Boohoo to take spotlight in coming week alongside Greggs, Ferguson and Reach as macro focus turns to US payroll data
The coming week will see several prominent names on the corporate calendar, including bakery chain Greggs, online fashion giant and AIM behemoth Boohoo and blue-chip plumbing and heating group Ferguson.
On the macro front, most of the attention will be on Fridays US non-farm payroll data, although UK and US GDP data on Wednesday as well as a smattering of PMIs across the week are also likely to draw scrutiny from the market.
Reach looks to turn a page
The owner of the Daily Mirror and the Daily Express, Reach PLC (LON:RCH), is due to deliver interim results on Monday, covering something of a difficult period for the media sector.
Investors were given a preview of what was to come in a trading update in early July, where the company reported that revenues in its second quarter had fallen 27.5% year-on-year due to declines in circulation and ad spending, although it highlighted that trends had “slightly improved” in June with revenue falling only 23.9% in the month compared to 30.5% in April.
Print media declined by 29.5% in the period while digital revenues were down 14.8%. Reach added that circulation remained “significant below pre-[coronavirus] levels” and that local advertising was “continuing to be challenging”.
With this in mind, investors will likely be focusing on the outlook for the rest of the year and whether the group foresees any impact on its bottom line on the new coronavirus restrictions, which could cut into the cash balances of some advertising groups and thus lead them to turn off the taps for marketing spending.
Another area of interest will be the firms cost saving plans, which it expects to deliver £35mln in annualised savings with an estimated one-off cost of £20mln.
The planned changes include the loss of around 550 people, 12% of the companys workforce, while Reach also said it will invest in improving its digital customer experience across its brands.
Greggs to serve up trading update
Bakery chain Greggs PLC (LON:GRG) will deliver a trading update on Tuesday as the firm joins a number of firms looking to adjust to the new reality that has led to the effective demise of commuters and office workers, a key part of its customer base, who often grab a quick pasty or sausage rolls in between work and home.
This hole in its existing business means the firm will likely have to step up is marketing efforts, however recent initiatives such as offering 10,000 free sausage rolls to university students have shown that the group may still have some advertising tricks up its sleeve.
While the company had something of an ugly first half, swinging to a £62.2mln operating loss from a £39.9mln profit last year due to its outlets being closed for most of the period due to the UKs lockdown, its sales rebounded strongly following its reopening in July which could bode well for the numbers in this coming update for the third quarter.
However, the latest restrictions once again encouraging people to work from home could put a brake on this recovery, and investors are therefore likely to look for any news on how the firm will handle what is shaping up to be a difficult winter.
One saving grace could be the digital front, where Greggs has begun to roll out a click and collect service while deliveries of its products can also be ordered on the Just Eat app in multiple cities.
With the group needed at least 80% of 2019s sales to break even, shareholders will want to see fast action otherwise their enthusiasm for the stock could cool quickly.
Hotel Chocolat in for a sweet set of finals
Hotel Chocolat Group PLC (LON:HOTC) is releasing its finals on Tuesday, which shouldnt come as a surprise considering the guidance issued in July.
The chocolatier expected revenue to rise 3% to £136mln in the year to June 28 despite the widespread closures.
While the firm benefitted from its digital sales and the subscriptions and recurring purchases, investors will wonder if the positive momentum is set to carry through the winter.
The market is also curious to know how operations in the US and Japan are doing and if they have been impacted further by the pandemic.
Boohoos on the catwalk again
Boohoo Group PLCs (LON:BOO) interims on Wednesday come just days after the fast fashion giant vowed to address the governance issues raised by an independent review.
After its online-only business model proved defensive during lockdown, shares took a hit in July from concerns over hits environmental, social and governance (ESG) practices, amid allegations over the use of sweated labour.
AJ Bell noted the questions raised by the allegations of poor pay and working conditions return to the core question of how Boohoo can make gross margins of 54% and operating margins of 8.7% (on an underlying basis) when its average selling prices are so competitive.
Investors will be interested in any further updates on that as well as sales growth in the second quarter after that 45% surge in the first quarter, to see whether the bad press deterred customers.
The market is also looking for trends in gross margin, which came to 54% in the fiscal year to February 2020, a slight drop on the year before, as well as trends in the adjusted operating margin, which fell very marginally to 8.7% in the year to February 2020.
Shareholders will also want to hear on plans for the AIM giants latest acquisitions, Oasis and Warehouse, and how they sit between the higher-end Karen Millen and Coast brands and the more fashion-forward boohoo, PLT and NastyGal.
Is Compass bracing for the winter?
Compass Group PLC (LON:CPG) is releasing a trading update on Wednesday which could bring the tone down again following renewed restrictions around the world.
The caterer had reopened 60% of its business by the end of June, from 55% in May, with sales down 44% in the third quarter.
Investors are wondering whether the FTSE 100 foodservice business can get back to prior peak sales and margins and whether future growth rates resemble prior 4-6% per annum.
Barclays believes this is possible, thanks to costs and contracts sufficiently flexible to recover margins even if volumes remain permanently impaired as well as the potential to gain share from smaller and weaker competitors.
In the short-term, the stock remains subject to COVID-19 fluctuations and a potential tough winter ahead.
Ferguson eyed for return of dividend
Plumbing and heating specialist Ferguson PLC (LON:FERG) is set to deliver its final results on Thursday, with some analysts expecting the firm to re-join the list of dividend-paying FTSE 100 firms with a second half payout after cancelling its interim divi in April.
The expectation is that the payment will match last years figure of around 112p per share, making Ferguson the tenth blue-chip firm to resume payments following the volatility caused by the initial stages of the coronavirus pandemic earlier this year.
Shareholders are also likely to be on the lookout for any news on the plan for the firm to demerge its UK operation, leaving it solely focused on its North American businesses in the US and Canada, as well as its proposed secondary listing of shares on the US markets.
“The firm already reports in dollars, CEO Kevin Murphy and his team are already based Stateside and the comparable peer group in America trade at higher valuations than their British counterparts, so the theory is that this would give Fergusons valuation and share price a potential boost”, said AJ Bell investment director Russ Mould.
The planned shift to the US, from which the group derives around 90% of revenues, also seems to have supported the shares following their initial slide, with the stock now back to around their all-time peak following a plunge in late February.
Halma to see record profits run coming to an end
Sensor and control manufacturer Halma PLC (LON:HLMA) will report its first half results on Wednesday, which could show some revenue resilience, although the profit trend remains lower.
On September 23 – when the group revealed that its chairman, Paul Walker, will step down from the board by next July after eight years in the role – Halma said its negative revenue trends have improved in the past few months.
Having already reported a 13% decline in sales in the first quarter, the manufacturer of lift door sensors, medical instruments and other banal but important devices said “revenue trends have gradually improved” since.
The FTSE 100-listed delivered a 17th consecutive year of record profits in the full-year to the end of March, 2020, with organic sales up some 5%, but the coronavirus pandemic looks to be bringing that run to an end.
Nicholas Hyett, equity analyst, Hargreaves Lansdown noted: “While coronavirus has inevitably had a knock-on effect since sales only dipped 4% in the first quarter of the new financial year. If that was replicated at the half year that would be a pretty impressive result all things considered.
“Nonetheless the group expects a 5-10% fall in profits in 2021 – not that you'd know its record breaking run is set to come to an end from the share price. At 40.2 times earnings, the PE ratio is close to the highest its ever been.
“That's a real health warning in the current market, and makes putting together a positive investment case for the business a challenge – despite its exceptionally high quality. We think Halma will struggle to change that assessment”.
US jobs data will be main macro focus
As it will be the start of a new month in the coming week, all the data release schedules will be reset, led as always by the latest global purchasing managers indexes, and then on the first FriRead More – Source