Companies Reporting: Haleon, AB Foods, Marks and Spencer

Our regular look at the FTSE 350 and a selection of other companies reporting from 7 – 11 November 2022.

• Associated British Foods (ABF) will show if they can continue resilience while facing cost-of-living headwinds
• Disney’s streaming growth should slow
• How long can demand remain robust for housebuilder Persimmon?
• ITV’s advertising revenue targets are in the spotlight
• Marks and Spencer are likely to report a mixed set of results next week
• Auto Trader is expected to deliver impressive results but an overall slowdown in growth
• Haleon should be benefitting from good demand for their respiratory portfolio

Associated British Foods, Full Year Results, Tuesday 8 November

Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown: ‘’Associated British Food’s LON:ABF final dividend has been in doubt as higher costs weigh on Primark, so investors will be waiting to find out if there is any surplus cash available. ABF has been showing resilience, despite the cost-of-living headwinds and weaker than expected trading in Europe across its retail operations. Any change to the outlook will also be closely watched with the group already having warned that adjusted operating profit will be sharply lower for the year ahead.

Although being seen as very much a value retailer, Primark is by no means immune as customers tighten their belts and lighten the load in their shopping baskets as a result. Expenditure on essentials should hold up well and the odd splurge on fashion may still be forthcoming but spending on homeware is likely to follow recent declining sales trends. With the savvy use of social media though, Primark has shown some sharp skills when it comes to shifting stock and keeping demand elevated so trading may well be better than feared, but this isn’t guaranteed.

However, ABF’s unique structure should help it navigate the inflationary environment better than others. Just as Primark starts to feel the sting from inflation, the price hikes in other parts of the business, like food and commodity divisions should start to filter through. High sugar prices in particular have helped here, and ABF is also successfully increasing prices in the grocery business, passing on rising costs to customers.’’

Disney, Fourth Quarter Results, Tuesday 8 November

Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “Next week investors will mostly be focused on Disney’s streaming platforms. The likes of Disney+ and Hulu – plus a host of others – are important sources of long-term growth for the group. The fierce competition over subscribers in the sector is at fever-pitch, and high inflation means convincing customers to stay logged in is a tall order. That’s something Netflix knows only too well. Disney NYSE:DIS ended the third quarter with 221m subscribers to its streaming services and picked up 14.4m Disney+ subscribers. Investors expect the rate of growth to have slowed, but any dramatic changes are likely to be harshly punished by the market.

When it comes to theme parks, investors suspect recovery to continue at pace in most markets but expect profits to be affected by ongoing lockdowns in China. Parks in the region have been operating below capacity recently, and the Shanghai site is currently closed, leaving visitors trapped inside until they can provide negative tests. While China continues with its strict zero Covid policies, it will be hard for Disney’s parks to fully recover, so many will be reading the outlook statement with great interest.”

Persimmon, Trading Statement, Tuesday 8 November

Matt Britzman, Equity Analyst, Hargreaves Lansdown: ”Signs are starting to emerge that suggest the resilient housing market is slowing. The recent mini-budget turmoil caused approval for new mortgages to fall sharply in August and recent data suggests house prices are starting to cool. Next week’s trading statement is more about the outlook and commentary than anything, and investors should get their first glimpse as to how recent events are impacting buyers – forward sales is the figure to watch for.

Many will be watching out for any updated information on build cost inflation, up to now rising prices have been enough to offset higher costs. Persimmon LON:PSN has a unique ace up its sleeve in this regard, with an integrated supply chain courtesy of the inhouse materials business. It was recently reported that the group was looking to ramp up materials production to provide the wider business with as much low cost supply as possible.”

ITV, Third Quarter Trading Statement, Wednesday 9 November

Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: ”ITV LON:ITV expected its Total Advertising Revenue (TAR) to fall 9% in July and 18% in August compared to the previous year. This was broadly in-line with expectations and partly reflects tough comparisons with last year when the group broadcast the Euros. Next week investors will find out if those predictions rang true. There are concerns that TAR, or projected TAR, will be weaker than expected because of the ongoing economic uncertainty.

Investors will also have a close eye on ITV’s Studios business, which makes and distributes shows in the UK and abroad. They view this as an attractive growth area but would like a bit more detail on the group’s content budget. The highly expensive nature of making hit-content means costs may increase. Many will also be interested to see if the group’s on track for its medium-term target of 3% annual growth in Studios. Rumours are spreading that ITV Studios, or parts of it, could be sold. Any news on this is likely to evoke a strong reaction from the market.”

Marks and Spencer, Half Year Results, Wednesday 9 November

Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “Marks & Spencer LON:MKS is likely to report a mixed set of results next week. On one hand investors are expecting a reasonable showing from clothing, where the group has made real strides online and in-store. This is likely to outshine home sales, which is an area of retail which has come under real pressure lately as customers tighten their purse strings. Despite progress in some areas, it is thought margins are going to come under pressure. Higher energy costs and wider inflationary pressures will rear their heads.

The food business, including the 50:50 joint venture with Ocado will also come under scrutiny. Weaker consumer confidence means investors may well see that performance in the more premium bracket of M&S has suffered. At the same time, the group’s quality-led proposition may well see it benefit from customers choosing to treat themselves at home rather than eating out. The net effect of this is one to monitor closely.”

Auto Trader, Half Year Results, Thursday 10 November

Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown: “The market’s expecting half year revenue for Auto Trader LON:AUTO  of £241.7m, which represents growth of around 12.2%. That’s impressive but represents a slowdown compared to previous results, and likely reflects the effect of some of the heat coming out the used car market compared to immediate aftermath of the pandemic.

With that in mind, investors will have an especially keen eye on the outlook statement. As inflationary pressures take hold, many wonder how consumer habits are affecting Auto Trader’s key customers – dealerships. Their ability to stomach higher advertising prices could be under pressure.”

Haleon, Third Quarter Trading Statement, Thursday 10 November

Steve Clayton, Fund Manager, HL Select: “With an apparently strong start to the cold and flu season witnessed in North America and Europe, Haleon LON:HLN should be benefitting from good demand for their respiratory portfolio. Brands here include Otrivine and Theraflu. The company are not expected to make comments about the ongoing litigation surrounding Zantac, given that key legal milestones are still some way ahead.

Sales momentum at the half-year stage was good and the company commented back in September that the momentum in the business had continued into the third quarter. With the company still carrying significant levels of debt following the demerger from GSK, many will look for cash flow commentary within the statement.”

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

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