Companies Reporting: BAE Systems, Burberry, United Utilities

Our regular look at the FTSE 350 and a selection of other companies reporting from 13 – 17 November.

• British Land’s new ventures will be closely watched
• BAE’s costs are in the spotlight
• United Utilities hoping to keep the revenue taps at full flow
• Burberry’s shine comes off as China slowdown and geo-politics unnerve luxury shoppers
• Royal Mail recovery takes centre stage for International Distribution Services

British Land Company, Half Year Results, Monday 13 November

Susannah Streeter, head of money and markets, Hargreaves Lansdown: “While concerns are still bubbling about the health of the commercial property sector, given how high interest rates have shot up while demand for office space has shrunk, British Land’s shape-shifting strategy has put it in a more resilient position. Its focus on higher end campus developments, combining topflight workspaces along with leisure, retail and hospitality facilities, appears to be paying off, with rents rising ahead of estimates at the last count. Investors will be keeping an eye on occupancy rates which have also edged up, so any drop off here will disappoint. The retail parks business also remains an area of strength where footfall has been much more robust than across high street locations and the more affordable price of units remains attractive to tenants.

Although higher interest rates have lifted rents, which has been beneficial to the group, they have also knocked the value of the group’s portfolio. Although there has been some relief that rates have been held and aren’t threatening to reach 6% levels of forecasts earlier this year, the restrictive position the Bank of England has adopted toward monetary policy may continue to be a headwind.

The company is offloading parts of its estate, which are considered to have less potential. This is likely to hit revenue in the short term, so its pick of new projects will be closely watched, given that the broad retail sector is still quite a tough place to be right now.’’

BAE Systems, Trading Statement, Monday 13 November 

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “Next week, investors could be treated to some more details on plans for new addition Ball Aerospace. The deal demanded a hefty price tag, but it also opens up some exciting growth areas, including heightened exposure to intelligence services.

Underneath the noise, investors would like to see how overall trading’s looking – especially in the order book. Analysts are optimistic that things will be ticking along given the more resilient nature of having developed-world governments as core customers. Of course, there are no guarantees.

One thing to watch will be the outlook for costs. The long-term nature of many contracts means that the related risks and costs can change over time. Fluctuating energy costs, in particular, are worth attention.”

United Utilities, Half Year Results, Thursday 16 November

Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “United Utilities recently unveiled its plans for the next regulatory period. The group is planning to invest a mammoth £13.7bn into cleaning up its act across 2025-2030, which it even describes as ambitious and stretching. To fund these investment plans, United Utilities will need to raise around £5.2bn of cash. The group’s hoping this can be done via debt, but this would push debt levels towards the top of their target range and could put pressure on future dividend payments. Investors will be keeping a close eye out on the balance sheet health in next week’s results.

Nearer term, the group announced it was trading in line with previous expectations, with markets expecting first-half revenue to rise 7.9% to around £992m. Investors will also be looking for any early progress on reducing the amount of sewage being spilt into rivers and seas – something which the regulators have the power to impose huge fines for.”

Burberry, Half Year Results, Thursday 16 November

Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’China has been the engine of growth for luxury brands, so signs of weakness across the vast economy have sent chill winds whistling through the sector. Burberry’s share price has been sideswiped by worries about Chinese consumers tightening their belts as confidence remains low and the fragile housing market affects perceptions of wealth. Concerns are swirling, not just about domestic spend, but also the appetite of Chinese travellers to splash out in high end boutiques around the world. Conflict in the Middle East and concerns that the violence will spill over to other countries is also expected to affect tourism and have a knock-on effect on sales across the region.

Although Burberry’s core customers do usually have wealthy layers of protection from slowdowns, buying a luxury item is not likely to be top of the list amid scenes of humanitarian crisis. In the US as well, sales have been dipping back quite markedly as domestic shoppers have pulled back on spending. This is likely to be down to lockdown savings dwindling fast. Longer term, the group’s efforts in elevating the brand, should pay off in the form of higher prices and customer loyalty, but this will necessitate ongoing investment.’’

International Distribution Services, Half Year Results, Thursday 16 November

Matt Britzman, equity analyst, Hargreaves Lansdown: “Now strike action’s in the rear-view mirror for the Royal Mail owner, focus can now firmly turn to recapturing lost revenue. Markets will be eagerly awaiting further details as the Royal Mail recovery story takes centre stage. But the lingering pain is expected to be felt in next week’s half-year results. Back in June, management guided to a first half operating loss at the division, with improvements coming over the second.

At the group level, the international business, GLS, is propping up performance and with the former GLS CEO now taking the reins of the entire group, there are some positive developments. Next up is filling the empty CEO seats and returning Royal Mail to profitability, all while maintaining progress at GLS. If that sounds like a lot, that’s because it is. There are still substantial hurdles to overcome.”

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