Wednesday preview: Will Marks & Sparks fly? Otherwise look to Tullow, Persimmon
Marks & Spencer interims are the big talking point ahead of Wednesday's release, while others reporting include Persimmon, Esure, JD Wetherspoon, OneSavings Bank, Sophos and Tullow Oil.
For macro news, traders in London will wake up to October trade stats from of China and Bank of Japan meeting minutes, while analysts suggested that, with little in the way of other major economic data, the other focus for markets will likely be politics in the UK, Middle East and a speech from President Donald Trump in South Korea.
Recent soft data from China has suggested the export recovery has continued to hold up well, on the back of steadily improving global demand. Imports likely remained strong, helped by improving demand, and rising commodity prices, said HSBC.
ALL EYES ON MARKS & SPENCER
Interim results from Marks & Sparks are expected to show a fairly sharp fall in profits, while this being the first results under new chairman Archie Norman could result in a slight change in priorities.
The clothing and food retailer is not even half way through a five-year restructuring under chief executive Steve Rowe, a year and a half after he took the helm.
In July, first quarter results showed UK like-for-like sales down 0.5% as clothing sales fell 1.2% and the food division was down 0.1%.
Furthermore, recent industry reports have painted a mixed picture for the clothing market and in recent weeks Rowe's recently recruited director of clothing and beauty resigned to take another job in the industry.
Among the numerous M&S previews put out ahead of results, Investec analysts forecast a 12% fall in first-half profit before tax, with FX and cost pressures predicted to diminish in the second half.
As the M&S trading period is to the end of September, recent numbers from Next and John Lewis have shown weak clothing demand in October, so management "reassurance on current trading is needed for the shares to go better in our view", though the analysts stressed that it it is still early days in Rowe’s rejuvenation strategy, where most of the benefits are due to be back-ended.
Food will also be in focus after two quarters underperforming the industry, which management put down to having taken out too many promotions and slow-moving lines.
"This is the first set of results since the appointment of the new chairman," said UBS. "While the main thrust of group strategy is unlikely to change – non-food downsizing, focus on full price, food space growth, international retrenchment – investors will be looking for any change in priorities or timescale. This could include an acceleration in UK non-food space reduction, which at 10% over the next four years was less than the market expected 12 months ago."
Deutsche Bank forecast a 0.7% decline in second quarter UK LFL sales and a 12% drop in underlying PBT reflecting mixed performance in an increasingly challenging UK market.
Barclays was looking for underlying PBT of £201m, down 13%, hoping for encouragement that recent issues around wastage, ranging and promotional attractiveness are being death with; in clothing, the hope was for "further confident noises around the growth of full-price sales and some visibility on total sales stabilizing".
PERSIMMON, ONESAVINGS, ESURE
Housebuilder Persimmon is scheduled to release a third quarter trading update following a bumper set of interims in August.
In the first half of the year PBT surged 30% to £457m on the back of a 12% improvement in sales and margins leaping higher thanks to strong cost control.
Legal completions during the period were 8% higher at 7,794 while the average selling price increased 4% at £213,262.
JP Morgan Cazenove said it expected the sales rate to be up slightly, with the group having reporting +2% for the summer months, while the order book is seen growing strongly though slightly less than the 15% growth reported at half-time.
Some broad guidance is expected on second half margins and net cash, "although like last year, it may remain too vague to drive an upgrade at this point".
"Even if estimates don’t move on Wednesday, we still see scope for margin-driven upside, and we continue to expect the large cash balance to be used to increase shareholder returns and/or cash settle part of the large LTIP, driving upgrades, which in combination could drive double-digit upgrades to EPS in 2018."
Third-quarter results from OneSavings Bank are normally pretty brief and should give details on gross originations, net loan book size at end of September and commentary around growth.
Barclays expected management to report gross originations of £570m compared to £510m this time last year and net loan book up circa 21% year-on-year to £6.77bn.
Analyst Daniel Garrod forecast management will reiterate their comments about expecting net loan book growth for the full year of at least high teens percentages and net interest margin expectations of circa 314 basis points.
"Analysts will be looking for any commentary around pipeline and application levels remaining strong," he said.
Insurer Esure's quarterly update should contain a policy count, gross written premium and qualitative commentary on margins and pricing trends.
"Any commentary on pricing changes and Esure's growth post the semi-reversal of the Ogden discount rate change will be in focus," said UBS, forecasting group GWP of £218m, up 22% on last year.
An increase in average motor GWP is seen resulting in a 27% increase in motor GWP to £197m, while in home insurance UBS expects a continuation of the difficult market conditions in the first half to drive a 4% reduction in policy count compared to the second quarter and a 4% increase in average GWP to drive an 10% yearly reduction in total GWP to £21m.
TULLOW, SOPHOS, WETHERSPOON
Tullow Oil is also expected to deliver a trading update, following July's interim results where a massive impairment charge on Ghanaian operations saw the oil producer report an operating loss of $395m.
Pre-tax impairment charges came in at $642m (£493m) due to the weak oil price and a $572m hit on the TEN oilfields off Ghana.
But since being given permission by the International Tribunal for the Law of the Sea to re-start the development of the TEN fields offshore Ghana and resolving the Jubilee turret issue, analysts have been positive on the stock.
RBC Capital Markets forecast Tullow could be targeting a year-end exit rate of more than 100,000 barrels per day, up from its first-half average of 82,500 barrels of oil equivalent per day. RBC also highlighted potential for resource growth in October, when Tullow drills its first high-impact exploration well offshore Suriname.
Deutsche expects the third quarter trading statement to confirm robust production from both the Jubilee and TEN fields in line with guidance.
"There may also be more detail on development drilling plans following the positive ITLOS ruling in the maritime boundary dispute between Ghana and Côte d'Ivoire."
Security software group Sophos will deliver half-year results following a capital markets day last month where management raised guidance for the year to 20% growth following the 19% in the first half.
The consensus analysts forecast is for second quarter billings of $168m leading to first-half billings of $325m, cash EBITDA of $57m and free cash flow of $41m.
Margin and cash flow targets were unchanged but UBS analyst Michael Briest believes Sophos is likely to invest at least some of any billings upside for the future, but there is likely some upside to both.
At JD Wetherspoon's full-year results in September, the pubs group reiterated that given the market's cost pressures, it will require 3-4% LFL sales growth just to keep margins flat in the current trading year.
"With site growth seemingly a thing of the past and leverage rising, we were concerned that profitability could be significantly affected," said Berenberg. "However, increasing mobile app penetration has begun to drive exceptional LFL growth, which seems likely to continue in the near term, mitigating any immediate margin risk."
The app has been downloaded more than one million times across Apple and Android devices since being launched in March and as it allows customers at the pubs to order food and drinks to their table and settle bills it is felt by removing the friction of queuing at the bar, it seems to have contributed to significant LFL outperformance in recent quarters, Berenberg said, with 6.1% LFL growth in August to mid-September.
Wednesday November 08
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Crude Oil Inventories (US) (15:30)
MBA Mortgage Applications (US) (11:00)
UK ECONOMIC ANNOUNCEMENTS
RICS Housing Market Survey (23:01)
FINALS
Tracsis
INTERIMS
JZ Capital Partners Ltd, Marks & Spencer Group, Schroder Real Estate Investment Trust, Sophos Group, SSE, Wizz Air Holdings , Workspace Group
TRADING ANNOUNCEMENTS
esure Group, Novae Group, OneSavings Bank, Persimmon, Tullow Oil, Wetherspoon (J.D.)
EGMS
Symphony Environmental Technologies
AGMS
Craneware, Haynes Publishing Group, InnovaDerma, Macau Property Opportunities Fund Ltd., Pathfinder Minerals , Picton Property Income Ltd, Ricardo, Strategic Equity Capital
FINAL DIVIDEND PAYMENT DATE
Begbies Traynor Group
INTERIM DIVIDEND PAYMENT DATE
STM Group