Friday preview: UK Q2 GDP, Carillion first half in investors' sights

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Friday preview: UK Q2 GDP, Carillion first half in investors' sights

Thu, 28 September 2017
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Friday preview: UK Q2 GDP, Carillion first half in investors' sights

(ShareCast News) - Friday sees the release of final UK GDP figures for the second quarter and eurozone inflation. On the corporate front, investors will be looking at first half figures for troubled construction firm Carillion and the rising AIM star Purplebricks, which has its AGM and trading update.
Analyst consensus for the final reading of Q2 UK GDP is for it to stay at 0.3%, (1.7% year-on-year). HSBC said the preliminary breakdown showed government investment and spending drove growth, with no contribution from net trade, and private consumption slowing to its weakest rate since Q4 2014.

"We will also get data for the current account deficit and the savings ratio. The latter took a dive to 1.7% in Q1, which was partly anomalous, due to higher self-assessed tax revenues in Q1 reducing disposable income," HSBC said.

"But we expect both series to be heavily revised as the large annual 'Blue Book' revisions will also come out with this release. The current account deficit is likely to be revised to a larger figure and the savings rate higher, although its downward trajectory over the last five years should remain intact.

The UK Index of services is also released. It surprised to the upside in June, rising 0.4% month on month, and setting up a stronger third quarter. For July, the PMI picked back up, but after two relatively strong months, analysts are expecting an increase of 0.1% monthe on month.

UK GfK's consumer confidence index figures follows Thursday's European Commission's ESI which showed sentiment for the UK slipped to 109.2 from 109.6 in August, primarily due to a decline in confidence in the services sectors and reduced optimism in the industrial sector..

Energy price rises are expected to push up annual eurozone inflation for September to 1.6%. The headline rate rose from to 1.5% from 1.3% year on year in August, driven almost entirely by energy base effects. Fuel prices increased sharply at the start of September, analysts noted.

Core inflation is expected to decrease slightly by 0.1 percentage points to 1.1% year on year.


Troubled builder Carillion has lost a chief executive and chief financial officer and changed its full year guidance. The company expects first half revenue to be around £2.5bn, with EBITA lower than previous expectations due to the phasing of PPP equity disposals, which should be weighted in the second half.

UBS said the company had already signalled an £845m write down on construction contracts and net debt of £575m as well as guidance for H2 average net debt of £850-900m (average).

"Therefore focus will be on the outcome of the strategic review, and any actions to reduce leverage. Key will be an update on the outlook for the support services business, and whether there is any issues / margin pressure revealed. We also previously indicated we believe Carillion's debt position requires comprehensive restructuring, which could include (1) an equity raise; (2) further asset sales or (3) debt for equity swap or a combination of these," added.

Land Securites is expected to hold a shareholder's meeting regarding the proposed return of capital to shareholders and the share consolidation following the announced sale of its stake in 20 Fenchurch Street (the "Walkie Talkie").

Purplebricks, the online real estate agent, will give a trading update. Reports suggest the AIM-listed market disruptor will unveil plans to break into the US market in Los Angeles before taking on the rest of California.

Analysts at Citi have retained their 'buy' recommendation on the stock and lowered their target price to 505p.

"We believe the recent sell-off appears overdone, particularly given the limited news flow. We highlight that the share price currently trades at a 14% premium to our de-risked bear case valuation of 340p, which provides a 'free' option on the US expansion upside," they said in a note to clients.

"We look for promising commentary on the existing market trading...We retain our Buy rating to reflect the strong long-term growth potential as Purplebricks revolutionizes the industry."

Friday September 29

Chicago PMI (US) (14:45)
Import Price Index (GER) (07:00)
Personal Consumption Expenditures (US) (13:30)
Personal Income (US) (13:30)
Personal Spending (US) (13:30)
U. of Michigan Confidence (US) (15:00)

Consumer Credit (09:30)
Index of Services (09:30)
M4 Money Supply (09:30)
Mortgage Approvals (09:30)

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