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Among those currently scheduled to release results next week:
- Imperial Brands should give an update on next-gen product progress.
- We’ll be looking for progress on Royal Mail’s negotiations with the union over staff cuts.
- National Grid should outline how it’s electric-heavy business plans to meet ballooning demand.
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Among those currently scheduled to release results next week:
*Events on which we will be updating investors.
Imperial Brands – Matt Britzman, Equity Analyst
As we enter the second year of Imperial Brands’ 5-year strategy plan, focus remains on improving market share in the group’s core markets – the US, UK, Spain, Germany and Australia – which account for around 70% of profits. Trends seen last year seem to be continuing, growth in US, UK and Spain is progressing, but Germany and Australia remain tough cookies to crack.
Half-year performance is expected to be impacted by a return to normal purchasing patterns in Europe, offsetting growth elsewhere. Revenue’s expected to come in flat, with operating profit up a couple of percent. Eye’s will be on Next Generation Product (NGP) losses as they’re expected to narrow. Progress here is important given the transition away from traditional tobacco products is key for future growth. We’ve been told to expect an update on next steps, last we heard trials of Pulze heated tobacco in Greece and the Czech Republic were promising as was performance from blu vapour in the US.
Negotiations for the transfer of the group’s Russian assets are ongoing, with operations in the region being suspended at the start of March. Operationally speaking, the region (including Ukraine) represents about 0.5% of operating profit so shouldn’t impact trading performance in a major way.
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National Grid – Laura Hoy, Equity Analyst
National Grid (NG) is at a turning point as the transition toward renewable energy increases demand on its networks. How NG plans to rise up and meet the growing wave of new connection applications is where our attention will be focussed. The group’s spate of acquisitions and disposals mean its portfolio is weighted toward electric now, and that’s paying off as inflation’s expected to boost profits beyond guidance. But it’s bound by regulatory oversight, and that will dictate how much of that pay-off will go toward building out a more capable grid. This push to invest more will come alongside pressure to reduce customers’ bills as the cost-of-living squeeze continues to bite.
The other big factor to watch is how the group’s disposals are progressing. To buy Western Power Distribution, National Grid took on short-term bridge loans. These are to be paid off through the sale of the group’s gas business. While things appear to be on track so far, we’d like further confirmation that the sale is still set to complete in the next few months, particularly as rising interest rates make loans like this one much riskier to have on the books.
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Royal Mail – Laura Hoy, Equity Analyst
Royal Mail’s in a tricky position heading into its results. The group’s been delivering on an impressive turnaround that’s seen a shift toward automation and efficiency, which was only helped along by the pandemic. Now that those tailwinds have dissipated much of the transition involves cutting costs, and Royal Mail’s biggest cost is its massive network of employees. The group’s aiming to cut 700 management positions, which should save RMG £40m per year. But with rumours circulating that the union’s unhappy, we wonder if progress has been made. Not to mention the mounting pressure on employers around the country to implement pay increases to keep up with the rising cost of living.
Commentary around this issue is where markets will be focused, but there are other key factors to watch. We’d like to see that the group’s on track with its planned automation investments and that spending isn’t getting out of hand. Management forecast “well over £400m” of investment costs at the half year. With inflation driving up construction costs, we’re keen to know exactly what that means. We’ll also have an eye on parcel volumes, which have come down somewhat from pandemic highs. They appear to be rebasing at a higher level, though, a trend we’d like to see solidified at the full year results.
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