Hargreaves Lansdown look ahead to the FTSE 350 companies reporting from 22 to 26 March.
- Kingfisher will update on whether the DIY boom is continuing
- Keywords’ valuation means there’s a lot to live up to in its full year results
- We’ll get a sense of how accurate forecasts have been at United Utilities
- The outlook statement’s the thing to watch at Compass
- Cineworld will still be counting the cost of Covid closures
Kingfisher LON:KGF, Full year Results, Monday 22 March
Susannah Streeter, senior investment and markets analyst
“As people have rolled up their sleeves and got stuck into home improvements during lockdowns, DIY retailers have cleaned up, with online sales of household goods up 73% during 2020. With DIY becoming almost a national past time, it’s boosted the fortunes of B&Q and Screwfix owner Kingfisher which has been on a recruitment drive for more staff to keep up with demand. The pandemic seems to have prompted the turnaround that was eluding management last year as it struggled with weak sales in France, particularly for its Castorama business. The home-working revolution proved a particular benefit as people were forced to find new ways of using space in their homes. However, underlying sales growth slowed towards the end of 2020, and it’s unclear exactly what the impact of fresh lockdowns will have on the business. Kingfisher is likely to have continued to capitalise on the confinement but there is a risk that people will become more fearful of spending even more on their homes given the uncertain economic outlook. Kingfisher’s recent announcement about the expansion of Screwfix might be a good indication of the expectation the company has about future sales. The chain is planning on opening another 50 stores in the UK and Ireland, focusing on opportunities in inner cities and rural areas.”
Keywords LON:KWS, Full Year Results, Wednesday 24 March
Laura Hoy, Equity Analyst
“Keywords is one of the few companies whose operations benefitted from the pandemic. The popularity of computer games boomed with other leisure activities closed, and Keywords is expecting to deliver full-year organic revenue growth of 12%. Margins will be top of mind. That’s been a key strength for Keywords so far. Some of those savings could be pandemic-related, though, and we’re keen to see whether management expects its profitability to fall as things return to normal. Another big question mark is how the group’s acquisitions are fitting into its existing portfolio. Since May, the group’s brought seven new businesses under its umbrella, and while we believe they weren’t overly expensive, we’d like more detail as to how and when they’ll pay off. Perhaps the most important thing to watch when Keywords reports, though, is how the market takes it. The group is in a strong position to capitalise on the rise of gaming. But the market is clearly excited by the prospects too – it’s price to earnings ratio of 38 is some way above its all-time average. That means investors are expecting big things and merely meeting expectations may not be enough to support that valuation.”
United Utilities [LON:UU], Pre-Close Trading Statement, Thursday 25 March
Will Ryder, Equity Analyst
“United Utilities has spent this year dealing with both the pandemic and a tougher regulatory regime. As a result, when the group released its half year results in November, full year revenue was expected to be between £1.75bn and £1.80bn, compared with £1.86bn in 2020. It was also expecting higher underlying operating costs thanks to small inflationary increases in some core costs and higher spending on infrastructure renewals. Put the two together and it’s reasonable to expect lower profits for the year. Underlying operating profit was down 18.5% in the first half, and analysts are expecting something in the region of £570m for the full year, compared with £743.9m in 2020. In the corresponding March trading statement last year United Utilities didn’t give precise figures, but the language will likely give us a sense of how accurate these forecasts are. We’ll also be looking closely at commentary on business demand, which has struggled during lockdowns, and bad debts as some customers have struggled to pay during the pandemic. Both will be important as we recover from the pandemic and life begins to normalise.”
Compass Group LON:CPG, Half-Year Trading Statement, Thursday 25 March
Steve Clayton, Manager of HL Select funds
“Compass Group has been hard hit by lockdowns around the world. Many of the canteens where Compass provides catering services have been closed altogether, or serving much reduced workforces. That’s left a big hole in revenues since the pandemic broke loose. We don’t expect these numbers to look pretty. But nor does anyone else. What really matters is how Compass can take advantage of the reopening of economies. Will the business be able to capitalise on its financial strength to gain share against weaker rivals? So far the market is unconvinced, with Compass lagging against major rivals Aramark in the US and Sodexho of France.”
Cineworld LON:CINE, Full year Results, Thursday 25 March
Susannah Streeter, senior investment and markets analyst
‘’Like an extra in Titanic, Cineworld was forced to grab at every lifeline it could to stay above water as the pandemic took hold. With major movie studios delaying big releases, the world’s second largest chain was forced to lock up its theatres across the world and wait for the flood of panic over the future of the industry to subside. In November it secured another lifebelt of liquidity with a new loan of $450m, as well as an extension of its revolving credit facility of $111 million. Vaccine roll outs have lifted the curtain on a more positive picture, bringing hopes to movie goers who will be more confident to snap up seats once cinemas reopen. This optimism has helped shares stage a sharp upturn this year, with some day traders also appearing to target the stock to upset short sellers still betting on its decline. However, lights won’t go on again until May 17th at the earliest at the company’s movie theatres in the UK and its Regal cinemas in the US also remain closed for now. A swift recovery will be crucial given the company is saddled with high levels of debt but there are fears that some movie fans may have got a little too comfortable watching releases from the comfort of their sofas, and might be slow to return to the big screen.’’
FTSE 350 companies reporting
22-Mar
- Centamin Full Year Results
- Kingfisher Full Year Results
23-Mar
- Elementis Full Year Results
- Softcat Half Year Results
24-Mar
- Bellway Half Year Results
- Diploma Second Quarter Trading Statement
- Halma Full Year Results
- Keywords* Full Year Results
25-Mar
- Cineworld Full Year Results
- Compass Group* Half Year Trading Statement
- International Public Partnerships Full Year Results
- United Utilities* Pre-Close Trading Statement
26-Mar
- Smiths Group Half Year Results
This article is 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.
