The week ahead: Royal Mail, Marks and Spencer, Thomas Cook
15th May 2015 14:58
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Monday 18 May
Trading Statements
Future, Nord Gold, MITIE Group, Babcock International Group, Cranswick.
AGM/EGM
Panmure Gordon & Co, Fresnillo.
Tuesday 19 May
Economic news
Investec suspects Tuesday's inflation number will garner the most attention - it forecasts the first official negative inflation print since comparable records began in 1989.
"We always considered the likelihood of April's figures entering negative territory to be a close run thing. Our view is now that they will," says Investec's Philip Shaw, who has pencilled in a fall to -0.2%.
However, Shaw is at pains to stress that this is not technically deflation.
"Deflation properly defined is a persistent fall in the general level of prices, not a temporary decline below zero, triggered by sharp declines in energy and food costs. Indeed we suspect that May's figures will re-enter positive territory. As such the policy implications of sub-zero inflation next week should be limited."
Last month's Producer Price Index figures will also be revealed on Tuesday - Investec expect to see producer input prices increase month-to-month , reflecting a near 6% increase in oil prices over the month, alongside signs of firming soft commodity and industrial metal prices.
"Our forecast is for a 0.8% month-to-month rise, such that the annual decline in input price falls should ease off for the third consecutive month, to -11.5%, from -13.0% in March," says Investec analyst Victoria Clarke.
"On the output prices front, we expect a more static picture, with our forecast for a modestly positive month to month shift (+0.2%), leaving factory gate prices 1.6% lower year over year."
Trading Statements
Innovation Group (The), Renew Holdings, Topps Tiles, Victrex, Zytronic, Impax Asset Management, Paradigm Metals, Intelligent Energy Holdings, Premier Foods, AVEVA Group, Land Securities Group, Homeserve, Bloomsbury Publishing, Entertainment One Group, ICAP, Big Yellow Group, Vodafone Group.
AGM/EGM
Computacenter, Safecharge International Group, Rockhopper Exploration, Royal Dutch Shell (RDSA), Synectics, Regus, Crossrider, Cloudbuy, Stock Spirits Group, Somero Enterprises.
Wednesday 20 May
Nomura says we might get an indication of potential additional returns to shareholders when reports its full-year results midway through the week.
"M&S has indicated that, beyond dividend cover of c2x, it is targeting a net debt/EBITDA ratio of 2.0x-1.5x, implying potential for any excess cash to be returned on a regular basis," according to Nomura's Fraser Ramzan.
Following +0.7% food and general merchandise like-for-likes in Q4, Ramzan forecasts full-year profit before tax (PBT) of £657 million (+5% year-on-year), and a 3% increase in the final dividend to 11.1p.
With "substantial upside" relative to peers, the broker rates Marks a 'buy' and raises his target price to 600p.
Expect to report steady progress when the travel company publishes half-year results on Wednesday.
Broker Jefferies suggests that the more stable underlying trading seen in recent updates will be sustained. However, due to FX headwinds it has trimmed full-year operating profit estimates for Thomas Cook by 3% to £362 million - resulting in a 4% earnings per share (EPS) downgrade.
"We remain advocates of the (organic) restructuring story, with management focusing on cost out/cash flow, product quality and online distribution," says Jefferies, with a 'buy' rating and 185p target price.
Economic news
May's MPC minutes are set for release midweek, and with the latest Bank of England Inflation Report appearing to be comfortable with the current stance of policy, Investec suspect that both votes to keep policy on hold were unanimous.
Shaw notes that the post-election strength of sterling has resulted in the broker putting back its expectation of the timing of the first increase in interest rates to Q1 2016 from Q4 this year.
Trading Statements
Zoopla Property Group, Thomas Cook Group, Britvic, Patisserie Holdings, Burberry Group, Intermediate Capital Group, SSE, Pennon Group, Quantum Pharma, Marks & Spencer Group, Cable & Wireless Communications, Hogg Robinson Group, Great Portland Estates, Ricardo.
AGM/EGM
Revolymer, Bankers Petroleum, Polymetal International, UK Oil & Gas Investments, Vislink, AssetCo, Empresaria Group, Hiscox, 21st Century Technology.
Thursday 21 May
will release its full-year numbers on Thursday with broker Jefferies expecting the results to "re-focus attention on relatively weak underlying fundamentals, with stable underlying revenues and profitability, reflecting increasing parcel competition".
Taking into account a number of one-off factors, reported operating profit will be 16% lower at £562 million, says equity analyst David Kersten.
"Downside earnings risk has been reduced, after consensus estimates have come down by 30% over the last six months and are now in line with our estimates."
Kersten has an 'underperform' rating on the stock and bearish 360p target price.
Media conglomerate will publish interims on this day, following an encouraging pre-close IMS in March.
Westhouse Securities looks for an update on progress in driving the profitability of MailOnline, management’' view on currency (DMGT derives approximately a third of its annual revenues from North America), and the group's acquisition pipeline.
"We like the quality of DMGT's B2B portfolio and the improving prospects within its increasingly digitally-focused Media division. We forecast strong organic EPS and DPS [dividend per share] progress (aggregate growth of 44%/21% respectively over three years) and expect this to be supplemented by complementary acquisitions," says Westhouse's Roddy Davidson.
"As the group's valuation (17.0x / 11.4x FY2015E P/E and EV/ EBITDA ratios respectively, 2.4% yield) is now within 8% of our 960p target price (on a total return basis) we will use these results as an opportunity to review our Add recommendation."
Economic news
Investec's forecast for next week's retail sales figures from the ONS, which will be adjusted for the roaming timing of Easter, is for a 0.4% monthly rise (3.7% year on year) and a smaller 0.2% increase in the ex-fuel metric (3.5% year on year).
"From a position of exceptional buoyancy we could see some easing off in the pace of growth over coming months, but nothing remarkable," adds Clarke.
Trading Statements
Daily Mail & General Trust, SSP Group, Shaftesbury, Assura Group, Royal Mail, HICL Infrastructure, Investec, Lombard Risk Management, Young & Co's Brewery, United Utilities Group, Dairy Crest Group, National Grid, Inchcape, Amlin, Darty.
AGM/EGM
Bank of Georgia Holdings, Optimal Pay, Gamma Communications, Hydrogen Group, Acron Jsc, Evocutis, Harworth Estates Group, Vmoto Limited, Coats Group, Safestyle UK, Rotala.
Friday 22 May
Economic news
Public finances estimates for April will be disclosed at the end of the week.
Provisional estimates for 2014/15 show that government borrowing (PSNBX) was recorded at £87.3 billion, £2.8 billion below the forecast set out by the OBR at the Budget in March, according to Investec.
"This equates to 4.8% of GDP, less than half the 10.2% recorded at the peak of the deficit in 2009/10, but still around twice the size of the shortfall in Greece," says Shaw, who has pencilled in PSNBX at £8.5 billion, £800 million lower than at this time last year.
Trading statements
Sirius Real Estate, Severn Trent, Quintain Estates & Development, Close Brothers Group.
AGM/EGM
Air China, Ros Agro, Etalon Group.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.