Companies Reporting: Associated British Foods, ITV, Ocado

Our regular look at the FTSE 350 and a selection of other companies reporting from 27th February to 3rd March.

• Bunzl looks for double digit top line growth
• Associated British Foods works to keep momentum
• Ocado adds value to stave off cheaper competitors
• Will Persimmon’s foundations hold strong?
• How far can Reckitt push prices?
• Shiny new services prop up ITV
• Pearson sales continue to impress

Bunzl, Full Year Results, Monday 27 February

Matt Britzman, equity analyst, Hargreaves Lansdown: “Bunzl LON:BNZL sources, consolidates, and delivers a range of essential products to businesses. Think food packaging, cleaning products and safety equipment – though that’s just the tip of the iceberg. Next week marks the release of full year results, and expectations are high. The top line, ignoring the effect of currency changes, is expected to grow around 10% – expect to see a good chunk of that coming from higher prices and acquisitions.

Acquisitions have long been a driving force for growth at Bunzl, so it’s always something worth keeping an eye on. Back in December, markets were given details on the purchase of four businesses and the sale of its UK healthcare division, Mediq. The additions look like good complements to the existing portfolio, generating enough existing profit to offset the sale of Mediq. Acquisition plans for the new year, including details on the pipeline and anticipated spend, will be eagerly watched.“

Associated British Foods, Trading Statement, Monday 27 February

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The lure of Associated British Food’s LON:ABF Primark’s value ranges proved super-strong over the Christmas period, with the retailer posting a 20% rise in sales. While it’s highly unlikely this level of momentum will have continued into the New Year, the chain is still expected to reveal some resilient numbers in this latest trading statement. Turning over high volumes will still be key given that cost pressures are still high, but with energy prices coming down, these should start easing.=

The broader retail picture shows that consumers are still on the hunt for bargains, and recent ONS data showing that overall spending patterns haven’t changed, despite the rail strikes and cost-of-living crisis, should be reflected in the numbers. Shoppers also seem much more inclined to search through the racks at bricks and mortar stores, with online sales waning. Even so, Primark’s trial of click and collect services will be closely watched and investors will be keen to see any data demonstrating it is winning new customers through this approach. The company also has agriculture, sugar and food ingredients operations and its diversified umbrella of businesses should keep providing shelter from any inclement weather.”

Ocado, Full Year Results, Tuesday 28 February

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Ocado’s LON:OCDO retail business has been sideswiped by a mini-reversal of the huge upswing in pandemic business and cost-of-living pressures, with shoppers drifting off to cheaper competitors.  It’s been affected by ever-increasing price pressures such as higher energy bills and staff costs.

Investors will be keen to find out if the extra focus on its perfect execution programme, which aims to offer better value for money, improving efficiency and product availability, shows any sign of reaping rewards in terms of customer loyalty and attracting new shoppers. This drive may help long term retention but it’s going to come at an extra cost to the business with cash profits already set to be negative for the first half due to the expectation of lower volumes.

Average basket value will be watched closely for any signs that shoppers are becoming more confident about their finances and are willing to spend that little bit extra. For the last quarter, it came in at £117, and any progress or fresh stumble here is likely to affect the share price. While Ocado’s vans may be front-of-mind in terms of brand, it’s the hidden away Solutions business which will be the real driver of long-term growth. This provides robotic systems for third party retailers to use, although expansion is costly and the number of new deals being inked appeared to be dwindling. For meaningful recovery in the valuation, such deals need to start being delivered more frequently.’’

Persimmon, Full Year Results, Wednesday 1 March

Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “Persimmon’s LON:PSN feeling the pressures of a tough housing market, and the group’s valuation has tumbled around 40% in the last 12 months as a result. We’ve already heard that “notably weaker” customer demand and higher cancellations pushed full-year forward sales down from £1.6bn to £1.0bn in 2022. And as the mortgage rate environment remains challenging for home buyers, we don’t expect to hear things picking up in this area.

Next week’s more detailed full-year results should paint a clearer picture of other areas like cost inflation. The entire industry has been facing high material and labour costs, which eats into profitability. Persimmon’s business model includes some in-house suppliers which could help in this regard, so we’re keen to find out whether they’ve been able to relieve some of those cost pressures.

But we’re most interested in the outlook statement. The group should give an indication of how forward sales have been at the start of this year, as well as what the rest of 2023 could look like. The fear is that the current dip in house prices could be the start of a bigger correction. If that looks like the case next week, there could be a negative market reaction, despite a lot of concerns already being priced in. “

Reckitt Benckiser, Full Year Results, Wednesday 1 March

Matt Britzman, equity analyst, Hargreaves Lansdown: “We’re hoping for a decent set of results from Reckitt Benckiser LON:RKT when they release full year numbers next week. Like-for-like net revenue growth of 6-8% is the target, with growth in underlying operating margin. Volumes will be key, having fallen 4.6% in the third quarter. Though, the headline number didn’t tell the full story. Excluding Lysol, which is normalising from heightened pandemic demand, volumes were only down 1%. We’re not expecting price hikes to end any time soon, so if underlying volume declines can stay in the current range, that’d be a good result.

The outlook on Nutrition will also be key. Lack of supply in the US has been a major tailwind over the year, one that’s expected to tail off. Management have previously said they could retain as much of 70% of the excess market share they picked up this year. Whether that figure’s achievable remains to be seen but as the new number one paediatrician recommended brand, it’s possible they could keep a good chunk.’’

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ITV, Full Year Results, Thursday 2 March

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “There are a number of suitors reported to be enticed by the bright lights of ITV LON:ITV and the potential of its studios arm and new streaming service, so interest will be high in finding out how the broadcaster is faring in the current economic climate. The company had disappointed the market by warning that high inflation was going to be a headache this year, so any sign that there has been success in reining in costs would be well received.

ITV plans to double digital revenue by 2026 and, so far, that target appears to be going to plan given that its ITVX subscription based streaming service performed strongly in the first month after its launch in early December. Investors will be keen to find out if this trend continues or whether subscriptions were skewed due to the world cup. User growth has been strong, thanks also to its joint BritBox venture with the BBC and its ITV Hub service, but competition in the subscription streaming space is hot and persuading consumers to shell out for another monthly fee may be a hard sell in the current climate when household budgets continue to be stretched.”

Pearson, Full Year Results, Friday 3 March

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Pearson LON:PSON has displayed some impressive momentum in its digital transformation and investors will want evidence this is being maintained. Shares are up by 47% over the past year, and it’s the second biggest gainer on the FTSE 100, behind BAE Systems. The gear shift has been showing up in sales growth in almost every part of the business.  That’s being achieved by some well-suited acquisitions, as well as growth through its own efforts focusing on direct-to-consumer sales and slimming the group’s physical footprint.

The company is well-placed to capitalise on the need to upskill armies of workers to fill talent shortages. Given the sharp increase in its valuation, any slip up in its drive to be the global king of learning might cause a share price wobble. If there are any signs of progress in halting revenue decline in its higher education business, this would be a big plus point. But with traditional textbooks on the decline, it’s a tall order, and its why the pivot to digital is so important.”

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.

FTSE 100, FTSE 250 and selected other companies scheduled to report