Tuesday preview: Results due from AA, AG Barr, Close Bros, Card Factory, Thos Cook
(ShareCast News) - Tuesday will see a step up in company activity in London, with a results from the likes AG Barr, Close Brothers, Card Factory and Thomas Cook, while US watchers will keep an eye for remarks from Federal Reserve chief Janet Yellen.
Full year results from Close Brothers will provide a reading on current credit conditions in UK car-related lending, an area that has sparked concerns at the Bank of England.
Despite the group's only having roughly 15% exposure to personal contract purchase (PCP) plans in its car lending business, investors have broader market concerns about the outlook for the UK and unsecured lending in particular, said UBS, which said its analysis the Close auto loan securitisation portfolio pointed to somewhat higher bad debt production in the second half of 2017.
"With recent mixed macro data - low unemployment but sluggish wage growth and relatively high inflation - we expect a focus on loan losses in this book."
Although Close Bros has a hard fought reputation for prioritising returns over volumes during difficult times, the use by challengers Metro and Virgin Money of BoE funding facilities to expand their loan books may hamper growth for the company in motor and asset finance.
As well as bigger players taking a stronger interest in motor and challengers taking share in asset finance in the first half, recent data from the Finance & Leasing Association pointed to a slowing UK auto dealership market which may also act to depress volume growth, UBS said. "With a 10.3% leverage ratio, one of the highest among the European banks, we think the group's plan to adopt IRB models against the backdrop of Basel IV changes may be a focus also."
Broker Numis expected Close to report a 10.4% increase in profit from loan book growth of 6.5% and growth of 15.0% in funds under management. "Credit quality is expected to have remained excellent for the year as a whole at 64bps but to have increased from H1 where it was just 54bps on an annualised basis. This compares to the company guidance of 100bps at the top of the economic cycle."
Barclays forecast 5% loan book growth to £6.85bn with growth across the lending segments but most strongly in property, plus stable AuM of £10.2bn in asset management. PBT is seen coming in at £248m, for Barclays, up 8% due to slightly lower impairments, with adjusted EPS of 126p and a dividend of 57.5p.
AA AND AG BARR
AA shares skidded down by a third after executive chairman Bob Mackenzie was fired on 1 August for gross misconduct and the roadside assistance and motor insurance company cautioned that full-year results would be flat on last year.
First-half results will show membership marginally up year-on-year to around 3.3m, with growth in motor insurance policies to circa 619,000 from 572,000 but overall insurance policies down in line with our strategy to reduce exposure to underperforming insurance segments.
"The financial performance in the first six months has been negatively impacted by the effect of erratic work load patterns on an inherently fixed cost base," the company said in August. "This was especially true in June and July which saw significant spikes in demand."
Ahead of the results, Credit Suisse said risks to the upside included a new CEO with tech and turnaround experience, plus paid membership numbers increasing at margin-enhancing rates.
Risks to the downside include were seen as an announcement on further "erratic work load" patterns to indicate a deeper structural challenge; material negative impact of the new General Data Protection Regulation; a new CEO implementing a cash intensive strategic review; and news of structural headwinds to insurance volumes.
Ahead of its interim results, soft drinks maker AG Barr has guided to an 8% increase in first-half sales to around £136m.
Due to higher raw material costs, gross profit margins are likely to contract by 280 basis points to 44.0%, Numis forecast, which results in 1% operating profit growth to £17.5m.
Lower interest costs result in 2% growth in adjusted PBT to £17.4m with a lower tax charge driving 8% adjusted EPS growth to 12.3p, analyst Damian McNeela estimated, with an interim dividend of 3.8p per share.
Retailer Card Factory will post interim results that it already informed will show sales growth of 6.1% with like-for-like sales up 3.1%.
With the impact of the weak pound largely being absorbed by the company, UBS expects gross margin to be down 200 basis points, though this may be tempered as there have been some signs of certain price points being increased.
Assuming operating costs improve despite 30 new stores, the Swiss bank forecast profit before tax of £26.3m, down 5% on last year, with 6.2p of earnings per share and a 3.1p dividend per share.
Analysts predicted commentary is likely to focus on whether margin guidance is still for a fall of 150 basis points.
A year end update for Thomas Cook follows a third quarter where revenue grew 14% but margins were clipped, leading management to expect full year results in line with expectations. Group bookings for Summer 2017 rose 11% with pricing up 1%.
For the full year Barclays thinks the late summer markets in the UK were a little better than expected and so expect "slight upside to guidance for the Condor airline. EBIT for the full year was forecast at £325m.
Numis said Cook has performed strongly this year thus far, despite continued overcapacity in the airline market and strong competition in its UK business and margin pressure in Spain were counterbalanced by its own-brand and core hotel offering and strong overall summer demand.
Tuesday September 26
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
New Homes Sales (US) (15:00)
U. of Michigan Confidence (US) (15:00)
Animalcare Group, Close Brothers Group, Mysale Group, Netcall, Transense Technologies, Zinc Media Group
Altitude Group, Barr (AG), Card Factory, e-Therapeutics, Ebiquity, Faroe Petroleum, GYG, Horizon Discovery Group, Inspiration Healthcare Group, Instem, Mi-Pay Group, Minds + Machines Group Limited, Mortgage Advice Bureau (Holdings) , Moss Bros Group, Personal Group Holdings, Premier Technical Services Group , Public Power GDR SA, S&U, Taptica International, Time Out Group, Universe Group
Thomas Cook Group, United Utilities Group
Arcontech Group, Galileo Resources, Great Eastern Energy Corp Ltd. GDR, Kromek Group, MediaZest, Meikles Ltd., Scientific Digital Imaging, Vitesse Media
FINAL DIVIDEND PAYMENT DATE
Accrol Group Holdings, BHP Billiton, Glencore
INTERIM DIVIDEND PAYMENT DATE
Foxtons Group , Mincon Group