Companies Reporting: Ashtead, Frasers, Balfour Beatty

Our regular look at the FTSE 350 and a selection of other companies reporting from 5– 9 December 2022

• Ashtead looks to build on a strong first quarter
• Balfour Beatty will show how inflationary pressures have impacted construction
• Will DS Smith’s half year results tick the right boxes?
• Frasers will show if they are still on track to hit targets
• Berkeley Group hopes to maintain enviable margins

Ashtead Group, Q2 Results, Tuesday 6 December

Matt Britzman, Equity Analyst: “Markets will be eagerly awaiting Ashtead LON:AHT second quarter results next week, following a strong showing over the first. Revenue and profit were up in the mid-high 20’s, with both price and volumes driving performance. The better than expected first quarter performance gave management the confidence to bump revenue guidance, we’re keen to see that early optimism continue.

Ashtead rents construction and industrial equipment across various geographies, though the US is its main market. Medium-term trends look promising, as the US looks to build out its domestic supply chains there should be an abundance of projects that drive up demand for Ashtead’s equipment.

The last decade’s seen the larger players consolidate and grow, and Ashtead’s not sitting idly to admire the results. New bolt-on acquisitions are a key part of the growth strategy, with $337m spent on acquisitions last quarter. The acquisitions have tended to be lower margin businesses though, so the benefits from increased scale were somewhat offset in margin decline. We’ll be watching margins closely, especially considering the host of cost pressures also in the mix.”

Balfour Beatty, Q3 Trading Statement, Thursday 8 December

Susannah Streeter, Senior Investment and Markets Analyst: “The wind has been in the sails of Balfour Beatty LON:BBY as it has overcome the pandemic set back and pushed up profits slightly ahead of pre-Covid levels. Margins will be watched closely given how thin they are in the construction sector and worries remain that continued inflationary pressures will continue to nibble away at the edges. Given the huge reliance on public sector contracts, there was relief that the UK government’s cost-cutting drive was largely delayed.

The company should be well positioned to capitalise on rising demand for renewable energy, and better transport infrastructure in the UK and the US, but it will depend on how quickly contracts are tendered and won, so any inkling of fresh deals in the pipeline would be very well received.’’

DS Smith, Half Year Results, Thursday 8 December

Derren Nathan, Head of Equity Research: “In its latest trading update, DS Smith LON:SMDS told us it expected at least £400m of underlying operating profit in next week’s half year results, and that trading for the full year was tracking ahead of previous expectations. Revenue growth has been ‘very strong’ suggesting that its selling prices remain high. DS Smith has also been working hard to manage its cost base.

It will be interesting to see if weaker consumer activity amongst its customers’ end users is driving volumes down further, particularly as the important e-commerce sector heads into the Christmas trading period. Cash generation for the first half should be impressive and it will be revealed whether that translates into a possible higher interim dividend payment to shareholders. Of course, there is no guarantee that any dividend will be declared.”

Frasers Group, Half Year Results, Thursday 8 December

Matt Britzman, Equity Analyst: “Frasers’ ‘‘elevation strategy’’ appears to be in full flow with flagship stores opening in Liverpool and Birmingham earlier in the year.  Now that Mike Ashley is off the Board, we are looking out for any changes to strategic direction from the current CEO, Michael Murray who is Mr Ashley’s Son in Law.

Frasers LON:FRAS are also looking to expand their digital presence. As part of this push, they’ve acquired Missguided and I Saw It First, and it will be interesting to see how well the integrations are going in next week’s half year results.

Frasers has targeted 30%+ profit growth for the full year. Four months on from when the outlook was last updated, it will be revealed just how far along the group is in delivering on this target, amidst a tough economic environment.”

Berkeley Group Holdings, Half Year Results, Friday 9 December

Susannah Streeter, Senior Investment and Markets Analyst: ‘’Berkeley LON:BKG has been building its forward sales numbers despite cost-of-living headwinds and rising interest rates and investors will be keen to see signs that this trend has continued into the second half of the year. With mortgage approvals plummeting in October after cheaper fixed rates disappeared there will be concerns that Berkeley’s resilient showing so far could take a bit of a knock. But the group’s London focus, where international demand in particular has remained more consistent, and its attention on more exclusive property, may mean it can maintain what have been some enviable margins.

Build costs will be closely scrutinised to see if inflation is still problematic, especially given that average selling prices have fallen, however they have remained above the group’s business plan level which should provide a bit of a buffer.”

This article has been brought to you in association with Hargreaves Lansdown. All opinions expressed in this article are from the analysts and do not necessarily represent the opinions of The Armchair Trader.

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