Thursday preview: Unilever finals, UK GDP, Brexit bill

Consumer goods giant Unilever reports its annual results on Thursday with analysts expecting an increase in pre-tax profits on the back of like-for-like sales growth.

The owner of Marmite, Ben & Jerry’s and Vaseline products is anticipated to report pre-tax profit of €7.7bn in 2016, compared to €7.5bn the previous year, following strong like-for-like sales.

The company has reported a like-for-like sales increase of 4.7% in both the first and second quarters followed by a 3.2% rise in the third quarter. In the first nine months of the year, like-for-like sales growth was 4.2%.

At the third quarter results in October, the company reiterated that it expects like-for-like sales growth between 3-5% in 2016, with earnings before interest and tax (EBIT) margin expansion of 30-40 basis points (bps).

The consensus forecast is for a sales like-for-like increase of 3.9% in 2016 and a EBIT margin gain of 40 bps.

The group is also expected to benefit from a weaker pound against the euro, its reporting currency. The UK accounts for just 5% of sales.

“A high quality stock and we remarked after the Reckitt Benckiser third quarter results last October how the short term case for Unilever looked the better one given the former issues in South Korea,” said Numis analyst Charles Pick.

However, UBS said it sees a slowdown in underlying sales growth in the fourth quarter due to the demonetisation in India, which represents 8% of sales.

“We identify de-monetisation in India as a likely drag on organic sales in 4Q, reflected in our +2.5% forecast (vs. consensus +2.8%),” the bank said.

On the upside, the bank sees EBIT margins rising 50 bps, ahead of the consensus forecasts.

For fiscal year 2016, UBS expects a 3.8% increase in organic sales, slightly undershooting guidance at about 4% and the consensus forecasts of 3.9%. Its core earnings per share forecast of €1.87 is in line with consensus.

Away from corporate earnings, UK economic growth data for the fourth quarter will be published on Thursday.

Economists expect a slowdown in gross domestic product to 0.5% quarter-on-quarter growth from 0.6% in the third quarter. Compared to the same period a year earlier, GDP is forecast to rise 2.1% in the fourth quarter after 2.2% annualised growth in the previous three-month period.

Meanwhile, Brexit Secretary David Davis will also reportedly publish a “straightforward” Brexit bill as early as Thursday.

Thursday 26 January

INTERIMS
Angle, CPL Resources, Rank Group, Renishaw, Sky

INTERIM DIVIDEND PAYMENT DATE
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INTERIM EX-DIVIDEND DATE
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INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
GFK Consumer Confidence (GER) (07:00)
Initial Jobless Claims (US) (13:30)
New Homes Sales (US) (15:00)
Wholesales Inventories (US) (13:30)

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UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)
CBI Distributive Trades Surveys (11:00)
Gross Domestic Product (09:30)
Index of Services (09:30)

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Blackrock Frontiers Investment Trust, Blue Capital Global Reinsurance Fund Ltd (DI), Cardiff Property, Elegant Hotels Group , Fenner, Renew Holdings, RWS Holdings, Titon Holdings, Tracsis, Watkin Jones