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Carney & Co in the crosshairs, plus key UK data and updates from Next, Morrisons and Wetherspoon

Last updated: 15:00 11 Sep 2017 AEST, First published: 21:57 08 Sep 2017 AEST

Mark Carney

Mark Carney & Co will again take centre stage this week as the Bank of England’s Monetary Policy Committee (MPC) gathers for its latest meeting on Thursday, with a raft of key UK economic data also due ahead of then to provide some spice.

Hargreaves Lansdown commentator George Salmon thinks that any hike in UK interest rates by the MPC would be a surprise, as the BoE knows that a subsequent rapid increase would have significant consequences for individuals, businesses and the stock market as a whole.

Salmon pointed out: “The bank has repeatedly disappointed expectations of a rate rise and we don’t see one anytime soon.”

In August, two members of the MPC, Ian McCafferty and Michael Saunders, voted for interest rates to be increased.

But since then, the news on the UK economy has been largely negative, inflation appears to be close to peaking and the MPC minutes – also published on Thursday - are likely to show it is more likely to see less members voting for a hike than more.

Data mining

The latest UK inflation numbers will be released by the Office for National Statistics for Tuesday, and after having surprised by holding steady at 2.6% in July, with prices falling month-on-month by 0.1%, economists believe is a good chance that the consumer price index will have increased a little in August.

Graham Spooner, Investment Research Analyst at The Share Centre thinks it is clear that the falls in sterling after the Brexit vote are not having the inflationary effect that many economists expected.

However, he pointed out, sterling has fallen again since the June UK general election and that may lead to a bigger rise in inflation next year. 

Meanwhile, although UK unemployment now sits at a 42-year low, UK average earnings rose by just 2.1% in the three months to June, much less than inflation, meaning that real wages fell. 

Spooner expects real wages to have probably fallen again in July, when the latest UK labour market data is reported on Wednesday, maybe by an even bigger margin than in June.

The week’s other interesting UK data will come on Thursday morning – with the BoE decision due at midday then – and could show a further gain in retail sales, which rose by an impressive 0.3% month-on-month in July, but by only 1.3% year-on-year.

Data from the British Retail Consortium for August was encouraging, with annual sales growth rising to 1.3% from 0.9% the month before, so the ONS data could reflect this.

Retail round-up

Conditions on the high street will also be key for the week’s main corporate news this week, with Next Plc (LON:NXT), Primark owner Associated British Foods plc  (LON:ABF), food retailer Wm. Morrison Supermarkets PLC (LON:MRW), and pubs operator JD Wetherspoon PLC (LON:JDW)  all due to update the markets

Fashion retailer Next has pre-warned investors that its first half results on Thursday will show a sales decline as consumers become increasingly squeezed by falling disposable incomes.

In a trading update last month, Next said total sales in the first half fell 2.3% after a weak first quarter offset a return to growth in the second quarter.

The company had said that although second quarter sales edged up 0.7% in the second quarter, this was mainly due to warmer weather attracting customers to its summer collection. Next also remained cautious on the outlook, saying it sees another drop in second half sales.

Retailers have come under pressure as consumers have been spending less on non-essential items such as clothing due to rising inflation and weak wage growth.

“Combined with the currency headwinds facing the group, even the uptick in second quarter trading is unlikely to prevent a meaningful decline in first half profitability,” said George Salmon, equity analyst at Hargreaves Lansdown.

However, Salmon noted that Next still expects significant excess cash this year, backed by the Directory business’ lucrative base of credit customers, and plans to return this to shareholders through four special quarterly dividends of 45p per share.

 “If half year results indicate that management are increasingly optimistic, the recent improvement in trading can be maintained, and the work undertaken to improve the Directory business is paying off this could raise hopes of further distributions.”

Primark key, as always, for AB Foods

Blue chip food to clothing retail conglomerate AB Foods issues its fourth quarter trading update on Monday, with conditions at high street discount fashion chain Primark, as always, the main focus.

In a preview, analysts at JPMorgan said they expect Primark to deliver fourth quarter like-for-like sales growth of +2%, which would take the chain’s full-year like-for-like increase to +1%.

Overall, they are forecasting Primark’s full-year  constant currency sales to grow by +13%, in line with the 9-month trend.

The analysts said: “We expect management to reiterate its full year expectation for ‘good growth’ in group adjusted operating profit & EPS and forecast +20% & +17% yoy, respectively “.

They said they also expect AB Food’s management to highlight some upside risk to Primark profitability if current euro strength is maintained.

And the analysts think recent currency moves should also be favourable for the firm’s British Sugar business, although they added that they are mindful that, given a decline in the world sugar price, it is possible this simply offsets some underlying downside risk to current sugar forecasts.

More from Morrisons

Recent price cuts and store refurbishments are expected to help William Morrison continue its recovery when it reports its interim results on Thursday.

Britain’s fourth largest supermarket has returned to growth in recent quarters under chief executive David Potts. It notched up its sixth consecutive quarter of underlying sales growth in the opening three months of the year and investors will be looking for that trend to have continued.

The industry remains intensely competitive though and Walmart-owned Asda has started to show signs of life again, so the market will be looking to see if any customers have defected.

Also of interest will be any more news on the deal to supply 1,600+ McColls convenience stores up and down the UK which it agreed last month and could add increase annual sales by around £1bn.

As for the numbers, analysts at Barclays are expecting the supermarket to grow first half sales by 5.4% to around £8.5bn, with underlying pre-tax profits pencilled to come in at £216mln (H1 2016: £157mln).

Wetherspoon won't worry

Tim Martin’s gripes with ‘Remoaners’ and supermarkets are well-known, but whatever issues he has with politics, his JD Wetherspoon pubs  business is expected to report a solid year when it publishes results on Friday.

In fact, the British pub chain lifted its full-year expectations not once but twice over summer, despite post-Brexit concerns that higher food and drink prices and stagnant wage growth could weigh on the pub industry.

Because of those updates we already know that like-for-like sales will grow by around 3-4% year-on-year, while margins are expected to improve to between 7.6% and 7.8% compared with 6.9% in 2016.

Martin has often cautioned that like-for-likes will have to grow by another 3-4% in the current financial year for Wetherspooon to maintain its profit levels, so investors will be interested to see how the business has fared so far in the opening couple of months.

It goes without saying that one eye should also be kept on Martin’s personal commentary which traditionally accompanies updates and results.

Trump infrastructure support for Ashtead

Away from the retail frenzy, equipment hire firm for Ashtead Group will deliver its first quarter numbers on Tuesday.

The FTSE 100-listed firm has been performing well in recent times, especially in the US, and with President Trump’s hoped for infrastructure boost and more general construction spending expected to remain strong, it should continue to benefit.

Ashtead’s fourth quarter results in June showed an 11% rise in rental revenue and the company said the spring had seen a good increase in fleet on rent, and a positive update from a US peer in July also provided a boost..

Further capital spending is expected in the new financial year so any update on that will also be of interest to the market as a signal of Ashtead’s confidence on future activity levels.

Housebulder Galliford shouldn’t be too trying

Galliford Try plc (LON:GFRD), which abandoned its plans to buy rival Bovis Homes Group PLC (LON:BVS) in April, has said it expects its full year results to meet the top end of analysts’ estimates. 

The housebuilders’ results for the year ended 30 June will be published on Wednesday with analysts’ expecting profit before tax of between £46mln and £59mln for the year ending June 30.

Revenue grew in its Linden Homes business, boosted by higher average prices of homes, Galliford said in a July trading update. However, its construction division’s cash position was reduced, reflecting £98mln non-recurring costs related to two large legacy contracts.

Liberum has said Galliford is one of its top picks in the sector and that it offers a “better upside for a recovery story” than Bovis Homes.

Earlier this year Bovis Homes rejected Galliford’s £1.2bn approach and instead poached its former boss Greg Fitzgerald to help turnaround the business, which has been hit by costs related to fixing build quality issues.

Galliford’s results follow a slew of earnings and trading updates from sector-peers Bovis Homes, Barratt Developments PLC (LON:BDEV), Berkeley Group Holdings PLC (LON:BKG) and Redrow plc (LON:RDW).

Significant events expected on:

Monday September 11:

Trading update: Associated British Foods plc (Q4) (LON:ABF)

Finals: Abcam PLC (LON:ABC), K3 Capital Group Plc (LON:K3C), 1pm (OPM)

Interims: Be Heard Group PLC (LON:BHRD), Cloudcall Group PLC (LON:CALL), Crossrider Plc (LON:CROS), Deltex Medical Group plc (LON:DEMG), EKF Diagnostics Holdings PLC (LON:EKF), John Laing Intrastructure Fund PLC (LON:JLIF), Luceco PLC (LON:LUCE), Pennant International PLC (LON:PEN), Restore Plc (LON:RST), XLMedia PLC (LON:XLM)

Tuesday September 12:

Finals: InnovaDerma PLC (LON:IDP); Murgitroyd Group PLC (LON:MUR), TyraTech Inc (LON:TYR), Vernalis plc (LON:VER)

Interims: Ashtead Group PLC (Q1) (LON:AHT), ADES International Hoding PLC (LON:ADES),  Flowtech Fluidpower PLC (LON: FLO), Goals Soccer Centres PLC (LON:GOAL), Hilton Food Group PLC (LON:HFG), Hydrogen Group PLC (LON:HYDG), IQE plc (LON:IQE), JD Sports Fashion PLC (LON:JD.), Manx Telecom PLC (LON:MANX), Midwich Group Plc (LON:MIDW), SafeCharge International Group Limited (LON:SCH), Servelec Group Plc (LON:SERV), Smart Metering Systems PLC (LON:SMS), STM Group Plc (LON:STM), Tasty Plc (LON:TAST), TP Group PLC (LON:TPG)

Economic data: UK CPI, RPI, PPI, HPI inflation

Wednesday September 13:

Finals: Dunelm Group PLC (LON:DNLM), Galliford Try plc (LON:GFRD),  Haynes Publishing Group PLC (LONLHYNS),  Town Centre Securities PLC (LON:TOWN), Wilmington PLC (LON:WILT)

Interims: Advanced Medical Solutions Group PLC (LON:AMS), Alliance Pharma plc (LON:APH), Columbus Energy Resources (LON:CERP), Epwin Group PLC (LON:EPWN), Eve Sleep Plc (LON:EVE), Gaming Realms PLC (LON:GMR), Ingenta PLC (LON:ING), Just Group PLC (LON:JUST), Soco International PLC (LON:SIA), SQS Software Quality Systems AG (LON:SQS), Sigmaroc PLC (LON:SRC), Ten Entertainment Group PLC (LON:TEG)

Economic data: UK unemployment, average earnings US forward PPI

Thursday September 14:

Bank of England monetary policy meeting

Trading update: Booker Group PLC (Q2) (LON:BOK), Safestore Holdings PLC (LON:SAFE)

Finals: Ricardo plc (LON:RCDO)

Interims: Corero Network Security PLC (LON:CNS),  Forbidden Technologies plc (LON:FBT), Gresham House Plc (LON:GHE),  GVC Holdings PLC (LON:GVC), Wm. Morrison Supermarkets PLC (LON:MRW),  Next Plc (LON:NXT), Ophir Energy Plc (LON:OPHR), Regional REIT Limited (LON:RGL), Property Franchise Group PLC (LON:TPFG), Spire Healthcare PLC (LON:SPI), Warpaint London plc (LON:W7L)

FTSE 100 ex-dividends:  None scheduled

Economic data: UK retail sales, US CPI, US weekly jobless

Friday September 15:

Finals: JD Wetherspoon PLC (LON:JDW)

Trading update: Investec PLC (LON:INVP), SThree PLC (LON:STHR)

Economic data: US retail sales, US industrial production, US Empire State manufacturing survey

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