Wednesday preview: UK earnings update eyed, Galliford and Dunelm report
(ShareCast News) - Wednesday's average earnings figures will be scrutinised closely as it comes a day after data showing rising inflation and a day before the Bank of England's interest rate decision.
Corporate results on the day include finals from builder Galliford Try, retailer Dunelm Group and financial services provider Just Group.
The Office for National Statistics will publish UK unemployment and earnings data at 0930 BST.
Last month the unemployment rate fell to a new 42-year low of 4.4% and on Wednesday some economists feel July's number could tick down to 4.3%.
The consensus is for the headline ILO rate to remain at 4.4%, with a claimant count increasing minutely.
Signs of any further easing or renewed tightening of average earnings numbers in July will be the most closely anticipated amid the squeeze on real incomes from the combination with rising inflation since the start of the year.
Last month earnings growth for the three months to June improved to 2.1% from 1.9%, while average earnings excluding bonuses rose 2.1% from 2%.
The consensus is for total earnings to continue to improve in July, rising 2.3% or 2.2% if excluding bonuses - both still well short of the 2.9% rate of consumer price inflation for that month announced on Tuesday and so will extend the period of negative real wage growth.
Economists at Credit Suisse predicted regular pay growth will be flat at 2.1%, while those at RBC Capital Markets predicted the earnings story to continue being disappointing, with the ex-bonus measure growing 2.1% though the including bonus measure should rise to 2.3%.
On unemployment, RBC said the rate "will either stay there or tick down to 4.3%, in our view", pointing to survey indicators that continue to be optimistic on employment.
BoA Merrill Lynch's chief economist Robert Wood predicted there will be a more hawkish BoE statement on Thursday.
"That is not to say the UK economy is doing well. Growth is underwhelming and risks high. But growth seems to be beating BoE expectations and most importantly wage growth shows some signs of life. Add in sterling's fall since early August and the BoE's statement will have to be a challenge to a market pricing the first rate hike in mid-2019," he said.
He added: "With inflation likely to slow after peaking in October, the BoE would have time to watch the data. We still expect weak growth to prevent hikes until 2019 at least. We have been here before with a wage spurt fading quickly. But unemployment is lower than in early 2016. The risks of a hike are not zero and may be growing."
Homewares retailer Dunelm guided to full year pre-tax profit of £109-111m, when in July it reported a 2.4% decline in like-for-like sales from its stores, in total down 0.5% when strong home delivery sales are included and up 8.5% when acquisition Worldstores' 31-week contribution is included.
At the end of August it then revealed that chief executive John Browett was leaving with immediate effect "for personal reasons", though these personal reasons seemed to include that "the next phase of growth requires different leadership".
UBS estimated a decline of circa 15% in PBT to £110m, "a rare blemish on an excellent long-term track record" and expects the FY dividend to rise modestly to 26p, reflecting the strong balance sheet and long-term cash generation of the business.
Housebuilder Galliford Try is also due to publish final results on Wednesday, with many investors interested to see what it has to say about the £98m cost to finish two delayed joint venture projects.
In its July trading update, the company pointed to full year profit being towards the upper end of the consensus range and that the outlook for the new financial year was unchanged.
The core Linden Homes business grew completions 7%, although the sales rate was flat at 0.62x and average outlets fell to 77, which led to sales carried forward falling 2% to £373m.
The Partnerships business recorded revenue and margin growth for the year, while the Construction arm's new contracts performed well.
"We believe investors will be more interested in an update in regards to the recent £98m provision, which was primarily in relation to two large legacy contracts," said broker Numis, noting that one of the contracts is now complete.
Just Group is scheduled to report half-year results and Numis, which is house broker to the retirement income specialist, said the key metric is likely to be the new business margin, which in turn is a key driver of the operating profit.
A trading update in July highlighted retirement income sales volumes of £720m, up 16% year-on-year, and a half-year margin in excess of 7.0%.
Numis has pencilled in operating profit of £68.2m, which compares to £48.4m pro forma in the same period last year, with the increase driven by new business profit of £53.2m and margins of 7.4% on retirement sales of £720m.
The interim dividend is seen increasing 6% to 1.17p.
Wednesday, 13 September
Haynes Publishing Group, Wilmington, Dunelm Group, Town Centre Securities, Galliford Try
Epwin, SQS Software Quality Systems AG, Advanced Medical Solutions Group, Columbus Energy Resources, MyCelx Technologies Corporation (DI), Alliance Pharma, Ten Entertainment Group, Just Group, Soco International, Sigmaroc, Gaming Realms, Ingenta
Games Workshop Group, Intercede Group, Hardy Oil & Gas, Marechale Capital, Versarien, Tricorn Group, Argo Group Ltd.
TwentyFour Select Monthly Income Fund Limited
FINAL DIVIDEND PAYMENT DATE
INTERIM DIVIDEND PAYMENT DATE
Rentokil Initial, Hiscox Limited (DI), Mobeus Income & Growth Vct
UK ECONOMIC ANNOUNCEMENT
Claimant Count Rate (09:30)
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Wholesale Price Index (GER) (07:00)
Consumer Price Index (GER) (07:00)
Industrial Production (EU) (11:00)
MBA Mortgage Applications (US) (12:00)
Producer Price Index (US) (14:30)
Crude Oil Inventories (US) (15:30)