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AB Foods, JD Sports and UK macro under microscope in coming week

Morrisons, Galliford Try, Ashtead Group, Bovis Homes, Sanne and JD Wetherspoon are among others reporting in the week

AB Foods, JD Sports and UK macro under microscope in coming week

Three retailers and another trio in the construction sector will be the objects of investor interest in the coming week, which kicks off with updates on UK economic growth and the labour market.

Kicking off the week, Primark will be the big focus when Associated British Foods plc (LON:ABF) it releases its year-end trading update on Monday.

When we last heard from the FTSE 250 conglomerate in July, bosses said like-for-like sales at Primark had been dented by “unseasonable weather” in May, which was in stark contrast to the heatwave a year earlier.

Growth has largely been driven by more selling space – new shops, increasing size of existing stores – but investors will want to see a recovery in like-for-likes as well.

UBS expects Primark to deliver overall sales growth of 5% - up from the 40-week run-rate of 4% after a strong finish to Q3 and weaker comparatives in Q4.

As for the discount fashion retailer’s margins, the analysts reckon they will have improved by around 30 basis points in the year just gone.

“However, given recent FX moves, we could see cautionary comments about the margin outlook for FY20, as Primark tends to be slow to pass through any increase in supply chain costs in order to protect / enhance its value proposition.”

For the wider group, current guidance is for earnings per share to be broadly in line with what ABF achieved last year (134.9p), and UBS doesn’t expect that to change.

Sales sprint predicted for JD Sports

Analysts expect more strong revenue and profit growth from JD Sports Fashion PLC (LON:JD.) when the sportswear retailer publishes its half-year results on Tuesday.

JD has tapped into the booming market for ‘athleisurewear’ – where people wear jogging bottoms and tracksuits casually rather than for sports – which has insulated it from some of the challenges faced by other bricks-and-mortar retailers.

Its expansion into the US with the £400mln acquisition of Finish Line has also helped and is the main reason why the City is expecting a big jump in sales and profits in the opening six months of 2019.

Shore Capital is forecasting a 41% rise in first-half revenue to £2.6bn, while underlying earnings are pencilled in at £158mln – 28% higher than what JD recorded in the same period last year.

“We look for an update on the international plans of the company, together with the trading performance of the US stores, in particular the six stores that have been converted from Finish Line to the JD fascia. We also look for an update on the on-going CMA inquiry into Footasylum,” said Shore Cap in a note to clients.

Tough summer for Morrisons

WM Morrison PLC (LON:MRW) shares have dropped to three-year lows of late, with weak consumer confidence and concerns over costs post-Brexit no doubt playing their parts.

Of more concern is the latest UK grocery market share data from Kantar, in which Morrisons lost another 0.2 percentage points to take it down to 10.1% - comfortably below the 13.6% combined share of Aldi and Lidl.

UBS has trimmed its like-for-like sales estimates after what it describes as a “slower summer” compared to last year, when the hot weather and World Cup boosted results.

But analysts do expect margins to pick up in the second half, helped by various cost savings and better wholesale economics.

Galliford expected to post solid finals

Construction firm Galliford Try plc (LON:GFRD) will be hoping for a solid set on finals on Wednesday, having forecast in line pre-tax profits in a July update.

Investors, therefore, may instead be looking for any more information on the group’s volume targets for 2021, which are currently being reviewed as the firm aims to manage its growth and gearing.

Analysts at Peel Hunt are expecting the results to show “continued robust new housing activity”, albeit with softer conditions in London and the South East, while order levels and pipeline activity are predicted to have been good.

“Construction will be more mixed with some end sectors being more wary of starting new projects under the Brexit uncertainty. Overall though the Construction pipeline is expected to continue showing better margins albeit from a smaller revenue base as it downsizes”, they added.

Peel Hunt has forecast a 2019 adjusted pre-tax profit for Galliford of £187mln with revenues of £2.7bn.

Slowdown worries hover over Ashtead

A boom in US construction and a rising preference for renting equipment rather than buying it should be good news for Ashtead Group PLC (LON:AHT) when its reports in first quarter results on Tuesday.

However, with recent trends showing shrinking US construction spending likely to impact the utilisation of the company’s fleet, margins could come under pressure and also knock pricing.

The firm’s UK business is also unlikely to provide any bright spots will Brexit uncertainty continuing to weigh on building activity.

With this in mind, investors will likely be looking for any signs that revenues and margins are starting to struggle, as more stress will add pressure to a balance sheet that already sees net debt rising to the upper end of its target range.

Savings and satisfaction key for Bovis

A half year trading statement showed sales rates and completions were going in the right direction for Bovis Homes Group PLC (LON:BVS), while a trend towards lucrative locations is underpinning selling prices.

However, investors will likely expect more progress when the group reports its interims on Tuesday, with more cost savings and higher-margin land purchases eyed as the key drivers.

Customer satisfaction ratings will also be in focus after the firm faced a public backlash in 2017 and 2018 over the quality of some of its houses, although recently it seems to have got its act together with scores moving towards a five-star rating.

“Focus will likely be on an update in trading environment in H2 and progress towards mid-term targets,” UBS said.

The latest guidance from Bovis was for 4,000 completions per year in the mid-term, with at least 23.5% of gross margin.

Sanne in the works

A few weeks ago Sanne Group PLC (LON:SNN) issued a profit warning as the FTSE 250-listed fund administrator found it was unable to deliver the hoped-for efficiencies in the first half of the year.

While the £16mln of new business in the six months to the end of June was a record for the group, resulting in underlying revenue growing 13% they came at a cost to underlying operating margin.

“We have already taken action to address these issues and continue to implement initiatives to improve the full year outturn,” the company said.

This, hopes new boss Martin Schnaier who was promoted from chief commercial officer in May, will lead to operating margins improving from around 26% in the first half to around 28%-30%, though this is still less than previously estimated. Margins in previous periods have topped 35%.

Broker Liberum said higher costs at the group level are dragging on margins, with growth in the group’s core Alternative business being balanced by a slowdown in the Corporate and Private Client business that has been worse than feared.

The outlook statement will tell us more.

Spoons sales brimming but profits leaking

A week ahead of its Friday 13th annual results, pub chain JD Wetherspoon PLC (LON:JDW) trumpeted a 20p cut to a pint of ale as founder Tim Martin continued to bang the drum about the potential benefits he sees from Brexit.

This came on the same day that the Institute of Alcohol Studies published research calling for higher taxes on supermarket alcohol sales, making beer poured in pubs relatively cheaper.

Although Martin will continue to beat around the Brexit bush, the 20p price cut touches on one of the likely main themes of the results.

A surge in costs this year, particularly in staff wages, will mean Wetherspoons is unlikely to report higher profits, as it has focused on growing sales, with like-for-like growth reported in July at around 6.7%, with total sales up 7.4%, well ahead of most of its rivals.

But Peel Hunt said this will mean PBT could fall by around 4% as the company has “sacrificed margins and profits to drive higher sales”, having not increased average drinks prices this year.

However this is much less than the 23% decline in first-half profit, as second-half cost pressure is expected to have slightly reduced.

888 numbers in focus

Half-year results from online gambling operator 888 Holdings (LON:888) follow a strategic update in June that revealed encouraging trends.

The group said “strong momentum” had continued in its global markets, with revenue growth in its Sport and Casino arms of 29% and 13%, plus 18% growth for its UK market as the Casino business is transformed to a mass-market proposition from the previous relaince on VIPs.

This offset a flat performance in Bingo and a 28% decline in the Poker division.

Bosses were “very encouraged” by the 20% increase in first time depositors in the period, a “key indicator” of its growth prospects.

UK macro on Monday and Tuesday

In economic data, the latest numbers from the Office for National Statistics on gross domestic product and UK jobs will be under the microscope on Monday and Tuesday respectively.

In the three months to the end of June, UK employers added 115,000 jobs despite Brexit uncertainty.

RBC Capital Markets said it expects employment growth to “remain positive” in the three months to the end of July and the unemployment rate to stay at 3.9%.

“However, the key focus will be on wages,” it said, expecting pay growth excluding bonuses slipping back a little this month, “but that shouldn’t detract too much from the bigger picture, which is that pay growth remains firm overall”.

RBC added: “In addition, that pay growth supporting domestically generated inflation is the main reason that the MPC can remain on hold as it awaits clarity on Brexit.”

On the UK GDP monthly data for July, this month’s estimate is unlikely to provide any great insight into the key questions around the third quarter GDP, with August and September more likely to be key.

Analysts expect a 0.1% dip in GDP for the month.

In economic data, market participants will be looking out for the latest numbers from the Office for National Statistics on UK jobs and gross domestic product.

Monday September 9:

Finals: Abcam Plc (LON:ABC), Duke Royalty Ltd (LON:DUKE),

Interims: Diaceutics PLC (LON:DXRX), Medica Group PLC (LON:MGP)

Trading announcements: Associated British Foods plc (LON:ABF)

Economic data: UK gross domestic product, UK industrial production, UK index of services

Tuesday September 10:

Finals: Litigation Capital Management Ltd (LON:LIT)

Interims: 888 Holdings PLC (LON:888), Anexo Group Plc (LON:ANX), Ashtead Group PLC (LON:AHT), Bovis Homes Group PLC (LON:BVS), Cairn Energy PLC (LON:CNE), Concurrent Technologies PLC (LON:CNE), Ekf Diagnostics Holding PLC (LON:EKF), Good Energy Group Plc (LON:GOOD), Gulf Keystone Petroleum Ltd (LON:GOOD), Harworth Group PLC (LON:HWG), Hilton Foods Group PLC (LON:HFG), IP Group Plc (LON:IPO), JD Sports Fashion PLC (LON:JD.), Midwich Group Plc (LON:MIDW), Nucleus Financial Group PLC (LON:NUC), Petropavlovsk PLC (LON:POG), Regional REIT Ltd (LON:RGL), Sanne Group PLC (LON:SNN), Team17 Group PLC (LON:TM17), SimplyBiz Group PLC (LON:SBIZ), TP Group PLC (LON:TPG), Trinity Exploration & Production PLC (LON:TRIN), Vectura Group PLC (LON:VEC)

Economic data: UK unemployment and average earnings

Wednesday September 11:

Finals: Galliford Try plc (LON:GFRD)

Interims: Advanced Medical Solutions Group (LON:AMS), Anpario (LON:ANP), DP Eurasia (LON:DPEU), Ecsc Group PLC (LON:ECSC), Epwin Group PLC (LON:EPWN), Futura Medical PLC (LON:FUM), Oakley Capital Investments Ltd (LON:OCI), S4 Capital PLC (LON:SFOR)

Economic data: MBA US mortgage applications, US producer prices

Thursday September 12:

Finals: Haynes Publishing Group PLC (LON:HYNS)

Interims: Igas Energy (LON:IGAS), WM Morrison Supermarkets PLC (LON:MRW), Silence Therapeutics PLC (LON:SLN)

Trading announcements: Safestore Holdings PLC (LON:SAFE)

Economic data: ECB policy statement, EU industrial production, US consumer prices index, US initial jobless claims

Friday September 13:     

Finals: JD Wetherspoon PLC (LON:JDW)

Trading announcements: SThree PLC (LON:STHR)

Economic data: US retail sales, US Michigan

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