Lloyds Banking Group, HSBC PLC and Primark results to come after PM sets agenda with lockdown reopening speech
In the business world, the consequences are mainly for consumer-facing industries.
Banks, otherwise, are likely to remain uppermost in the financial news headlines in the coming week, with three of the FTSE 100’s big five reporting, with Primark owner AB Foods providing a peek at the high street and the government’s test and trace outsourcing provider Serco also chipping in with its own report.
Bank dividends may be overshadowed
On Tuesday, Holdings PLC () will take its turn, with peers Barclays and NatWest having led the way with the sector’s expected restart of dividend payments in the wake of the ’s Prudential Regulation Authority (PRA) lifting its ban but calling for prudence in payouts.
The dividend is likely to be overshadowed, however, by the Asia-focused lender’s promised strategy update, with chief executive Noel Quinn having pledged last autumn to accelerate the transformation of its US business and senior management having since reportedly come up with a plan to spin this arm off.
Additional restructuring for HSBC is expected to depress its profitability in the near term, said analysts at JPMorgan Cazenove in a recent note, though they see economic growth as likely to rebound faster in Asia and across EM versus the UK, meaning there could be “upside potential from loan growth and lower impairments”.
Fewer branches seems a likely future for the Hong Kong and Shanghai bank, it suggested last month as it announced the planned closure of over 80 UK branches was because customers prefer digital banking, especially in the wake of coronavirus.
These final results will be the last under chief executive António Horta-Osório, who is stepping down at the end of April, as well as the first under new chairman Robin Budenberg, who started last month.
Analysts are forecasting the Spaniard will have to bow out with a rather meagre dividend of 1p a share, due to the PRA’s caution despite impairment charges against expected bad loans falling from £3.8bn in the first half dropping to £300mln in the third quarter.
As Lloyds’ incoming CEO Charlie Nunn, currently HSBC’s head of executive, wealth and personal banking, will not be joining in the summer, analysts at UBS expect “some uncertainty to remain over potential longer-term strategy beyond results”.
“But, with costs under good control and a low comparative base for revenues set in 2020 we think the firm has the potential to offer attractively valued gearing to a recovering UK post COVID 19”.
() on Thursday should be geared to the fast-recovering Asian markets, but like HSBC, is also expected to refresh its strategic targets.
In a recent note on emerging markets lenders, analysts at JPMorgan tipped StanChart to outperform HSBC in the coming months.
Although there is expected to be continued structural pressure from low rates, the number crunchers said near-term earnings for both bank should potentially benefit from lower bad debt provisioning as Asia drives the global recovery.
William Hill eyed for market read-across
() will report its final results on Wednesday, shortly after reporting that it returned to growth in the final quarter of 2020 thanks to strong performances from its sport betting business in the UK and US.
As the FTSE 250 bookmaker’s shareholders recently voted to approve a £2.9bn takeover by Caesars Entertainment Inc (NASDAQ:CZR), which is expected to complete in April or May, its numbers will really only be of interest to investors in its rivals such as ().
The US business will hold particular interest, given its strong growth in net revenues last year.
BAE looks to keep stable altitude
In a trading statement in November, defence contractor PLC () held its sales and cashflow guidance steady for 2020 but nudged up guidance for underlying earnings per share.
In its finals on Thursday, there will be much more flesh to add the bare bones of its last update, including on management’s indication that order intake expectations was ahead of pre-coronavirus pandemic planning for the year.
Investors will be looking for updates on the company’s order backlog, as well as whether the Eurofighter consortium member is expecting any specific benefit from the UK’s planned £16.5bn increase to its military budget over the next four years.
Serco seen making big profits from UK govt outsourcing
Outsourcing firm PLC (), the company running large sections of the UK government’s heavily criticised COVID-19 test and trace scheme, is scheduled to report its finals on Thursday.
These numbers come just over a week after the group announced a move to bolster its defence business by snapping up US Air Force and Army-focused Whitney, Bradley & Brown for US$295mln.
Investors will be keen to see if the figures for the year align with the company’s upbeat assessment in an update in December, when it said it expects profits to have grown strongly, helped by bumper revenues from Test & Trace, along with increased ‘citizen services’ and immigration work for the government.
Turnover for the calendar year is expected to swell 19% to £3.9bn, reflecting organic growth of 16%, while underlying trading profits are forecast to jump 35% to between £160-165mln, according to the guidance.
Serco’s outlook will also be of interest to see if the outsourcer still forecasts revenue and underlying profits to keep rising in 2021.
When is Primark reopening?
Also on Thursday, () will be dropping a trading update that may contain news on its shop reopenings after Boris Johnson’s big announcement at the start of the week.
The FTSE 100 group said last month it will lose £1.05bn if the Primark stores currently closed remain shuttered until the financial half-year end on February 27.
As a result, the adjusted operating profit for the fast fashion retailer in the first half is forecast to be broadly break-even, compared to £441mln for the same period last year.
Under the scenario that the entire estate is closed imminently, and remains closed until the end of March, the further loss of Primark sales would amount to £800mln, with a consequent hit on profits of £300mln.
The budget clothier doesn’t have an online presence so it can’t offset the losses caused by store closures, though it has a loyal fan base that is willing to hold on their purchases until shops reopen.
“While Primark’s struggles have made headlines, ABF’s food business has enjoyed quiet success with bumper results in the third quarter,” analysts at Hargreaves Lansdown said.
“The Grocery division benefited from increased sales over lockdown as consumers have eaten more at home and a cyclical upturn in sugar prices is good news for the sizeable Sugar business.”
Anglo American to post big second-half rebound
() will also be announcing final results on a busy Thursday, a week after big rivals BHP, Glencore and Rio Tinto.
The diversified miner’s shares have risen 40% over the past year, despite a horrible set of interim results, which showed a sharp drop in profits, drops in production and a dividend cut.
Numbers should be looking up now, with higher commodity prices as lockdowns also become less impactful in South Africa.
The market expects underlying earnings (EBITDA) for the De Beers owner to come in at US$9.4bn, down from US$10bn a year ago though it still implies a second-half rebound after reporting US$3.4bn EBITDA in the first half.
“Bumper dividend pay-outs from BHP and Rio Tinto and a return to the dividend list from Glencore have set the mining sector on its way to be the largest individual paying sector within the FTSE 100 in 2021 (and possibly even 2020, depending upon what the banks declare) and Anglo-American will be the next big digger to set up to the plate,” analysts at AJ Bell said.
Based on Anglo’s policy of paying out 40% of net profits in dividends, a second-half distribution of around US$0.65 a share would be expected, taking the full-year total to US$0.93.
Brace, brace for IAG
British Airways owner PLC () is closing the week with its final results, where investors will be braced for a painful read.
The market will focus on restructuring and summer bookings as well as the weekly cash burn, which has become the most important metric to watch in the airline sector.
“IAG will be looking to hoard cash and hold on longer than rivals in order to spring back into life once travel restrictions have eased. Thus far, the group has done well in that pursuit,” analysts at Hargreaves Lansdown said.
At the end of September, the BA and Iberia owner was burning through €205mln per week, which is not expected to have changed much.
The consensus analysts forecast is for €1.3bn of revenue for the fourth quarter, compared to €6.2bn the year before.
UK employment data will be released on Tuesday, with the unemployment rate expected to climb.
“In theory that could be negative for the currency, but the pound has been preternaturally strong recently as the market concentrates not on the economics but rather on the country’s surprisingly successful vaccine rollout,” said market analyst Marshall Gittler at BDSwiss. “I’d expect only a temporary dip unless it’s a disaster.”
Also, Bank of England governor Andrew Bailey appears before the Treasury Committee on Wednesday, which could produce some market-moving comments.
Elsewhere, there’s “not that much excitement” on the schedule, reckons Gittler.
Among the US macro stats, the main ones will be weekly jobs data and durable goods orders on Thursday and personal income and spending on Friday, which also brings the personal consumption expenditure (PCE) deflators.
Significant announcements expected for week ending 26 February:
Monday February 22:
Finals: (), ()
Interims: Dechra Pharmaceuticals PLC (), PLC (), ()
Tuesday February 23:
Finals: HSBC Holdings PLC (), Group PLC (), ()
Interims: (), Group PLC (), (), ()
Economic data: UK unemployment
Wednesday February 24:
Finals: Lloyds Banking Group PLC (), Group PLC (), William Hill PLC (), Petrofac Ltd (), Telecom Egypt SAE (LON:TEEG)
Interims: Haydale Graphene Industries PLC (), (), Town Centre Securities PLC (LON:TOWN)
Thursday February 25:
Trading announcements: Associated British Foods PLC ()
Finals: Anglo American PLC (), BAE Systems PLC (), (), (), (), (), St. James’s Place PLC (), Standard Chartered PLC (), (), PLC (), PLC (LON:GFTU), PLC (), Impax Environmental Markets PLC (LON:IEM), PLC (), PLC (), (), (), Group PLC (), Serco Group PLC (), (), ()
Interims: (), (), Cap-XX Ltd (), ()
FTSE 100 ex-dividends to knock 12.76 points off the index: (), Group PLC (), (), PLC ()
Economic data: US GDP, US jobless claims, US durable goods orders
Friday February 26:
Trading announcements: Group PLC ()
Finals: International Consolidated Airlines Group SA (), (), (), PLC (), (), PLC (), (), (), ()
Interims: Jupiter PLC ()
Economic data: US personal incomes, UK house prices
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