Thursday preview: Spotlight on AB Foods and Bovis

Primark owner Associated British Foods is due to release a update for its third quarter's trading on Thursday, while housebuilder Bovis Homes will publish a first-half trading update fresh on the heels of a strong report from sector peer Persimmon.

Like-for-like sales from ABF's its Primark retail arm were flat in the first half and analysts at UBS forecast sales growth of 12%, with 2% LFL and a 10% contribution from new store space.

"LFL is after circa 1% cannibalisation from Europe... and the expected recovery reflects a stronger performance in the UK as indicated by management with the interim results, especially against weak comps in April."

UBS also suggested there could be a translation benefit of close to the 9% reported in H1 giving 21% reported growth for Q3.

Housebuilder Bovis Homes' update may include new CEO Greg Fitzgerald providing comment on his initial review of the business, though Numis felt it was too early and the new man would outline his strategic objectives at the interims in early September.

The broker expected Bovis’ update to be in-line with previous guidance and the AGM update given in early May, entailing a reduction in the sales rate as the four months to May was down 26% to 0.45 times, with the group looking to restrict product release from some divisions and improve its customer care and production processes falling the problems at the end of 2016.

"We think that the additional cost associated with improving these functions, alongside the higher build cost incurred at the end of 2016 and lower volumes will result in H1 PBT falling circa 28% to £44m," analysts said, expecting some of this lost ground to be recovered in H2, with FY PBT forecast to be down 14%.

UBS forecast a 6% fall in volumes to 1,500 at an average selling price of £267000, resulting in flat revenues of £413m, with gross margins to be sequentially flat from the second half and so down 3.6 percentages points on last year.

Analysts predicted more investments into marketing and customer care to weigh at the operating margin level and estimate 10.8%, also expecting Fitzgerald to comment on "what is being done in the supply chain in order to stabilise the company and return to a sustainable growth path".

Great Portland will provide a trading statement alongside its annual meeting.

Following completion of the sale of Rathbone Square and the £110m return of capital earlier in the year, the group has one of the lowest leveraged balance sheets (on a net basis) in the UK sector at a proforma 12% putting it in a good position to exploit potential acquisition opportunities that may arise, Numis said.

"The problem it faces, however, is that buying opportunities are few and far between. It recently secured a circa £50m purchase of an office development site to the east of the City, outside of its historic area of focus... Further opportunities are expected to come from the institutional market as asset risk profiles evolve as leases shorten, but competition levels remain high.

"Management has previously commented that if it is unable to put the capital to work, it would consider further returns of capital; we believe it is too early for this to be considered yet, but as time progresses we would expect the market to ratchet up the pressure so it will be important for mgmt to maintain its buying discipline."

MACRO MATTERS

Market watchers will be looking at the minutes of the European Central Bank's June meeting for any further details on the debate over the change in ECB guidance, while in the US the ADP employment report is a precursor but not a predictor.

The ADP report is expected to show an employment change in June of 185,000, down from the 253,000 figure a month ago.

This comes a day ahead of the most important figure of the week, the US non-farm payroll report for June after May’s disappointing reading which was still not enough to stop the Federal Open Markets Committee from raising rates.

By the time of both reports, we shall have gained more insight into the Fed’s thoughts following the release of the minutes of the last meeting late on Wednesday.

From a forex perspective, Konstantinos Anthis at ADS Securities said: "Should the FOMC minutes indicate that the Fed is indeed close to normalizing their policy further, then the dollar will trade with a positive bias towards Friday's non-farm payroll report.

"A key level for the US currency appears to be the 113.50 resistance against the Japanese Yen; the USD/JPY has gained around 3.5% since its June lows and a move above this barrier will lead the dollar towards the 114.00 medium-term resistance."

The US goods and services trade deficit is also due and expected to narrow to $46bn in May, consistent with the recent improvement in the goods deficit.

Elsewhere stateside, the ISM-non manufacturing index to narrow moderately to 56.5 from 56.9.

Barclays predicted it to remain flat at 56.9 after the total activity index edged lower in May as declines in business activity and new orders were offset by a sharp improvement in the employment index.

"We expect these diverging trends to settle in June and for sentiment in the non-manufacturing sector to remain at solid levels."

Thursday July 06

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (US) (13:30)
ISM Non-Manufacturing (US) (15:00)

FINALS
Syncona Limited NPV

SPECIAL EX-DIVIDEND DATE
Caledonia Investments, European Investment Trust, Next

TRADING ANNOUNCEMENTS
Associated British Foods, Bovis Homes Group, Ferrexpo, Great Portland Estates

EGMS
IronRidge Resources Limited

AGMS
3i Infrastructure, C&C Group, Chaarat Gold Holdings Ltd. (DI), Elektron Technology, Establishment Inv Trust, Great Portland Estates, Maven Income & Growth VCT, Mckay Securities, Pennon Group, Puma Vct 11, Quantum Pharma, Seneca Global Income & Growth Trust, TwentyFour Select Monthly Income Fund Limited

FINAL DIVIDEND PAYMENT DATE
Arrow Global Group, Forterra, Huntsworth, Mears Group, Synthomer, Tarsus Group

FINAL EX-DIVIDEND DATE
Amati VCT , Aveva Group, Biffa, Bisichi Mining, Blue Planet Investment Trust, Brown (N.) Group, Burberry Group, Caffyns, Caledonia Investments, CML Microsystems, Dairy Crest Group, Diversified Gas & Oil, Entertainment One Limited, Hibernia Reit , Homeserve, IG Design Group, Impellam Group, Monks Inv Trust, Montanaro UK Smaller Companies Inv Trust, Next, Octopus AIM VCT, Palace Capital , Panther Securities, Pennon Group, Speedy Hire, TalkTalk Telecom Group , Telecom Plus, ULS Technology , Warpaint London , Wincanton, Workspace Group

INTERIM DIVIDEND PAYMENT DATE
Cardiff Property

INTERIM EX-DIVIDEND DATE

Albion Venture Capital Trust, BBA Aviation, CC Japan Income & Growth Trust, Character Group, Dewhurst, Dunedin Smaller Companies Inv Trust, European Investment Trust, Mobeus Income & Growth 2 Vct, Paragon Group Of Companies, Stride Gaming, Up Global Sourcing Holdings , Zytronic

QUARTERLY EX-DIVIDEND DATE

F & C UK High Income Trust , Fair Oaks Income Limited 2017 Shs NPV, Schroder Income Growth Fund