AB Foods, Persimmon and Polymetal International

Here’s our regular look at the FTSE 350 and a selection of other companies reporting from 28 February to 4 March.

• We expect to see a continuation of positive trends at Associated British Foods
• easyJet on a flight line for promotion to FTSE 100 but Royal Mail could fall out of the top flight
• The Restaurant Group and Clipper Logistics set for FTSE 250 promotion, while Cineworld and Capita look set to leave FTSE 250
• Spotlight on Polymetal International given the impact of Russia sanctions
• Persimmon and Taylor Wimpey results should provide a health-check on the state of the housing market
• We’ll see whether online demand is sticky at Entain post-pandemic
• Melrose will reveal whether inflation’s hurt margins in Automotive
• Rentokil Initial have the opportunity to spell out more detail on their plans for the Terminix acquisition

Associated British Foods, Trading Statement, Monday 28 February

Sophie Lund-Yates, Lead Equity Analyst “Associated British Foods has shown an incredible ability to keep customers coming through Primark’s doors, despite a lack of online business. What’s been most impressive is its ability to shift excess stock built up from lockdowns. As life has continued to get back to normal, we expect to see a continuation of positive trends next week. It will be interesting to see the group’s outlook statement, as demand patterns are hard to predict, but now things are calming down that’s no longer the case.

Soaring commodity prices will also be making themselves known in the various food businesses, and it remains to be seen what the net effect will be between higher input costs and ABF’s ability to hike prices.”

Hays, Half Year Results, Monday 28 February

Susannah Streeter, Senior Investment and Markets Analyst “As the fight for talent has intensified, Hays has benefited from a surge in fees as the confidence of candidates in their market worth had risen and firms have become increasingly desperate to fill crucial gaps in their workforces with permanent staff or contractors. Recruitment for the tech sector in particular boosted fees paid as companies shelled out larger sums for the best talent amid higher vacancies. With wage inflation not likely to stall any time soon, given that starting salaries in key markets like the UK are at their highest level in a quarter of century there is potential for fees per hire to rise further and we should find out if this trend has evolved in this latest set of numbers. However, with companies dangling better packages to retain staff, the battle for recruiters like Hays will be finding enough candidates willing to take up the positions on offer, which could cut into the volumes of deals going forward.”

FTSE reshuffle, Tuesday 1 March

Susannah Streeter, Senior Investment and Markets Analyst “easyJet is a contender to fly back into the FTSE 100 given the progress made on its turbulent journey of recovery. The lifting of travel restrictions and another relaxation of testing requirements in February came as a much needed shot of medicine after the set-back of the Omicron variant. However with war breaking out on the doorstep of Europe it’s unnerved the market, and could prove to be yet another setback in the far from easy path easyJet is trying to follow to get back into the blue chip index. Royal Mail made a rapid recovery in 2021 but recent share price declines could see it fall out of the FTSE 100.  Some investors appear to think its pandemic performance has now come unstuck with parcel volumes on the decline, but although volumes have declined from last year’s highs, they crucially appear to be rebasing at a much higher level than pre-pandemic. Royal Mail’s accelerated modernisation drive has also been boosting profitability and the move to greater automation should make the company more flexible to deal with peaks and troughs of demand going forward and weather the worries of increased cost inflation.

The horror story continues for Cineworld and with its share price is bumping along in the cheap seats, it could be heading for the FTSE 250 exit.  Spies and superheroes alone won’t be the secret weapon back to health given that Cineworld is now reeling from the punch delivered by the Supreme Court of Justice in Ontario which ruled in favour of the Cineplex chain of cinemas in its legal battle against the company. Investors have shown renewed appetite for Wagamama owner, The Restaurant Group and its recent turnaround in fortunes could see it land a place at the FTSE 250 table. As the Omicron variant emerged to be less serious, it’s become the flavour of the month, with a strong uptick in bookings as shoppers and commuters have flooded back into town and city centres. Outsourcer Capita has been trying to streamline its operations and cut debt by offloading parts of its portfolio but that’s not stemmed the loss of confidence. After years of declining revenues due to a loss of contracts, the restructuring drive has yet to reap rewards and it could be kicked out of the FTSE 250. Clipper Logistics could enter the FTSE 250 for a short lived stint, having capitalised on the accelerated shift to e-commerce during the pandemic. News that US rival GXO Logistics is circling with a bid has sent the share price soaring. Although no firm offer has yet been made, the group said it was minded to accept the cash and share offer. The review of the FTSE UK Index Series will be conducted using data as at market close on Tuesday 1 March 2022.”

Intertek Group, Full Year Results, Tuesday 1 March

Steve Clayton, HL Select Fund Manager “Intertek, the global assurance provider reports full year results on Tuesday 1 March which should show a continuing recovery in activity levels. Intertek’s testing, inspection and certification services sit at the heart of global supply chains, so volatility in day-to-day trading cannot be ruled out. But Intertek should be able to point toward an increasingly positive future. Their activities providing assurance to clients about the integrity and ESG credibility of suppliers look well set to drive growth going forwards. Their natural resources testing business should be benefiting from the surge in energy prices, conditions that have historically tended to see cargo trading activity, and the testing associated with that, pick up significantly.”

Polymetal International, Trading Statement, Wednesday 2 March

Susannah Streeter, Senior Investment and Markets Analyst “The outlook for Polymetal International will be one to watch in this trading update given the huge volatility surrounding the Russia focused gold and silver mining company, as investors fret about the impact of tougher sanctions will have on its business. The company operates mines across Russia and Kazakhstan, and underlying earnings have been neatly stacking up thanks to favourable commodity prices. But covid absences and also an increase in capital expenditure has seen costs mount up at a time when the company is also continuing its expansion drive through acquisition in the region. It has expanded the number of mines it operates but now revenues are set to be side swiped by a range of targeted sanctions.”

Persimmon, Full Year Results, Wednesday 2 March

Steve Clayton, HL Select Fund Manager “Persimmon report full year results on 2 March, which should provide the usual health-check on the state of the housing market. Investors will be hoping for robust commentary on volumes and margins. Build costs have been picking up across the industry, and whilst Persimmon’s own manufacturing capacity for key inputs gives it some protection and security of supply, it will not be immune. Investors will want to hear the group’s plans for sustaining and growing volumes. The group could be finding that earlier caution in adding to its landbank and number of operating locations now holds it back as we move into the spring selling season. With interest rates set to rise, and the potential for cladding compensation costs to impact the sector, the market has turned its back on the housebuilders of late and yields have been pushed up. Persimmon now sits on a prospective yield of 10%.”

Entain, Full Year Results, Thursday 3 March

Laura Hoy, Equity Analyst “Entain’s already offered a preview of what to expect at the full year, and it looks promising. The group revealed that overall net gaming revenue (NGR) was up 8% for the year, driven by a strong online performance. As that’s a higher-margin part of the business, profits are expected to rise at a faster clip. Management’s guided for underlying cash profits between £875m and £885m.

Further growth is expected in online and management’s take on the direction of travel as we exit the pandemic. Online has been a profit driver, so hopefully some of the lockdown-fuelled demand will stick around now that in person betting has fully reopened. BetMGM will also be a key segment to watch, CEO Jette Nygaard-Anderson called it out as “a particular highlight”, so the market could be expecting big things. The recent acquisition of a Canadian sports betting firm suggests it could be open to planting more flags across North America.”

Melrose, Full Year Results, Thursday 3 March

Laura Hoy, Equity Analyst “Recovery is the name of the game at Melrose. The pandemic’s depressed Aerospace sales plus supply chain bottlenecks have left the Automotive division struggling to squeeze out profits. It appears that things have nearly stabilised in the Aerospace division. The second half likely saw an improvement as commercial flights resumed. This will be helped by the group’s focus on narrow body planes, which returned to the skies faster than their long-haul counterparts.

Automotive is likely still struggling against supply chain issues, so there shouldn’t be we’re not expecting to see much sales growth. However, managements said it expects margins to be double 2020 levels, suggesting cost saving initiatives are paying off. We do wonder whether inflation and the rising input costs that go along with it will have dulled the shine of these efforts though.”

Taylor Wimpey, Full Year Results, Thursday 3 March

Matt Britzman, Equity Analyst “Next week’s full-year results should reflect what’s been a strong backdrop over the past year. Mortgage availability has remained high, interest rates low by historical standards and house prices are showing no signs of slowing. With that, there should be operating profits of £820m, with margins of 21-22%. Those margins will be watched closely, as will any further updates on margin outlook as cost inflation and supply chain pressures have been a persistent headwind.

Updates on forward sales should give an indication on where demand is for 2022. That’ll be timely information given the governments most recent data suggested house sales in January cooled off. Investors will be eyeing more information on shareholder returns, given management hinted at a possible share buyback in last month’s trading update. The group finished the year with net cash of £837m, in addition to an already strong strategic land bank, so there should be cash to spare. Remember though, there are no guarantees.”

Rentokil Initial, Full Year Results, Thursday 3 March

Steve Clayton, HL Select Fund Manager “Rentokil Initial’s full year results are the first opportunity for the group to spell out in more detail their plans for the Terminix acquisition in the States, easily Rentokil’s largest in recent years. The market could be disappointed though, for the complex regulatory approvals needed mean that the deal is unlikely to complete for a while yet. With the majority of consideration being paid in Rentokil stock, there is likely to be a degree of forced selling as completion nears, by any holders unable or unwilling to invest in the UK market. That’s a tough backdrop especially given the fading of the extraordinary hygiene business picked up during the pandemic. The underlying story of organic growth in the Pest business, bolstered by accretive bolt-on acquisitions, should be pretty positive though, if investors are willing to look through the noise around the deal and fading pandemic impacts.”

FTSE 100, FTSE 250 and selected other companies scheduled to report

This article is brought to you in association with Hargreaves Lansdown. All opinions expressed in this article are from the analysts and do not necessarily represent the opinions of The Armchair Trader.

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