Companies Reporting: Netflix, Burberry, AB Foods, Entain

Here’s our regular look at the FTSE 350 and a selection of other companies reporting from 17 to 21 January.

• Netflix should indicate whether its ballooning content costs are a one-off event.
• Has Omicron induced another severe headache for J D Wetherspoon
• We will see whether sales have held up in key markets for Burberry
• Associated British Foods will update us on the impact of price hikes and supply chain issues
• We look to see Entain’s next move now takeover plans have been shelved

Netflix, Q4 earnings, Thursday 19 January

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Laura Hoy, Equity Analyst

“As always, subscriber growth will be the focus of Netflix’s NASDAQ:NFLX upcoming results. The group has so far managed to grow its subscriber base even as lockdown restrictions faded thanks to expansion in the Asia Pacific region. At some point Netflix will reach saturation, but there are no signs of slowing yet. Subscriber growth will be key as the group looks to make up for ballooning content costs. Margins are expected to fall to 6.5% in the fourth quarter. This shouldn’t be too problematic as a short-term issue—management’s said subscription growth will be enough for free cash flow to breakeven. Forecasts for next year’s spending will be top of mind. The group can’t continue to shell out at the same rate if it is to produce the kind of returns shareholders have become accustomed to.”

J D Wetherspoon, Trading Statement, Thursday 19th January

Susannah Streeter, Senior Investment and Markets Analyst

“Omicron is likely to have induced yet another severe headache for JD Wetherspoon LON:JD. in the run up to Christmas with bookings evaporating as big celebrations were cancelled. With the group relying more on younger partygoers to boost sales, with a trend for older more vulnerable patrons opting to drink at home, it’s likely to have been another set-back for the company and we should find out to what extent in this update. However, with the variant causing less severe illness, despite being highly infectious, hopes are higher that the worst of the pandemic may truly be over for the pub chain and its business model of selling cheap beer and value meals to high volumes of punters should swing back into action. Wetherspoon has so far also managed to sidestep the labour shortages and supply chain issues affecting some competitors which should help its resilience. Forward guidance is likely to show a significant amount of uncertainty ahead but the group’s low-cost offerings could give it a leg up in the year ahead if disposable income takes a hit due to inflation.”

Burberry, Trading Statement, Thursday 19th January

Susannah Streeter, Senior Investment and Markets Analyst

“It’s likely that European sales which had already been struggling will have taken another hit with the spread of Omicron. The full extent of the new variant’s effects in the region won’t show up in this update, so the focus is likely to be on the extent to which sales have held up in other key markets like the Americas and China which have seen strong growth recently. Those sales helped revenues return to pre-pandemic levels at the last reading in November, helped by Burberry’s LON:BRBY ongoing long term strategy to consolidate its position at the very top of the value chain. That has involved making the brand more exclusive, cutting ties with non-luxury partners, reducing outlet activity and stopping in-store discounts. Digital channels are also getting some serious TLC with tie ups with influencers and even NFT assets which have been helping the company win new style hungry customers across the world. The hope is that Omicron will be a short sharp shock for many economies, and the lifting of travel restrictions should see the high spending international tourists return to boost revenues from capital city stores. However, there are still lingering concerns about a slowdown in China, a lucrative market for luxury brands, which has also dragged down Burberry’s share price.’’

Associated British Foods, Trading Statement, Thursday 20 January

Susannah Streeter, Senior Investment and Markets Analyst

“Future guidance will be the thing to watch when Associated British Foods LON:ABF reports—we’re keen to get management’s take on the potential pitfalls ahead. At last check ABF was emerging from its pandemic-related woes relatively unscathed. Impressive stock control at Primark plus business as usual at its Grocery, Sugar, Ingredients and Agriculture segments meant the group was able to weather the storm. However despite easing restrictions, conditions are tough for retailers—ABF included. The group’s non-clothing arm saw supply chain bottlenecks and rising costs in December. These conditions have probably worsened, so we’ll be keen to hear whether price hikes will be enough to offset them. Primark could also struggle against similar issues, and the group’s price-sensitive customers may start to pare back spending if inflation continues to rise. We’d also like an update on stock management and whether supply chain kinks are making it more difficult to replenish the shelves.”

EMIS Group, Trading Statement, Thursday 20 January

Steve Clayton, Manager of the HL Select Funds

“EMIS LON:EMIS release a full year trading update on Thursday 20 January. Last time round the group was talking about returning to a more normal world, focused on growth. How much has Omicron interfered here? And has it been offset by the benefits gained from their role in co-ordinating the vaccine roll-out? EMIS’s next generation products will drive the spread of data across Integrated Care Systems within the NHS and the group hopes to play a critical role in an increasingly digitised healthcare sector.”

Entain, Trading Statement, Thursday 20 January

Matt Britzman, Equity Analyst

“With the DraftKings offer now firmly off the table, eyes turn back to Entain’s LON:ENT core business proposition ahead of next week’s trading update. Last we heard the group was on track for full year guidance of cash profits between £850-£900m. We should get a good indication next week as to whether that’s still the case. With the group trading well above its long-term P/E ratio, any slip ups are unlikely to go down well with investors. BetMGM, the joint venture with MGM, has been a big attraction for the group and in our opinion, the likely driving force behind the takeover offers. Market share of the US sports betting and iGaming markets was 23% last we heard. With recent launches in 3 new states, we’ll be hoping to see that number push higher. We saw at the end of the third quarter that net gaming revenue in the UK was approaching pre-pandemic levels. With Covid worries increasing in recent months, we’re keen to see what impact that’s had on performance.”

Close Brothers Group, Trading Statement, Friday 21 January

Steve Clayton, Manager of the HL Select Funds

“Barely two months will have passed since Close Brothers Group LON:CBG last updated the market when they release a half year pre-close trading statement on Friday Jan 21st. The bank should be able to report strong trading in its banking division, allied to very low charge-offs against bad debts. With markets strong and alternative assets well sought after, their asset management business should be well placed to have continued growing assets under management. Winterflood, their market-making division is expected to have enjoyed robust trading, albeit somewhat below the extraordinary period of meme-driven trading seen a few quarters ago.”

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FTSE 100, FTSE 250 and selected other companies scheduled to report

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.

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