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What's in store today...
By Darshini Shah | Thu, 7th February 2013 - 01:00
Thursday will be a bumper day for corporate news, with everyone from Supergroup to Compass Group reporting.
Bellway (BWY) will unveil its interim management statement, in which it is expected to confirm its 2013 targets.
Recent news: The most recent trading at the housebuilder was good, with reservations up 6% and average selling prices up 4%. Margins have also progressed recently and are running ahead of the 12.5% reported last year.
Analysts' expectations: "We forecast a 4.3% increase in volume growth in 2013. Net margins should continue to improve at the group (we forecast a 180 basis point (bps) improvement to 13.2%). We therefore forecast July 2013 pre-tax profit of £126.4 million (20% up year-on-year)," predict analysts at Panmure Gordon.
"The group should continue to see solid profitability against the backdrop of stagnant market conditions - but this is the case throughout the sector and with the shares trading on a December 2013 price to net asset value premium the valuation looks up with events to us for now. We therefore maintain our 'hold' recommendation."
Next up is Compass Group (CPG), also with its interim management statement.
Recent news: Compass announced full-year 2012 results in line with expectations, reporting £1.1 billion in pre-tax profit, exactly in line with forecasts. The full-year dividend increased 10% to 21.3p, in line with expectations. The support-services group has committed to returning another £400 million to shareholders via a share buyback over the next 12 months.
Analysts' expectations: Simon French at Panmure Gordon says: "We forecast 4.5% organic growth in 2013. At the prelims, management stated the future prospects of the group remain encouraging and it was confident of delivery against market expectations in 2013.
"For 2013 we forecast £1,188 million pre-tax profit, slightly ahead of consensus forecasts of £1,167 million pre-tax profit."
Valuation: The stock trades on a 2013 price/earnings (P/E) ratio of 16.5 times, supported by a yield of 3%.
French has a 'sell' recommendation on Thomas Cook Group (TCG).
Recent news: 2012 full-year results were below expectations, with the tour operator reporting pre-tax profits of £12.7 million versus consensus expectations of £18.4 million. The group also outlined £100 million of cost savings, with more due to be announced in the spring.
Analysts' expectations: "The stock performance has been exceptionally strong in January but we await details of the group's strategy," says French. "Far from putting the stock on a recovery multiple, we would argue that the stock should trade at a discount to peer TUI Travel (TT.), itself overvalued in our view."
Valuation: The stock is trading on a 2013 P/E ratio of between 26 and 27 times.
This brings us to TUI Travel.
Recent news: TUI announced 2012 full-year results modestly ahead of expectations, reporting an underlying operating profit increase of 4% to £490 million, driven by record UK mainstream profits, no doubt benefiting from Thomas Cook's difficulties and business improvement performance ahead of plan.
Analysts' expectations: "We believe current trading is strong, reflecting the tailwind of 2012 being the wettest year on record in England, but still see headwinds in continental Europe, particularly France," states French.
He adds: "The aborted bid approach from TUI AG highlighted that the parent company does not want to pay a premium for control of this minority. We therefore reiterate our 'sell' recommendation."
Valuation: The stock trades on a 2013 P/E of 11 times.
McBride (MCB) will reveal its first-half results.
Recent news: The household products company's pre-close statement indicated that its first-half performance was negatively impacted by a reduced level of toll manufacturing revenues, resulting in constant currency revenues declining by 6%.
Analysts' expectations: "Following the planned exit from a number of toll manufacturing agreements we forecast that first revenues will be 11% lower at £375 million but expect adjusted operating profit to rise 12% to £11.5 million, reflecting the improved underlying margin structure of the business."
Valuation: The shares continue to trade at an 18% discount to its peer group on 5.6 times enterprise value/EBITDA ration for 2013.
And finally for Thursday, Supergroup (SGP) will issue its third-quarter trading update.
Analysts' expectations: "Supergroup can look forward to much softer comparables in the second half. The fourth quarter in particular has a flat retail like-for-like comparable and 4.4% growth in wholesale revenues. We forecast third-quarter revenue growth of 16.3%.
"We think margin guidance may have some upside and to this end we have nudged our second-half gross margin forecast up: we now see +60 bps versus -20bps previously."
Valuation: Supergroup shares trade on a 2013 P/E ratio of 11.8 times, dropping to 10.3 times in 2014, compared with UK apparel and homewares retail peers on an average of 15.1 times and 13.6 times.
November's manufacturing figures were a nasty surprise, posting a 0.3% decline on the month, frustrating expectations of a rebound, following a published slump of 1.3% in October. Investors will be hoping that December's figures show an improvement.
Philip Shaw of Investec comments: "Overall we hope to be looking forward to a modest revival of the manufacturing sector over 2013, following what looks like a 2% contraction last year. However the sector will have its hands tied behind its back until the eurozone economy begins to show a recovery, most likely during the second half of this year."
Thursday 7 February
TUI Travel, Beazley, Smith & Nephew, Ocado Group, Amino Technologies, ICAP, Vodafone Group, Avon Rubber, Thomas Cook.
Thomas Cook Group, Hotel Corporation, TUI Travel, Paragon Group of Companies, Unicorn Aim, Avon Rubber, Compass Group, Downing Absolute Income.