By the time markets open for the coming week we should know whether a Brexit deal has been agreed and this should dominate all the news scheduled for the rest of the week, notably probably the comments made by the Bank of England Monetary Policy Committee after its latest meeting on Thursday.
In the corporate diary, there are updates due from companies in various sectors most affected by the coronavirus (COVID-19) pandemic this year, including retail, property and travel.
With a foot in both the travel and the retail markets, SSP Group plc (LON:SSPG), which operates food and drink outlets in airports and stations, will publish results on Tuesday for what has been an exceptionally tough year to the end of September 2020.
The FTSE 250-listed group, which runs stores under its own brands such as Upper Crust and Camden Food Co, as well as for the likes of Burger King, Starbucks and Jamie’s Deli, said in a pre-close statement in September that it expected second-half sales to be down around 86% year-on-year to £1.3bn.
While there was a slight recovery in the air sector over the summer, the rail sector remained very weak, with underlying losses expected to be in the middle of the £180mln-£250mln guidance range, with cash outflow of £250mln-£270mln.
City analysts expect a pre-tax loss of £238mln, compared to last year’s profit of £197mln.
As with many other companies, the outlook will be of most interest, where the market is currently expecting broadly flat sales of £1.4bn and a slightly lower loss.
“We continue to see a roadmap to reaching profitability in the second half next year, although recent news flow may moderate the pace of recovery in the first half,” analysts at Shore Capital said.
Shaftesbury portfolio suffering from pandemic subsidence?
Tuesday will bring full-year results from commercial property landlord Shaftsbury PLC (LON:SHB), although investors are unlikely to expect a positive performance as most of the group’s portfolio of properties in London’s Chinatown, Soho, Fitzrovia and Covent Garden is likely to have been hammered by the effects of the pandemic.
These concerns have been reflected in the shares, which are trading around a third below the company’s last net asset value (NAV) of 878p per share. As a result, the value of the firm’s portfolio is likely expected to drop, possibly taking its rental income with it.
This view is reflected in consensus estimates, with analysts expecting the NAV to fall further in the year to the end of September 2020 to 750p.
Investors will also be looking at the group’s vacancy rate as the economic fallout of the pandemic continues to shutter businesses across the UK.
Analysts at UBS are forecasting a NAV decrease of 14% to 752p per share and said they will be focusing on the firm’s dividend status and rent collection.
Purplebricks should stack up well
Results are likely to be well ahead of forecasts, trading update revealed last month.
Residential instructions were said to be up around 8% on last year, which analysts at UBS expect to result in underlying profit (EBITDA) of around £4mln compared to previous guidance of at least £3.5mln.
Although it has a beneficiary of the rebound in the housing market, the company said now is “too early” to extrapolate this trend into the second half of the year, due to uncertainty arising from the pandemic as well as the looming end of the UK government’s stamp duty holiday.
Smack bang in the traditionally big shopping month, there will also be a retail focus in the middle of the week, with half-year numbers from Dixons Carphone PLC (LON:DC.) on Wednesday and Watches of Switzerland Group PLC (LON:WOSG) the day after.
Back in July, the electronics and mobile phone pedlar reported pre-tax profits more than halved to £166mln for the year to May 2, 2020, as the UK’s pandemic lockdown hit its mobile sales in particular, with overall revenues down 3% to £10.2bn.
But Dixons’ exposure to a strong market for household electricals in the UK and overseas has been a boon, with stuck-at-home consumers spending more on their homes while being locked down, with the group generating a hefty chunk of sales from appliances, home office equipment, TVs and gaming consoles and launches of the new Playstation and Xbox versions helping to offset the lack of sales from its travel stores and ongoing weakness in mobile.
‘’The big retail survivors of the pandemic are those who have embraced the accelerated shift to digital,” said Susannah Streeter, analyst at Hargreaves Lansdown.
“Dixons Carphone hasn’t just relied on shop bots and delivery slots to gain market share. Through the Shoplive platform customers have been able to book virtual appointments with assistants in store and see video demos for a whole range of electrical goods from the comfort of their sofas. That helped online sales triple while stores were closed. Even when the first lockdown ended, virtual tills were ringing at double the rate of last year.”
Watches for Christmas?
Watches of Switzerland’s interims follow an October trading update where the retailer raised its full-year guidance.
The luxury watch seller enjoyed a strong second quarter, with revenue up 20% in the 13 weeks to October 25, as the UK performance driven by strong domestic sales offsetting lower tourist and airport business, and regional stores outperforming London sites.
Investors will want to hear about how the November lockdown has impacted trading and what the expectations are for the Christmas period.
The market is eager to hear on the US business too, where the FTSE 250 group had said momentum continued to accelerate.
Serco may not have any forecasts under the tree
Serco Group PLC (LON:SRP), the outsourcing group that is running large parts of the UK government’s coronavirus (COVID-19) test-and-trace and virus testing services, is releasing a pre-close update on Thursday where investors will be eager to see management’s outlook for the new year.
However, the outsourcer previously complained that despite its many ongoing contracts, the current crisis makes things difficult, with the uncertainties of 2020 expected to persist into 2021.
Last month, the Ministry of Defence confirmed that the Atomic Weapons Establishment (AWE) contract, which has been managed by a consortium including Serco and US defence giants Lockheed Martin and Jacobs since the turn of the millennium, will return to state control from June 30, 2021.
Back in October, Serco upgraded its full-year guidance to revenue of around £3.9bn and an underlying trading profit of £160mln-£165mln, after enjoying strong revenue growth and clamping down on costs, even going so far as to say it may restart dividend payments.
The Bank of England’s Monetary Policy Committee (MPC) is due to share the fruits of its deliberations on Thursday, sandwiched between the latest US Federal Reserve policy decision on Wednesday and the Bank of Japan on Friday – though no major changes are expected from any of them.
At its last meeting in early November, the MPC voted 9-0 to keep interest rates unchanged at 0.1% and to increase quantitative easing by £150bn to £895bn.
But, with the positive cornavirus vaccine news since then, the Threadneedle Street gang will see less pressure on the economy from the pandemic next year, though Brexit still remains a huge unknown.
Assuming a successful conclusion to Sunday’s talks between Boris Johnson and EC president Ursula von der Leyen, this would see the pound rocket and absolutely rule out any need for lower interest rates for the time being.
Preparing for an unsuccessful conclusion, as both sides have warned people to do, “the pound would probably fall, but it’s inconceivable that they would raise interest rates to support the currency just a few days before the economy is going to get an unprecedented kick in the pants”, said analyst Marshall Gittler at BDSwiss.
“On the contrary, they’ll probably want to wait until January to see how bad the carnage is. Either way, it makes much more sense for them to wait until the 4 February meeting so that they can see how Brexit has developed before taking any action.”
Aside from the Fed news, over in Washington, US politicians face a deadline to agree a new fiscal package to replace the expiring CARES Act programs and a wider funding bill to avert a government shutdown.
Significant announcements expected for week ending December 18:
Monday December 14:
Economic announcements: US consumer inflation expectations
Tuesday December 15:
Interims: Purplebricks Group PLC (LON:PURP)
Economic announcements: UK unemployment, US production
Wednesday December 16:
Economic announcements: UK inflation, UK flash PMIs, US retail sales, US flash PMIs, Fed decision
Thursday December 17:
FTSE 100 ex-dividends to knock 9.16 points off the index: British American Tobacco PLC (LON:BATS), Vodafone Group PLC (LON:VOD), United Utilities Group PLC (LON:UU.), WM Morrison Supermarkets PLC (LON:MRW)
Economic announcements: BoE rates decision, US jobless claims
Friday December 18:
Economic announcements: UK GfK consumer confidence, UK retail sales