We give our thoughts on what to expect from companies announcing results week commencing 16 November 2020.
Companies reporting w/c 16 November
Vodafone Group Plc: Q2 2021 Earnings Release
Trading for the first quarter was described as resilient amidst the global pandemic, with revenues only falling by around 1%. There is some expectation that we will see a similar performance for the second half as a whole, with people staying at home resulting in increased mobile usage. This is expected to somewhat offset the reduction in roaming charges, with international travel still restricted for many parts of the world. Investors will expect a further update on the looming IPO of the towers portfolio and further commentary on the recent acquisition of a further radio spectrum in Egypt. At times when dividends are slim, Vodafone will be looked at as a good option, and therefore investors will expect some assurances on its payouts.
We currently list Vodafone as BUY.
Smiths Group: Interim Results
In recent years, the Group has become a more diversified business offering services in a wider range of areas. As a result, this has helped provide some resilience in the current crisis. Furthermore, around 60% of the Group's costs are variable, meaning less operating leverage and more flexibility which has certainly helped throughout the crisis. Nevertheless, the Group has not been immune to the effects of the pandemic and has seen profits hit over the course of the year. That said, the share price has recovered relatively well; investors will be quietly confident that the Group's solid cash flows and healthy balance sheet can pull it through these difficult times.
We currently list Smiths as BUY.
Experian Plc: Q2 2021 Earnings Release
The world’s largest credit data group has expanded the range of industries it services. Its original focus on financial services has developed into other areas such as telecoms, automotive, healthcare, identity checking, anti-fraud and debt collection advice and the public sector. The Company has also been keen to expand its geographic reach in Europe, Latin America and Asia Pacific and to make bolt on acquisitions where appropriate. The US remains its most important market where around 60% of group revenue is generated. Overall, the performance so far this year has been resilient. The Group raised its guidance for organic revenue growth for the second quarter in September from 3% to 5%. This was as a result of stronger trading in July and August. Attractions include solid revenue growth, strong cash flow and margins, limited concerns over competition and a diversification strategy that has moved it away from relying on the financial sector. The share price has recovered all of the initial Covid-19 induced losses.
We currently list Experian as BUY.
Imperial Brands Plc: Q4 2020 Earnings Release
It has been another tough year for investors in tobacco giant Imperial Brands, with shares underperforming the market despite a trend towards more defensive stocks due to the Covid-19 pandemic. A big part of the reason for this is the Company’s first cut of its dividend for many years, but disappointing sales of next generation products is also a factor. The last update in October was a little more positive, but investors will be looking out for any news on future dividends, while also expecting to hear more details on the future strategy to be followed by new CEO Stefan Bomhard.
We currently list Imperial Brands as HOLD.
The British Land Co. Plc: Q2 2021 Earnings Release
Real estate, particularly retail-exposed property, has suffered throughout lockdown periods as stores have closed and rental income has been hit. This was evident in the Group's full financial year pre-tax loss of £1.1bn compared to the previous year’s £319m profit. Furthermore, this financial strain is likely to continue heading into this financial year following new restrictions and subsequent store closures. Although occupancy levels remain relatively healthy, particularly in London, the Group's shares still trade on a heavy discount. Investors will be hoping that this is purely a short-term issue, with solid longer-term prospects still in sight and the possibility of dividends being reinstated in the current financial year.
We currently list British Land as HOLD.
SSE Plc: Q2 2021 Earnings Release
The Group was disappointed with Ofgem’s draft proposal in July regarding the next 5-year regulatory framework, which is set to limit what companies can make with new price controls. Initial thoughts were that it was more negative than expected, although some analysts are expecting the final draft to be less harsh. In September, the Group stated that there would be an expected hit to operating profit over the first half of £120 - £130m as a result of the virus. Dividend expectations for the year remain at 80 pence plus RPI inflation and the majority of retail investors’ focus remains on the dividend.
We currently list SSE as HOLD.
Johnson Matthey Plc: Q2 2021 Earnings Release
Earlier in the year, Johnson Matthey announced that they would be unable to provide any forward guidance and that operating performance would be heavily weighted towards the second half of the year. As such, investors will be hoping for some positive news next week. In their last update, the Company did highlight that customer demand was recovering despite declining sales. The Company still remains well-placed to capitalise on the climate change movement with favourable forecasts for their products in regions such as China and India. Nevertheless, with the global economy still in recovery mode, we can expect Johnson Matthey will be too.
We currently list Johnson Matthey as HOLD.
Kingfisher Plc: Q3 2021 Sales and Revenue Release – Trading Update
Kingfisher, which owns both the B&Q and Screwfix chains, has been one of the standout performers in the retail sector this year, which is reflected in its share price. That’s down to an increase in demand for DIY products as more people occupy themselves at home, along with a better strategy implemented by the new CEO. The interim results in September showed a big increase in online sales along with a notable improvement in the performance of the long-suffering French businesses. Investors will be looking closely at those two factors in this third quarter update and will also be interested to see if the more recent lockdown and restrictions across Europe have altered the Company’s full-year forecasts.
We currently list Kingfisher as HOLD.
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