Water and jeans to dominate coming week with United Utilities & Pennon, boohoo & Next on the calenda

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The coming week will feature industries for all tastes, with United Utilities and Pennon catering to the fans of water suppliers and boohoo and Next updating fashion fans.


Among other big names we have transport group Go-Ahead, sandwiches-on-the-go seller SSP and boozer Wetherspoons.


Macro matters


As we move into October at the end of next week, the new page in the calendar brings the usual bumper load of macroeconomic data.


This will include some important political events to watch for investors too, including the German election on Sunday, a new Japanese prime minister, a US government funding deadline, possible progress on the bipartisan infrastructure bill, plus Boris Johnson’s government have various issues it needs to fix, including wobbling energy market and lorry driver shortage.


“Meanwhile from central banks, we’ve got an array of speakers, including Fed Chair Powell and ECB President Lagarde, so it’ll be interesting to hear what they say as a number of central banks have recently tilted in a more hawkish direction given inflationary pressures,” said analysts at Deutsche Bank (NYSE:DB).


In terms of raw data, US durable goods on Monday; US consumer confidence on Tuesday; UK and US housing figures on Wednesday; a busy Thursday of Chinese official PMIs, UK GDP, EU unemployment and inflation, US jobless claims and PCE inflation (key for the Federal Reserve); with the first day of the new month on Friday bringing manufacturing PMI data for China, Europe, UK and US.


Looking at Friday’s key US PCE deflator, analysts at ING say: “Despite unemployment benefits being scaled back and the ending of stimulus cheques we still expect incomes to grow. This is because the strengthening economy is leading to employment gains and rising wages.


“This is a really important story that should lift consumer spending after the Covid resurgence speedbump that the economy appears to have hit in 3Q 2022. Inflation will remain elevated with upside risks to our forecast more likely than downside.”


It being the last week of the month, there are likely to be some portfolio rebalancing flows, with portfolio managers selling stock markets that have done well and buying those that have done poorly in order to keep their asset allocation unchanged.


This could result in the purchasing of Japanese yen and Aussie dollar, says analyst Marshall Gittler at BDSwiss.


It’s in the water


A different kind of UK utility is in the diary this week, albeit the gas and electric firms will no doubt remain in the headlines too for quite some time amidst the ‘energy crisis and consumer turmoil’.


United Utilities Plc kicks off the week, and the point of focus will be quite simple and practically singular – especially, as other income-investing stalwarts in the sector are evidently besieged by volatility.


“There’ll be one thing on investors’ minds when United Utilities offers a trading update – the dividend,” Hargreaves Lansdown analyst Laura Hoy said in a note. “One of the reasons people hold utilities is because their more reliable revenue streams can translate into healthier dividends, and a prospective yield of 4.3%, is a big part of United’s investment case. “


“But remember no dividend is guaranteed. This is especially true at the moment because United’s hit a few bumps recently. Regulatory changes resulted in lower chargeable price, which hit revenues last year, but Ofwat’s recent decision to allow utilities to up their prices could reverse some of that damage.


“We’re expecting management to offer an update on how this change might impact the group’s forecast for this year.”


Hoy at the same time didn’t rule out better-than-expected revenue, which she said would be a “welcome tailwind” and said bolstered profits could possibly trigger a larger than anticipated dividend hike this year.


Elsewhere, at Pennon Group PLC (LSE:PNN, OTC:PEGRY) – which reports on Tuesday – there are some in City that reckon the share may have become expensive and in turn that the bar of expectations is set high.


Last month, Credit Suisse (NYSE:CS.) analysts in London questioned whether it was time to sell Pennon shares as it switch its rating to ‘underperform’.


Credit Suisse (NYSE:CS.) essentially suggested the stock has been ‘overbought’ and said it is expensive compared with both the sector and the FTSE 100, pointing out that it trades at a 43% premium to the regulated asset base (RAB), which it said is “at extremes” for the industry. At the same the Swiss Bank’s analysts note that the dividend yield of 3% was at “historic lows”.


‘Congratulations’ or ‘Get Well Soon’ for Moonpig


Investors in Moonpig Group PLC (LSE:MOON) will hope the online greetings card specialist will come up with a better message in Tuesday’s update after a lukewarm outlook missive in the summer.


Back in July the London market newcomer forecast lower revenue for the current financial year of GBP250-260mln compared to GBP368mln last time as pre-pandemic consumer patterns return.


While the new financial year had started “moderately ahead of expectations”, customer purchase frequency was expected to slow down until it stalls at 5% ahead of pre-pandemic levels.


However, the online card and gift shop said it will continue scaling its business as it was buoyed by customer retention levels during the past year remaining consistent with historical patterns.


With shoppers no longer confined to home, hanging onto newly acquired customers is likely to be a costly business, said analyst Susannah Streeter at Hargreaves Lansdown.


But having now acquired a huge data set on customer choices and preferences, alongside its flexible delivery options, this “should help it stay ahead of the herd”, Streeter says, though “big chunks” of future profits are likely to be dedicated to trying to gobble up an even bigger share of the card market in the UK and the Netherlands.


Thank u, Next


Next plc is dropping a trading announcement mid-week, where investors will be seeking reassurance on dividend payment plans.


Alongside that second-quarter trading statement, Next announced a plan to return GBP240mln of “excess cash” to shareholders.


It paid out GBP140mln on 3 September and said it would pay out the rest, amounting to GBP100mln, following the Christmas trading update in January 2022, assuming all was going to plan.


The FTSE 100 retail powerhouse also noted that it would then look to resume ordinary dividend payments in the year to January 2023, when analysts and shareholders may also ponder the resumption of share buybacks as well.


Analysts and shareholders will also look out for Lord Wolfson’s take on pressing strategic and macroeconomic issues, notably the value of High Street stores, the ongoing addition of third-party brands to the website and issues surrounding input costs, the availability of raw materials and freight capacity and pricing.


“It should be particularly informative to hear Next’s views on pricing, given how the firm benchmarks itself on the basis of full-price sales,” analysts at AJ Bell said.


SSP: Seeing Some Progress?


Wednesday’s year-end numbers from SSP Group plc (LSE:SSPG) comes with the travel sector lately flying into brighter skies after the Biden administration re-opened the gates on flights into the US.


SSP, which operates food concessions in 180 airports as well as railway stations, was among those lifted by the news, having said it will start to reopen units when they can make a positive contribution to underlying profits.


In the previous quarter, the company reported a 73% decline in sales versus 2019, with flights down 41% globally and UK rail passenger volumes were down 57%.


With 1,150 out of 2,750 units open at the end of May, with 1,200-1,500 expected to be open in 4Q, management guided to fourth-quarter sales being down 60%.


Analysts at Peel Hunt said should be doable given that global flight numbers were down 32% and UK rail passenger numbers were down 43%.


“We estimate having about half the estate open would be consistent with total revenues being down 60%.”


Peel analysts do not expect 2022 to be upgraded at this stage, given the trend in business travel and the risk of new Covid variants to international travel, though they predict in future that SSP “should benefit from enhanced expansion opportunities and the long-term retention of recent cost savings”.


boohoo’s supply chain still star of the show


boohoo Group plc is releasing its interims on Thursday but figures continue to be overshadowed by concerns over its ongoing supply chain review, so the market will be keen to hear updates on how that’s going.


Of course, numbers are still important, and investors are expecting a lot from the AIM-listed fast-fashion retailer.


“‘Good’ isn’t good enough for the clothing retailer. With that in mind, there’s pressure for the group to remain on track for its medium-term goal of 25% revenue growth,” analysts at Hargreaves Lansdown commented.


“On a wider scale, we wonder if boohoo has any plans to strengthen its sustainability credentials. Fellow fast fashion names ASOS and Primark have recently committed to upping their use of sustainable materials. Any specific goals or comments around this, and what that means for margins, would be read with great interest.”


Go-Ahead results finally going ahead


Go-Ahead Group plc’s annual results, due Thursday, were delayed by discussions with the government over the final knockings of its Southeastern rail franchise.


Recovery from Covid would have been the theme up until a week ago. In June, the group reported bus passengers were around 65-70% of pre-covid levels, though in rail the end of franchises means Southeastern and GTR (Thameslink) now operate on a fee basis.


The planned merger between National Express and Stagecoach, has, however, raised the prospect of more combinations being formed.


Go-Ahead along with NEX and Stagecoach is one of five big bus/rail operators and analysts are asking if that many are needed now that the government sets the price and the emphasis is on cutting costs.


Peel Hunt predicts underlying profits of GBP69mln and sales of GBP3.68bn for the year to end June 2021, but is ruling out a return to dividends due to political sensitivity.


Spoons on Friday


JD Wetherspoon (LSE:JDW) plc’s results for the year to July should be another update on the Covid-recovery theme.


Consensus is for turnover in the year to July 2021 of around GBP799mln and a loss of GBP129mln, but the market’s attention will be focused on the FTSE 250 group comments about the pace of recovery.


Rival pub chains have been reporting sales are back to 90% of pre-pandemic levels and ‘Spoons too should have seen customers steadily return say analysts.


What chairman Tim Martin says about the UK’s recent shortage crisis will also be closely watched.


Wetherspoons hit the headlines recently after its pubs temporarily ran out of some Carling and Coors beers due to the UK lorry driver shortage and industrial action at its supplier.


Brokers suggest staff shortages and rising purchasing, distribution and energy costs will be more pressing ongoing issues for the group and might result in its famously low prices having to go up.


Significant announcements expected for the week ending 1 October:


Monday 27 September:


Trading announcements: United Utilities plc


Economic data: US durable goods


Tuesday 28 September:


Finals: Close Brothers plc, Ferguson PLC (LSE:FERG), Smiths Group (LSE:SMIN) plc


Interims: AG Barr (LSE:BAG) plc, Mortgage Advice Bureau plc, Next 15 plc, S&U PLC (LSE:SUS, FRA:97V)


Trading announcements: Moonpig plc, Pennon Group PLC (LSE:PNN, OTC:PEGRY)


Economic data: UK 30-year treasury gilt auction, US trade, US consumer confidence


Wednesday 29 September:


Interims: Next plc


Trading announcements: SSP PLC


Economic data: UK mortgage lending/approvals


Thursday 30 September:


Finals: Go-Ahead Group PLC, Renishaw PLC (LSE:RSW)


Interims: boohoo Group plc, OptiBiotix Health PLC (AIM:OPTI, FRA:OB3)


FTSE 100 ex-dividends to knock 5.55 points off the index: British American Tobacco PLC (LSE:BATS), Smith & Nephew PLC (LSE:SN), Rightmove PLC (LSE:RMV), Barratt Developments plc


Economic data: UK GDP growth rate, Nationwide housing prices, car production, US jobless claims


Friday 1 October:


Finals: J D Wetherspoon plc


Economic data: UK manufacturing PMI, US personal income/spending

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