Our regular look at the FTSE 350 and a selection of other companies reporting from 14 – 18 November 2022.
- British Land Company will offer rare insight through payment default predictions
- Nvidia hopes data centre sales will help it through a challenging market
- Experian looks to benefit from higher credit spending
- Premier Foods maintains a strong balance sheet amidst rising costs
- Alibaba will show whether low consumer confidence has impacted e-commerce sales
- Burberry reveals whether sluggish sales have seen an uplift following Singles Day
- Close Brothers Group’s outlook statement could affect opinion on the wider banking sector
- International Distribution Services battles with Unions over employee pay at Royal Mail
British Land Company, Half Year Results, Wednesday 16 November
Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “As a corporate landlord with very high exposure to the retail sector, British Land Company [LON:BLND] will be heading into the festive season with some trepidation as the cost-of-living crisis continues. Back at the full year, the group benefitted as it saw a significant reduction in provisions set aside in the event rents couldn’t be collected. Last year, the group collected 97% of its rent, which is near pre-pandemic levels. We’re optimistic this trend will have continued.
British Land Company isn’t phased by immediate ups and downs in shopper trends, but rather whether its tenants can pay their rent. That makes the outlook statement very important – its predictions for payment defaults over the next few months should offer some rare insight”
Nvidia, Q3 Results, Wednesday 16 November
Derren Nathan, Head of Equity Research, Hargreaves Lansdown: “Nvidia [NASDAQ:NVDA] expects third quarter revenues to be significantly lower than both the last quarter and the same period in 2021. A key question is whether the pioneer of superfast computer graphics cards has set the bar low enough with its expectation that revenue will be within 2% of $5.9bn. It has certainly been a tough time for the PC industry. Data from Gartner saw Global shipments of PCs down 19.5% compared to the third quarter of 2021, the steepest fall since the mid-nineties.
In recent quarterly updates from other microchip manufacturers, both Intel and Advanced Micro Devices (AMD) have cut their guidance for 2022 as a whole. There are some rays of light though. Nvidia has deep roots in gaming although that now accounts for well under half of its revenues. Sales from data centre customers now occupy the top spot. Encouragingly, rival AMD saw data centre chip sales rise 45% in the third quarter and sales of gaming chips rise 14%. With last reported net cash of $6.1bn, Nvidia is well placed to absorb bumps in the road, but with a challenging market we’ll be looking to see if the pace of share buybacks has been maintained.”
Experian, Half Year Results, Wednesday 16 November
Matt Britzman, Equity Analyst, Hargreaves Lansdown: “Experian’s [LON:EXPN] position as a digital middleman between borrowers and lenders has been a sweet spot as demand for data from both sides continues with strength. Half year results next week should shed light on whether the group’s target of 7-9% organic growth this year remains intact. Analysts remain a little more cautions, expecting growth toward the lower end of that range.
The consumer services division has been the standout of late, where the credit marketplace helps push large volumes of clients onto lending partners. It’s an area we’re expecting to see continue to do well, as embattled consumers start to see their savings eroded and rely more on credit. It’s a trend we’re already seeing, with strong growth over Q1 in cards and loans especially in the large North America segment.”
Premier Foods, Half Year Results, Wednesday 16 November
Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown: ‘’Cupboard staples are a lot easier to shift at a time when consumers are tightening their belts and turning away from big ticket items, so sales of Premier Foods’ [LON:PFD] larder of products should stay reasonably resilient. Nostalgia brands like Bisto gravy, Ambrosia custard and Mr Kipling cakes may also stay favourites as people reserve money to entertain at home rather than eat out, particularly amid a search for convenient cheap treats which won’t dent budgets too much.
However, there is always the risk that super-stretched shoppers may start migrating away to even cheaper alternatives, and customer loyalty could switch for the longer term, so investors will be keeping a close eye on whether Premier Foods will be able to keep prices low despite higher energy and labour costs. The group’s balance sheet appears to be in good health with net debt equivalent to 1.7 times the group’s cash profits, which should help provide resilience if economic conditions deteriorate more than expected.’’
Alibaba, Quarterly Results, Thursday 17 November
Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown: ‘’These results come hot on the heels of the Chinese shopping extravaganza that is Singles Day, so investors will be keen to see a breakdown of consumer behaviour over the past few weeks. It’s a crucial time for the e-commerce side of the business, particularly as consumer confidence hovers near historic lows and rolling lockdowns eat into sentiment. However, given that the restrictions in many parts of the country have disrupted visits to stores, e-commerce sales could benefit. But only if the price is right.
Value is likely to be high on the list of shoppers’ priorities which could show up in weakness for TMall, which sells higher-end and branded goods while the Taobao platform, which is China’s largest shopping website, may prove more resilient.
Although e-commerce makes up a big chunk of Alibaba’s revenue, 70% in the quarter just gone, it has plenty other tentacles of diversification. Its cloud business is seen as a future growth driver but remains small compared with international rivals and investor’s impatience may start to grow, as they keep seeing investment being poured in, but only small profits showing up.”
Burberry Group, Half Year Results, Thursday 17 November
Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown: “Burberry [LON:BRBY] has had a seat at the table at China’s shopping feast, Singles Day, and investors will be hoping that a sense of vitality returns to sales across this vast market given how sluggish they have been. It’s not just domestic demand which has been slow, hampered by ongoing lockdowns but as Burberry is highly reliant on China’s international tourists for sales, ongoing restrictions have also hurt revenues elsewhere.
Overall, efforts to elevate the brand into the top realms of luxury by reducing outlet activity and stopping in-store discounts have been reaping rewards but this doesn’t come cheap. Investing in upping its luxury cachet is set to continue so investors expecting a fast turnaround on the bottom line may be disappointed. Over the longer term, brand reinvigoration should help keep fashion fans loyal and Burberry’s products increasingly coveted. Its core customer base is also more insulated against cost-of-living headwinds, though there could still be a swing towards clothing and shoe sales, seen as more essential compared with super-expensive watches, jewellery or handbags.’’
Close Brothers Group, Q1 Trading statement, Thursday 17 November
Steve Clayton, Head of Equity Funds, Hargreaves Lansdown: “The group has been under a cloud of late, with momentum impacted by slower levels of trading activity in its market-making division. Meme-related trading had driven a surge in volumes at Winterflood, but these have now ebbed back to more normal levels. This should lead to the focus returning onto the core banking division, where we expect lending to remain strong with little impact to margins from bad debts at this stage.
The outlook statement will be key; Close Brothers [LON:CBG] lends only in the UK and so its loan book is fully exposed to the domestic economy. Any comments about credit quality could well impact both Close Brothers itself and also investors’ attitudes toward the wider banking sector.”
International Distribution Services, Half Year Results, Thursday 17 November
Matt Britzman, Equity Analyst, Hargreaves Lansdown: “The name may have changed but the owner of Royal Mail remains in an especially stick spot. Battles with Unions over workers’ pay continue to cause pain for the group, its employees, and customers. Two strikes planned for early November have been called off, as IDS [LON:IDS] and the Union attempt to resolve their pay issues through an intermediary. That’s certainly not the end of things though, rumours that fresh strikes are planned for the end of November and start of December come slap bang in the middle of the busiest period of the year.
Much of the focus next week will be on any updates with respect to negotiations and the impact strikes are having on business performance. Back in October, the group signalled it was expecting to deliver a first half underlying operating loss of £219m for the UK business, Royal Mail, though the reality may well be worse.
The group’s international business, GLS, remains on track to deliver against expectations. But it remains to be seen how long these two entities will sit under the same roof, while Royal Mail continues to lose money.”
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
|Diversified Energy Company||Q3 Trading Statement|
|Kainos Group||Half Year Results|
|BAE Systems||Trading Statement|
|Imperial Brands||Full Year Results|
|Land Securities Group||Half Year Results|
|Ninety One||Half Year Results|
|Vodafone Group||Half Year Results|
|Workspace Group||Half Year Results|
|Bridgepoint Group||Trading Statement|
|British Land Company||Half Year Results|
|CMC Markets||Half Year Results|
|Experian*||Half Year Results|
|Mediclinic International||Half Year Results|
|Premier Foods||Half Year Results|
|Sage Group||Full Year Results|
|SSE||Half Year Results|
|Burberry Group||Half Year Results|
|Close Brothers Group||Q1 Trading Statement|
|Grainger||Full Year Results|
|Great Portland Estates||Half Year Results|
|Halma||Half Year Results|
|Intermediate Capital Group||Half Year Results|
|International Distributions Services||Half Year Results|
|Investec||Half Year Results|
|Mitie Group||Half Year Results|
|Pershing Square Holdings||Q3 Results|
|Spirax-Sarco Engineering||Q3 Trading Statement|
|Syncona||Half Year Results|
|Virgin Money UK||Full Year Results|