright spot.
US and UK inflation numbers in the coming week will draw interest from financial folk, with stateside figures on Tuesday after the consumer price index hit 5% last time.
On Wednesday it will be the UK’s turn, following a CPI mark of 2.1% last time, which was the first time the figure had come in above the Bank of England‘s 2% target since November 2018.
Both the US Federal Reserve and the Bank of England both describe the spikes in inflation as ‘transitory’, seeing rising prices being caused by pent-up demand amid lockdowns reopening and hitches in supply chains.
But, noted analysts at AJ Bell, central banks in Brazil, Mexico and Russia are already raising interest rates and citing inflation as the reason why – “they clearly think it may not be temporary”.
While investors may be getting a bit fed up with the topic of inflation, the AJ Bell analysts said it “beggars belief how anyone can see the forecast of two, one-quarter-point rates hikes by the end of 2023, up from an all-time low of 0.25%, as ‘hawkish’.”
As they noted, if inflation goes up, economic theory suggests interest rates and bond yields should follow, resulting in bond prices slipping and sending investors towards commodities and other ‘real assets’ such as property, and the companies involved in these sectors, sometimes utilities too.
In summary, said the AJ Bell team, “if inflation goes up and stays up, therefore everything that has worked from an investment perspective for the last 40 years – bonds, secular growth stocks and paper assets – may stop working. What has been out of favour for 40 years – real assets, value and cyclical stocks, even gold – may come back into their own.”
Significant announcements expected for week ending 16 July:
Monday July 12:
Trading announcements: Dechra Pharmaceuticals PLC (LON:DPH)
Economic data: US inflation expectations
Tuesday July 13:
Economic data: US inflation
Wednesday July 14:
Economic data: UK inflation, US PPI
Thursday July 15:
Trading announcements: ASOS PLC (LON:ASC), Experian PLC (LON:EXPN), Hays PLC (LON:HAS), Severn Trent PLC (LON:SVT), Costain Group PLC (LON:COST), Galliford Try Holdings Plc (LON:GFRD), Johnson Service Group plc (LON:JSG)
FTSE 100 ex-dividends: None
Economic data: UK unemployment, UK earnings, US jobless claims
Friday July 16:
Economic data: US retail sales