Thursday preview: Burberry, Royal Mail, 3i, Hargreaves Lansdown

Burberry is due to report full year results, having last month reported second half sales of £1.27bn, implying around £2.8bn for the full year.

Although chief executive-in-waiting Marco Gobetti is not due to take over the reins until July, new CFO/ COO Julie Brown is expected to give her initial impressions of the business and how she is looking to make the £100m of guided cost savings.

The market is therefore likely to focus more on adjusted profit before tax, with forecasts including RBC at £457m, UBS at £460m and JPMorgan Cazenove at £467m.

UBS said cash flow generation in the second half "will be key to watch" given company commentary has suggested better inventory management versus the first half, and any outperformance possibly leading to a debate about additional cash returns after the current £150m buyback is completed.

Analysts all want more detail on guidance for cost saving targets and an update on currency effects.

"Any commentary ahead of the new CEO starting in his role on 5 July on how the company is looking to kick-start the retail like-for-like growth which disappointed in Q4," said UBS.

Royal Mail and Hargreaves in the news

Finals are also due from Royal Mail, for which the consensus forecasts are for revenue of £9.66bn, adjusted EBIT pre-transformation costs of £694m, adjusted PBT £535m, adjusted EPS of 40.9p and dividend of 23p a share.

"We expect letter volumes to fall by 5%, with parcels +1%," chipped in UBS. "There will be a focus on the ongoing pension situation, where negotiations are ongoing to avert potential strike action as well as current trading."

Royal Mail has been in the news over its plans to closing its existing pension plan in March 2018, as it has been accruing costs of around £1.3bn a year.

"Royal Mail is currently contributing 17.1% of members’ pensionable pay to the scheme, and with a highly unionised workforce we don’t think a replacement is going to come cheap. Whether the costs come as sizeable employer contributions to a future scheme, or through industrial action remains to be seen," said analyst Nicholas Hyett at Hargreaves Lansdown.

His employer, Hargreaves Lansdown has been in news this week due to worries about a price war over passive investment fees, is scheduled to report on trading update for the four months to the end of April.

Analysts at Barclays forecast the group will have recorded a strong increase in net flows to £2.77bn from £2.3bn for the prior year, with assets under administration benefiting from strong market appreciation to around £74.5bn.

"In terms of revenues we estimate that Vantage revenues will come in a £96m, £23.6m for Discretionary Management and £8.2m for Third Party Management. This should therefore result in group net revenue for Jan-Apr being +16% yoy to £127.8m."

Numis noted that the ISA season has been widely reported as having been weak but that it expected equity ISA’s to have outperformed cash ISA’s and HL to have outperformed the market as a whole, with the launch of Neil Woodford’s Income Focus Fund to have supported net flows.

"Overall we expect net flows of £3.3bn, ahead of the £3.2bn reported for the second half of the year to June 2017. We continue to believe HL offers structural growth and we believe the savings product will provide another significant growth opportunity for the group when it launches later in the year."

Cook losses in focus, Land ahoy

Interim results from Thomas Cook come after the travel agent recently confirmed that it expects full year underlying operating profit to be in line with current market expectations, which is £325m.

While Numis expected an improvement in last year losses, Barclays predicted a second quarter adjusted operating loss of £135m compared to £114m last year, implying a first half EBIT loss of £184m up from £163m last time, with FX and late Easter being key headwinds

"We continue to take the view that UK package holidays (especially all-inclusive deals) will take share from DIY holidays 2017 as consumers seek price visibility on all costs associated with summer holidays. We think TUI and TCG should benefit from this trend. This trend coupled with both the decline in oil prices and potentially positive commentary from LCCs with regards to pricing trends could bring the sector back into focus with investors in the coming weeks."

Numis previewed Land Securities, noting that in the absence of risk appetite, the company's recent focus has been inward-facing and on its capital structure.

"We expect property valuations to show more resilience than many expect given a lack of transactional evidence in retail, and a backdrop for London which is far from the doomsday scenario predicted by consensus post referendum."

Following the gloomy response to British Land's NAV-beating results on Wednesday, Land might get a similarly unwelcoming reaction, with Numis saying the longer term outlook for the larger cap property names is uninspiring and that Land is "a passive play at the whim of the cycle, deliberately avoiding developments to drive returns".

Balfour Beatty's trading statement is expected by Numis to be a relatively short affair, "most likely be focussed on successful management actions to date" and reflecting on a market outlook that "remains good".

Dairy Crest full year results may come under extra scrutiny, having been mentioned by the Sunday Telegraph's tipsters and the third quarter update in February revealing that aggregate brand volumes were flat for the first nine months but with progress from Clover, Country Life and Frylight.

Listed private equity group 3i reports their annual results, with Barclays forecasting gross investment return of £1.66bn, up strongly 55% due to realized and unrealized gains on the portfolio as well as an FX tailwind due to depreciation of sterling.

The bank expects operating profits up 66% to £1.38bn and a dividend at least flat at 22p, with NAV per share up 4% to 579p.

"Investors will be interested particularly in any management commentary on valuation of Action, the largest asset in the portfolio, as well as performance of the other top 10 assets."

Thursday 18 May

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (13:30)
Wholesale Price Index (GER) (07:00)

UK ECONOMIC ANNOUNCEMENTS
Retail Sales (09:30)

FINALS
Burberry Group, Elektron Technology, Experian, Land Securities Group, Mothercare, National Grid, Royal Mail

INTERIMS
Euromoney Institutional Investor, Marston's, Thomas Cook Group

TRADING ANNOUNCEMENTS
Greggs

INTERIM EX-DIVIDEND DATE
Bellway, Cambria Automobiles, Fidelity Special Values, Filta Group Holdings, Numis Corporation, Utilitywise plc

QUARTERLY PAYMENT DATE
Merchants Trust

QUARTERLY EX-DIVIDEND DATE
Blackrock North American Income Trust , M Winkworth, MedicX Fund Ltd., Royal Dutch Shell 'A', Royal Dutch Shell 'B', The Renewables Infrastructure Group Limited, TwentyFour Select Monthly Income Fund Limited

SPECIAL EX-DIVIDEND DATE
Great Portland Estates

AGMS
Balfour Beatty, Cineworld Group, Crossrider , Damille Investments II Ltd, Great Western Mining Corporation, Gresham House, Hiscox Limited (DI), Instem, JRP Group, Learning Technologies Group , Next, North Midland Construction, PJSC Novorossiysk Commercial Sea Port GDR (Reg S), ProPhotonix (DI), Prudential, S&U, Safestyle UK , Science Group , Staffline Group, Stilo International, Zhejiang Expressway Co 'H' Shares

FINAL DIVIDEND PAYMENT DATE
Chemring Group, Direct Line Insurance Group, Dunedin Enterprise Investment Trust, Ladbrokes Coral Group, Maintel Holdings, Mondi, Quixant

FINAL EX-DIVIDEND DATE
Ascential, BlackRock Emerging Europe, BlackRock Smaller Companies Trust, Cape, Clarkson, Dignity, Elderstreet VCT, Howden Joinery Group, Inchcape, Intertek Group, Keller Group, Non-Standard Finance, North American Income Trust (The), Pagegroup, Provident Financial, Quarto Group Inc., Robert Walters, Robinson, Science Group , St Peter Port Capital Ltd, Tandem Group, Ted Baker, TT Electronics, Witan Pacific Inv Trust