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Trading updates from easyJet PLC (), Royal Mail Group PLC () and Burberry PLC (LON:BURB) are likely to stand out in the coming week’s barrage of company news.
easyJet is tipped to warn on profits when it reports its third quarter update on Thursday.
The past few years have been tricky for Europe’s short-haul airlines, just ask the bosses at Monarch, Flybmi or Primera Air.
Intense competition in the sector has kept prices low, while rising costs have put margins under pressure.
expects this theme of “ongoing caution” to be repeated in easyJet trading update.
Analysts at the bank expect revenue per seat to have dropped 5.5% versus the same three-month period of 2018, although cost per seat is forecast to improve a little, largely due to fewer strikes.
Perhaps their boldest predication is that easyJet will sound the earnings alarm, something which other analysts seem to think will happen as well.
“We expect the company to set its FY 2019 [pre-tax profit] range below the most recently guided c£435mln level,” said Berenberg in a note to clients.
“We estimate £408mln, slightly below the current consensus of £417mln. Our estimate implies a c£90mln H2 improvement year-on-year.”
Royal Mail tackles low productivity
A trading update from could deliver an important spur to the shares that have fallen two thirds over the past 15 months but have rallied around 7% since the start of June.
In May this year, the postal service operator said it will cut its dividend 40% to pay for a new “turnaround and grow” strategy after profits fell 30% in the preceding year.
For this coming trading update, analysts at Jefferies projected a 3% rise in first-quarter revenue, driven by international parcels arm GLS and M&A, while UK parcel and letters division UKPIL declines 0.5% as letters drop 5% and parcel revenues climb 4%.
This reflects stable business confidence at the lowest level since 2009, a slowdown in online non-food retail sales and tough comparatives in advertising mail due to the introduction of General Data Protection Regulation (GDPR) on 25 May last year.
“Royal Mail’s biggest challenge is its low productivity of 50% below the sector average,” Jefferies said, with the ‘Journey 2024’ turnaround strategy seeking to restore profitability through parcel automation and targeting 15%-18% higher productivity.
“However, further measures and accelerating top-line growth are required to mitigate rising people cost inflation to >5% in our view, while re-nationalisation risk will likely keep potential investors on the sidelines.”
Burberry’s new creative director in the spotlight
’s first quarter trading update on Tuesday will be all about the performance of collections from new creative director Riccardo Tisci.
Former Givenchy designer Tisci, who took over from Christopher Bailey last year, released his debut runway collection to stores in February.
In its results statement for the year to March 30, Burberry said initial sales of Tisci’s designs had been “very encouraging”.
But with only a one-month contribution from the collection for the year, there was little evidence of how successful Tisci has been in helping to turn around the luxury British fashion group after a period of sluggish sales.
Investors will want to see improved revenues in the first quarter after a flat full-year performance as the retailer carries out an overhaul of the business, which includes taking the brand more upmarket.
“Fashion group Burberry has been through some tough times in recent years mainly due to a slowdown in sales growth in its key Asian market,” said The Share Centre.
“The management’s forecast for the current year did not impress the market when it was made in March so investors will be hoping for some rather more positive comments alongside the Q1 numbers.”
Big miners update on trading
Three of the world’s largest mining companies provide trading updates over the course of the week – PLC () on Tuesday, () on Wednesday and PLC () on Thursday.
For this half year period, iron ore production is expected to be lower given weather-related issues in Australia and other operational difficulties.
Respective first-quarter updates from the trio were all a bit gloomy, with Anglo’s production down 6% and BHP and Rio both cutting iron ore guidance in April, and Rio for a second time in June.
But in times of economic uncertainty and lower growth expectations, investors should be pretty pleased to see where the shares prices of Rio and BHP are, analysts at the Share Centre said, though a large chunk of this is down to the higher iron ore price.
Anglo’s shares have performed the best over the past year, up 29% to put its larger peers Rio and BHP in the shade even though the Anglo-Australian pair have both delivered around a 20% gain over that period.
In a note this week suggested Rio was perhaps the best short-term investment in the sector as it “offers the most powerful cash return story in 2019” from elevated iron ore prices, seeing a dividend yield of slightly over 9% with upside risk to over 10% at current iron ore prices, with more than 40% upside risk to 2020 consensus earnings estimates if prices remain at current levels.
While they expect iron ore prices to peak in the third quarter of this year, steel demand is seen underpinning prices through the second half, with supply “only gradually recovering” following the major disruptions in the first half.
TalkTalk hopes for good reception
Accident-prone internet and phone services provider PLC () said in May that it was confident of achieving earnings growth this year in line with market expectations, so not many surprises will be expected when it delivers a first quarter update on Wednesday.
The group, still trying to shake off a reputation for poor customer service and lax cybersecurity, said at the time that its optimistic outlook was underpinned by an acceleration of its roll-out of “fibre to the premises” and a much-reduced cost base, so any updates on either will be closely eyed.
Restructuring to shore up Galliford Try
Having rejected a takeover approach for its homebuilding business from Group PLC () in May, investors in () will be hoping the group at least has a plan for the division when it delivers a trading update on Wednesday.
Success in housebuilding will be even more paramount given the firm’s struggling construction arm has already caused it to issue a shock profit warning in May due to restructuring costs.
While the shrinking of the construction division will see revenues drop from £1.5bn to around £1.3bn, the restructuring is also expected to generate annualised cost savings of up to £15mln from 2021, making it easier to hit targets for improved operating margins.
SSE investors await update on cost savings plan
Energy company () has been in an increasingly difficult environment as a result of political and regulatory pressure, falling customer numbers, unusual weather and the failure to merge its retail division with Innogy.
The plan for the retail arm is still to offload it by the end of 2020 but the group has warned that operating profit will be “negatively impacted” for the year as a result of price hedging and profit at its electricity networks.
“Updates on its proposed cost savings program and future outlook will be worth noting,” said The Share Centre.
German economy key for Hays
With recruitment firm () due to report a fourth quarter trading update on Tuesday, shareholdings will be hoping the ongoing slowdown in the German economy, its largest market, hasn’t dented its prospects too much.
In its third quarter the company reported a 6% increase in its German like-for-like net fee income (NFI), a drop from second quarter growth of 16%, although as this was against tough comparatives from the prior year investors may be expecting an improvement.
Brexit will likely continue add a grain of uncertainty the firm’s UK arm, while the group may be looking for a turnaround in its New Zealand market, where NFI fell 8% last quarter.
Analysts will also be looking for more assurances to confirm their forecasts for the full year, which are currently predicting a pre-tax income of £245mln.
’s growth to ease in first quarter
Experian PLC () is expected to report a slowdown in organic revenue growth for the first quarter after strong end to the 2019 financial year.
The credit score giant posted a 10% rise in fourth quarter organic revenue as more banks and businesses in North America hired the company. In the full year, organic revenue rose 9%.
expects the company to report a 7% rise in organic revenue for the first quarter.
“We believe [this slowdown] creates a challenging environment for further re-rating.”
The longer-term outlook “remains positive” though, with strong underlying markets and a “raft of new market opportunities” supporting growth.
Dull update expected from
Despite some looming challenges from regulators, analysts have been a little more confident that water group Severn Trent PLC ().
The rest of the sector has the potential to deliver some attractive returns for their shareholders, so the company will be hoping it doesn’t dampen the optimism with a trading update ahead of its AGM on Wednesday.
Severn has performed well in terms of its cost savings and efficiencies — areas regulators like to keep a close eye on — although not a whole lot of excitement is expected so investors will be just be hoping the firm has kept its trading steady for the first quarter.
UK inflation, retail and jobs data
Away from company news, UK data on jobs, inflation and retail sales will be the under the microscope.
The data will provide a picture of the UK’s economic health in recent months but the outlook for the rest of the year remains unclear as Britain prepares to leave the European Union with or without deal.
Employment data for the three months to May will be released on Tuesday.
In the three months to April, UK jobs growth eased amid the uncertainty over Brexit.
The Office for National Statistics said employment rose by 32,000 to 32.75mln in the period, marking the weakest rise since August and significantly lower than the 99,000 jobs added in March.
However, the jobless rate held at 3.8% – the lowest since the mid 1970s – and annual growth in average weekly wages accelerated to 3.4% from 3.3% in March.
Consumer price inflation figures for June come out the day after the jobs data. In May, inflation was in line with the ’s 2.0% target.
“That means that wages are growing faster than the cost of living, a good thing for consumers and possibly consumer spending (or if not spending than at least the savings rate),” said investment director Russ Mould.
“This is a trend that could be good for consumers, bad for company profit margins and a source of concern for the Bank of England, which is talking about cutting interest rates, depending upon how Brexit plays out, even when this sort of data would normally have had the Old Lady of Threadneedle Street tightening monetary policy and not loosening it.”
June UK retail sales figures, due on Thursday, are likely to be distorted by a strong year-ago period when sales were boosted by warm weather and the FIFA World Cup.
The retail downturn deepened in May with sales falling 2.7% from a year ago as tough online competition and subdued consumer spending weighed on the market.
Significant announcements expected:
Monday July 15:
Trading update: PLC ()
Finals: (), Polar Capital Technology trust PLC (LON:PCT)
Economic data: US NY Empire State manufacturing survey
Tuesday July 16:
Trading update: Rio Tinto PLC (), Burberry PLC (), Experian PLC (); Hays PLC ()
Finals: Gately Holdings PLC ()
AGMs: PLC ()
Economic data: UK labour market data; US retail sales; US import/export prices; US manufacturing, industrial production
Wednesday July 17:
Trading updates: BHP PLC (); Severn Trent PLC (); TalkTalk PLC (), Galliford Try PLC (), (), PLC (); PLC (LON:HOCH), PLC (); Headlam PLC ()
Interims: PLC ()
AGMs: ()
Economic data: UK , RPI, PPI, HPI inflation data; US housing starts; Fed Beige book
Thursday July 18:
Trading updates: Royal Mail Group PLC (); Anglo American PLC (), SSE PLC (), easyJet PLC (), Thomas Cook PLC (), eve sleep PLC (), (LON:CRY); Hilton Food Group PLC ()
Finals: Sports Direct PLC (), (), SDI Group PLC ()
Interims: PLC (), Aubioboom Group PLC ()
FTSE 100 ex-dividends: None
Economic data: UK retail sales; US weekly jobless; US Philadelphia Fed manufacturing index
Friday July 19:
Trading updates: PLC (), (LON:REC, PLC (Q3) (LON:SSP)
AGMs: (), ()
Economic data: UK public sector finances; US University of Michigan consumer sentiment survey
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