We give our thoughts on what to expect from companies announcing results week commencing 23 November 2020.
Companies reporting w/c 23 November
Intertek Group Plc: Q3 2020 Sales and Revenue Release – Trading Update
The quality assurance and safety testing company has so far been resilient to the economic disruptions of Covid-19, with half year revenues falling by 7.8%, along with a reduction in the volume of traded goods. However, parts of is testing businesses, especially related to medicals and healthcare, have benefitted from the crisis. Investors expect a better third quarter, following management’s indication of an improved second half. This outlook and the resilient dividend has so far left the shares above pre-crisis levels, and investors would expect an improved outlook with vaccines on the horizon.
Compass Group: Q4 2020 Earnings Release
Global catering group Compass has been heavily affected by the Covid-19 lockdowns around the world this year. However, in July, the Company confirmed that around 60% of its business was back in operation. The Company admitted that its recovery had been fairly slow, and the more recent restrictions caused by the second wave of the virus have not helped that situation. Given the importance of the Group’s North American operations, any comments in these full year results specific to that region will be of particular interest, especially as the virus continues to spread across the US. The market will also focus on the state of the company’s resources, which stood at £5bn in July. Any further comments on prospects for 2021 as vaccines are rolled out will also be welcomed.
CRH Plc: Q3 2020 Sales and Revenue Release – Trading Update
The building materials group’s profitability is strongly linked to the health of the global economy, in particular housing and construction activity in the US and Europe. The Group has a strong balance sheet with good cash generation. As the financial impact of the pandemic continues to be felt, governments may decide on further fiscal pushes, which could see a boost to infrastructure spending from which CRH is well positioned to benefit. With performance driven by the Group’s three main divisions (Americas Materials, Europe Materials and Building Products), sales are expected to be slightly lower over the third quarter. As such, the longer-term focus will remain on improving profitability, margins and cash.
Pennon Group Plc: Q2 2021 Earnings Release
Shares in water utility company Pennon have been resilient this year, in line with other defensive companies. Among the key assets owned by Pennon is the South West Water
business, which serves a population of 1.7m people. Further, the Company sold its Viridor recycling business for £4.2bn in March, and so the market is likely to be interested in detail on how the Company plans to use the £3.7bn it received from the deal (there have been some reports the Company may be considering the purchase of Southern Water). There should be few surprises in the interim numbers themselves, as the Company said in late September that its financial performance was on track. Despite this, the pandemic is expected to reduce revenues by £10m in the current year.
Melrose Industries Plc: Q3 2020 Sales and Revenue Release – Trading Update
The focus will now be on managing the challenging situation created by the virus, especially for its aerospace and automotive divisions. The share price has been hit very hard in the current crisis, and although there has been a small recovery on the back of vaccine hopes, the shares remain one of the more volatile in the FTSE 100. Any update on cost savings or future sales will be worth noting.
United Utilities Group Plc: Q2 2021 Earnings Release
The Group provides water services across the northwest of England, to a customer base of around seven million people. There has only been a partial recovery in the share price since March, as the market focussed on a possible increase in bad debts as a result of the virus and how stable the dividend is going forward. With a current dividend yield of over 4%, income investors will be looking out for any news regarding its dividend policy.
Aviva Plc: Q3 2020 Sales and Revenue Release – Operating Update
The life insurance group is now under the control of Amanda Blanc as CEO, so it will be interesting to see any changes in style or strategy from her predecessor. Covid-19 has hurt the business through higher insurance claims and lower investment returns (and therefore management fees). This resulted in the suspension of the dividend, which although now reinstated, has prompted a review of the Company’s long-term dividend strategy. With viable vaccines on the horizon, investors will be pinning their hopes on any positive news, particularly the possible resumption of the dividend. Meanwhile, though, it is still expected that new management will continue to pursue structural reorganisations to reduce the complexity of the organisation and deliver cost cutting programmes.
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