We give our thoughts on what to expect from companies announcing results week commencing 18 May 2020
Companies reporting w/c 18 May
Imperial Brands Plc (Q2 2020 Earnings Release)
Tobacco group Imperial reassured the market in April that it had seen no material impact from the Covid-19 crisis on its business so far, underlining the defensive nature of the sector. However like all of its peers it still has to cope with increasing regulation and restrictions on traditional tobacco products along with growing regulations relating to the next generation products such as vaping. In these interim results the market will be looking for an update on sales growth in that area as well as any comments on future dividends.
We currently list Imperial Brands as a HOLD
Companies also reporting today include: DCC Plc (Q4 2020 Earnings Release) – HOLD
Compass Group Plc (Q2 2020 Earnings Release)
Compass has benefited from the long-term trend for companies to outsource food service but at the moment it’s suffering with many people working from home and not requiring its catering services. Its healthcare teams have been supporting frontline staff in a number of countries during the crisis but 55% of its business is closed and in March the company said it expected operating profit to be £125m-225m lower than previously forecast. Naturally the market will be looking for any forward-looking guidance and also how successful the company’s extensive mitigation actions are proving.
We currently list Compass Group as a Buy
Severn Trent Plc (Q4 2020 Earnings Release)
Utilities such as Severn Trent have naturally proven popular as defensive havens this year with many comfortably outperforming the market. In these full-year results investors are expecting to see pre-tax profits ease back by around 4% to £364m but the all-important dividend should rise by a very healthy 7% thanks to the company’s commitment to raising its payments by at least retail price inflation plus 4%. Any comments on future dividend policy will be closely watched as will any update on cost savings and whether the company has seen any impact on its customers from the Covid-19 lockdown.
We currently list Severn Trent as a HOLD
Experian Plc (Q4 2020 Earnings Release)
The data analytics company reported solid interim results back in November but it is safe to say times have changed from now. Clues from January’s trading update remained positive however investors will be interested to see how the company has performed in the eye of the storm. With the company benefitting from solid revenue growth, strong cash-flows, margins and better diversification after it reduced its reliance on banks, investors will be quietly confident. One of the areas investors will also be keeping their eyes on is North America where the Group’s core driver for growth was deriving from in its previous guidance.
We currently list Experian as a BUY
Aviva Plc (Q1 2020 Sales and Revenue Release)
A good portion of its workforce will have been able to work from home since the crisis like most other financial services firms but the crisis will still no doubt have major implications for the life and insurance company. Fee income due to lower markets valuations of assets under management will take a hit, however we wait to see how consumers have reacted in taking up new policies. The group already cut back on dividends early on during this crisis and now investors will expect to hear whether this was a temporary cut or a permanent reset to a lower level.
We currently list Aviva as a BUY
Intertek Group Plc (Q1 2020 Sales and Revenue Release – Trading Update)
The quality assurance and safety testing company has been impacted by lower global trade volumes of commodities and goods. However the current crisis heightens the needs for greater quality assurance and testing needs, especially within healthcare and therefore the may have presented more opportunities for the group. Overall all the long term structural drivers should remain in place, but in the short term we await to see if the group follows others by halting cash pay-outs to investors.
We currently list Intertek as a BUY
Tate & Lyle (Q4 2020 Earnings Release)
Tate & Lyle release results next week after posting an update where they reported a significant drop in demand as a result of coronavirus impact with bulk sweetener volume down by 26%. Despite this, investors will be hoping that the Group’s strong balance sheet should see them through the worse with access to over $1bn in cash and credit. Any news regarding developments in the US which is the Group’s biggest market will also catch investor’s attention.
We currently list Tate & Lyle as a BUY
Burberry Group Plc (Q4 2020 Earnings Release)
Burberry's full year results will reflect on a year of turbulence for a variety of factor. Firstly the US-China trade wars impacting Asian demand, the Hong Kong protests and the shutdown of Asian economies due to the coronavirus. With shops closed during the third and fourth quarter, management indicated sales would fall by roughly 30%, taking sales for the year as a whole by down by roughly 4% to £2.6bn. Dividends will take a hit, while it was good to see management take a pay cut but the trading update in recent weeks will be closely followed. Given its strong online offering it will be interesting to see if consumers are buying online or holding off from luxury items during this crisis moment.
We currently list Burberry as a HOLD
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