Companies Reporting: LVMH, Easyjet, Entain

Our regular look at the FTSE 350 and a selection of other companies reporting from 10 – 14 October 2022.

• Can LVMH block out the headwinds facing the retail sector
• Is Easyjet’s capacity back at pre-covid levels?
• How are Entain’s sports and gaming revenue’s faring?

LVMH, Q3 Trading Statement, Tuesday 11 October

Laura Hoy, Equity Analyst, “Sales will be in focus when LVMH offers up a progress report as investors look to high-end retailers for security amid rising prices. Inflation makes the cost of a high-end bags rise, but the high-net-worth customers buying them probably won’t notice much. However, that insulation isn’t bullet-proof. LVMH is widely exposed to the violent swings we’ve seen in currency markets recently with over a third of the business coming from Asia and another quarter derived in the US. Plus, the travel industry on which the group relies hasn’t recovered fully since the pandemic. With recession fears hanging heavy, we may not see a full recovery for some time. The group’s expected to post double-digit revenue growth this year, and it would be good to have confirmation it is on track to meet that forecast.

Debt is another area worth watching. Last year the group’s net debt position was over €12bn following its acquisition of US jewellery maker Tiffany’s. Debt reduction’s been named as a priority, so it will be interesting to see if that figure can be shaved down substantially by year end to avoid the ballooning cost of servicing debt in the current environment.

LVMH’s seen its valuation come down substantially this year but it still sits at the top end of the sector. That means the group will need to impress if it’s to overcome the market’s anxieties.“

Easyjet, Full Year Trading Statement, Thursday 13 October

Derren Nathan, Equity Analyst, “Easyjet will report a full year trading update next week. The final quarter of the year comprises the critical summer holiday season which is a key reason behind the budget airline’s second half weighting. In the last pre-pandemic year reported (2019), Easyjet generated 634% of its £6.4bn of sales in the second half of the financial year.

Easyjet has previously set an expectation that capacity for the quarter would nudge up to 90% of pre-pandemic levels from the 87% seen in the third quarter.  It will be revealed if the expected improvements in load factor have materialised, and it would be good to see some guidance for bookings in this new financial year. With consumer confidence on the wane people will be looking for evidence as to whether forward bookings are starting to suffer and whether people are starting to pull back on extras such as food, luggage allowances and additional legroom. This is a highly profitable revenue line, which has enjoyed considerable growth since travel restrictions have eased.

Further guidance on costs will be hoped for. For Q4 Easyjet had locked in about 83% of its fuel requirement at a price of $705 per metric tonne, some 28% below the going rate today. It will be interesting to see if there have been any changes to 2023’s hedging position, previously guided at about 60% at a price of $784 per tonne for the first six months.”

Entain, Q3 Trading Statement, Thursday 13 October

Charlie Williams, Equity Research Assistant, “Entain’s online and in-store presence around the globe served them well during lockdown as customers reverted to online, offsetting a fall in retail store revenue. The trend is somewhat reversing now, but online revenues remain above pre-pandemic levels and the larger customer base look to be more engaged. Although another round of revenue growth’s expected next week, the odds could start to stack against them as a cost-of-living crisis and a challenging macroeconomic backdrop dents online demand.

The group’s continued its Merger & Acquisition (M&A) spout after recently announcing the acquisition of SuperSport, the fifth one this year. This should allow expansion into the fragmented central and eastern European markets, where Entain can lead from the front, but success depends on their ability to integrate the business. With many moving parts in different regions, any update on progress will be welcomed.

The group’s also come under scrutiny for its anti-money laundering (AML) practices. A string of fines from the UK, most recently £17m, has scratched its reputation, and the UK Gambling Act still looms over their shoulders after suggestions it might be scrapped.”

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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