In the coming week, the volume of company news in the diary will be much reduced but there are still a number of companies reporting that are well followed by investors, including Costain, CRH, Hays and John Wood Group.
In the macroeconomic diary, the Jackson Hole central bank symposium dominates the schedule, with potential to create volatility in the financial markets, some analysts think.
John Wood Group PLC last year swung to a pre-tax loss as the pandemic hit the global engineering and consultancy market and oil prices were volatile.
But a half year update has already revealed that interim results on Tuesday will show the profit pendulum back in the black, on an underlying basis at least.
Although revenue is down 21% to around US$3.2bn, momentum was said to be improving in the second quarter, so more detail may be provided on how the first six months of the third quarter are going.
Adjusted profits (EBITDA) will be $255-265mln, the company said, with an operating profit before exceptionals of $85-95mln as around US$20m of “efficiencies” were delivered in the half.
Chief executive Robin Watson said margin improvement had been “strong” compared to a year ago, with a greater weighting of high margin consulting activity and margin improvement across all business units.
He said the full-year outlook was unchanged with confidence of a return to growth in the second half taken from trading momentum and 6% growth in the order book.
Costain’s devil in the detail
The last time we heard from Costain PLC, Costain, the infrastructure company, it was trading profitably with good cash generation.
That brief update was back in the middle of last month, so it’s unlikely a lot will have changed though there will be a lot more flesh on the bones.
When it reports interims on Wednesday, analysts will be looking at the size of the order book, which had slipped slightly to GBP4bn at the end of June, down from GBP4.2bn a year earlier. Of that GBP4bn, around GBP1.2bn was secured for 2021.
Another focus, reckons broker Peel Hunt, will be the Peterborough & Huntingdon (P&H) contract, amid an ongoing legal tussle with National Grid (LSE:NG.), with Costain recording a GBP49.3mln charge to the income statement in its interim results a year ago and believing it “has a strong entitlement” to suffer no further cash outflow.
Construction view with CRH
Back in April the FTSE 100 group said first half underlying profits would be “well ahead” of the previous year, as demand generally is returning and prices are rising.
First quarter like-for-like sales increased 3% year-on-year as a strong performance in building products was partly offset by weather disruption in materials businesses in North America and Europe.
Management, who have shelled out $200m so far on acquisitions in 2021, said they anticipated “further normalisation in our markets in the second half of the year as the health situation continues to improve”.
“The first half tends to be slower than the second at CRH, so guidance for the current trading period and beyond is also of keen interest,” said analyst Nicholas Hyett at Hargreaves Lansdown.
With the US$1trn infrastructure spending bill agreed in Washington, investors will want to hear what sort of tailwind is expected for future sales.
Also on Thursday, final results from recruiter Hays PLC (LSE:HAS) should prove a wider global indicator, as it reports its business in four regions: the UK & Ireland, Germany, Australia & New Zealand, and the rest of the world.
Hiring companies tend to follow the ups and downs of the wider economy, so results are useful even for those who don’t invest.
The FTSE 250 group reported a 39% increase in net fees in the fourth quarter as it rides the tailwind of the global recovery – though there are plenty of lumps and bumps in most regions.
“The particularly strong growth in permanent employment placements bodes well for the strength of the recovery,” says Hyett.
He says investor attention will be firmly on the cost line, where the group took steps to cut costs by 13% during the pandemic.
“Traditionally recruitment is a bit of a body shop. Winning new contracts requires hiring and training new recruiters, and consultants are paid in commission, which makes delivering improvements in margin difficult as a result.”
A lot of stock market movement in recent months has been triggered by the effects of investors reacting to potential policy tightening by major central banks around the world.
From next Thursday, the US Federal Reserve will host counterparts from around the world at the Jackson Hole symposium.
It is one of the most eagerly-anticipated events on the macroeconomic calendar, says Fawad Razaqzada, market analyst at ThinkMarkets, and “could provide some volatility in the markets as the Fed is seen spilling the beans on tapering timeline”.
We also have a handful of other important macro data during the week, not least the global manufacturing and services purchasing managers’ index (PMIs) reports on Monday.
“Some investors will view [Jackson Hole] as nothing more than a sounding post for prolix windbags who seem to think that centrally planning economies is a good idea – despite there being plentiful evidence to the contrary,” said analysts at AJ Bell.
“Others will hang on every word, in the belief that central banks’ policies are the key tool available when it comes to keeping the global economic show on the road – and financial markets too, for that matter – even once the pandemic is beaten back.”
As for the PMI data, the manufacturing numbers could trigger further volatility, reckons Razaqzada.
“Sentiment will be shaky after the recent sell-off in some key commodity prices such as crude oil and copper that was triggered, at least in part, by anxiety about the economic impact of the coronavirus spread and global supply chains.”
Other data includes US durable goods orders on Wednesday, US GDP and jobless claims on Thursday
Significant announcements expected for week ending 27 August:
Monday 23 August:
Economic data: UK flash manufacturing/services PMIs, US flash manufacturing/services PMIs
Tuesday 24 August:
Wednesday 25 August:
Economic data: US crude oil inventories
Thursday 26 August:
Finals: Hays PLC
FTSE 100 ex-dividends to knock 5.78 points off the index: Auto Trader Group PLC (LSE:AUTO), Land Securities (LSE:LAND) Group plc, St. James’s Place plc, Diageo PLC (LSE:DGE), Mondi PLC (LSE:MNDI), Aviva plc
Economic data: US initial jobless claims, US GDP growth rate, UK car production
Friday 27 August:
Economic data: US personal income/ spending