Thursday preview: Prudential, DFS and TUI in focus
(ShareCast News) - Thursday stands as the last big hurrah of results season, including numbers from Prudential, Glencore and DFS Furniture, and will see the only major UK macroeconomic data release of the week, in the form of industrial production and the trade balance.
UK manufacturing production growth is expected to be flat on a monthly basis in June, having fallen 0.2% on the month in May, while the year-on-year rate is forecast to strengthen to 0.6% from 0.4%.
Based on this, the consensus for industrial production is a 0.1% monthly fall, improving from the 0.2% decline a month ago, with the yearly figure rising 0.1% after May's 0.1% decrease.
PRU AND GLENCORE
In May, Prudential reported strong first-quarter profits growth and a boardroom reshuffle, with finance chief Nic Nicandrou shifted over to manage the key Asia business, to be replaced by 26-year Deloitte veteran Tony Wilkey as CFO.
Group new business profit in the first three months of the year was up 42% thanks the benefit of the weak pound, or 25% at the underlying level, with Asia the key boost as new business profit surged 45%, or 26% underlying. In the US, positive net flows and market movements lifted assets 5% to $157bn and in the UK life business sales were up 33% and assets under management up 11%.
Since then, thanks to a stronger economic backdrop in Asian economies, the shares have risen more than 7% to an all time high on Tuesday before being knocked back by the renewed North Korea tensions this week.
Analysis of Prudential's interim results will be complicated by a myriad of exceptionals in the comparative period last year and scope changes, said analysts at Deutsche Bank, with currency volatility adding a further layer of complexity. DB forecasts £2.2bn operating profits, representing +7% growth inclusive of a 11% tailwind from currencies, or even more if exceptional are stripped out, with US growth rate benefiting from a considerable uplift in average equity market levels between the two periods.
UBS said the main areas of interest will be Asia new business flows, in particular any diversification away from Hong Kong mainland sales, while recent press reports have mentioned that Pru may sell part of it UK annuity portfolio. UBS estimates £2.28bn operating profit, £1.65bn new business profit and an interim dividend of 14.50p.
Commodities giant Glencore reports interim results after last month posting first half production numbers that showed own-sourced copper production fell 9% to 642,900 tonnes and zinc production was up 13% to 570,800 tonnes. Attributable ferrochrome production was up 10% to 836,000 tonnes, coal up 4% and oil down 39%. Glencore also in July agreed to buy a 49% interest in the Hunter Valley Operations coal mine in New South Wales from Yancoal and form a joint venture to operate the mine.
UBS expects segmental EBITDA of $6.8bn and a dividend of $500m amounting to 3.5 cents per share as committed last year. "We expect H1 earnings to be held back by the tail-end of the coal hedging, and by volumes being H2-weighted," analysts said, also expecting an update on its spot free cash flow estimate at around $8bn.
TUI, DFS, ALDERMORE AND AMEC
Third quarter numbers are also booked in from Anglo-German tourism group TUI, which had a good first half and the market will be interested to see if hotel and cruise bookings remain strong. Investors will also be keeping an eye out to see if guidance for a rise in full year earnings of at least 10% remains in place. City rumours have suggested the group is talking to Air Berlin and Etihad about setting up a leisure-orientated airline. The inclusion of Easter will help, with the company highlighting a €38m headwind in the second quarter which should reverse.
UBS forecast underlying EBITA of €217m, with £116m in source markets, £73m in Hotels & Resorts, and £37m in Cruise.
DFS Furniture will be closely watched after issuing a profit warning in mid-June, reporting that trading since the end of January had been much weaker than expected due to significant declines in footfall and 'a material reduction in customer orders', with some of the blame lumped on political turmoil and unfavourable weather. Based on KPMG/BRC data, DFS estimated its area of the market had been down 5-6% during the period.
Analysts at Numis downgraded full year PBT forecast 18% at the time. "There was little cost mitigation that could be implemented in the short-term and the relatively high operational gearing meant that EBITDA in H2 would be -20% at the low point of the £82m-87m guidance range for FY17. Numis sees Thursday's trading statement, which updates on the final six weeks of the year, as indicating whether demand has recovered -- "unlikely, in our view, given the heatwave" -- and what flexibility DFS can exercise on costs to protect profits next year.
Aldermore, the challenger bank, reports interim results on too, amid much commentary on asset pricing pressure in the UK and the slowdown in buy-to-let volumes during 2017 so far. The PBT consensus is for £73m. "However, we think a key focus should also turn to the cost of deposits," says Deutsche, noting internal research showing a small increase in UK deposit costs in the second quarter for the first time in many years, and that Aldermore increased fixed rate retail deposits by 25-50bps in recent months. "We expect questions on the implications for margins, particularly post-TFS drawdown period."
For Amec Foster Wheeler, as it reports half-year results, the key focus remains its merger with Wood Group. Amec guided for another year of oil and gas decline and for solar activity to reduce significantly from the record levels in 2016. It is also expected that there will be a better performance from Environment & Infrastructure and a further significant contribution from standalone overhead cost savings.
Thursday August 10
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (13:30)
Producer Price Index (US) (13:30)
UK ECONOMIC ANNOUNCEMENTS
Balance of Trade (09:30)
Industrial Production (09:30)
Manufacturing Production (09:30)
Aldermore Group, Amec Foster Wheeler, Capital & Regional, Cineworld Group, Coca-Cola HBC AG (CDI), Derwent London, Evraz, Glanbia, Glencore , Hill & Smith Holdings, Ibstock , North Midland Construction, Pagegroup, Prudential, Tritax Big Box Reit , Vitec Group
Card Factory, DFS Furniture, OMV Petrom S.A. GDR (REG S), TUI AG, Wentworth Resources Ltd
HSS Hire Group , TT Electronics
SPECIAL EX-DIVIDEND DATE
Income & Growth VCT , Northern Bear
Blue Planet Investment Trust, Creightons, Invesco Asia Trust, Investec, Terra Capital
FINAL DIVIDEND PAYMENT DATE
Avation, Impellam Group
FINAL EX-DIVIDEND DATE
BT Group, Calculus VCT 'D', Diageo, Greene King, Iomart Group, Maven Income And Growth VCT 6 , New Century AIM VCT, Northern Bear, Northgate, PZ Cussons, RPC Group, Triad Group, Yu Group
INTERIM EX-DIVIDEND DATE
Amino Technologies, Anglo American, AstraZeneca, Avon Rubber, Barclays, Direct Line Insurance Group, Ferrexpo, Fevertree Drinks, Fresnillo, GKN, Hiscox Limited (DI), IMI, Impact Healthcare Reit , Informa, Keller Group, Lancashire Holdings Limited, Law Debenture Corp., Lloyds Banking Group, LSL Property Services, McColl's Retail Group , Rentokil Initial, Rio Tinto, RM, Spirent Communications, St. Modwen Properties, Vesuvius, Virgin Money Holdings (UK)
QUARTERLY EX-DIVIDEND DATE
BP, GlaxoSmithKline, Picton Property Income Ltd, Royal Dutch Shell 'A', Royal Dutch Shell 'B'