A week in advance 13th - 17th October 2008

By Keith Bowman | 10 Oct, 2008 

This coming week sees the scheduled UK major corporate calendar again staying relatively quiet, whilst major economic announcements look likely to dominate investor attention. In the US, a series of economic announcements are scheduled, whilst the third quarter corporate results season begins to gain momentum.

Economics

In the UK, although investor attention will remain with the almost daily global events in the financial credit markets, attention turns back to pricing issues or inflation data. On Monday, Producer Price Indicators or factory gate inflation, as it is often known, is due to be announced. On Tuesday, the more general inflation or Consumer Price Index is scheduled to be announced. With energy and commodity prices having retreated significantly in recent weeks and months – oil is now trading back near $90 as opposed to its July08 high of $147 per barrel – economists’ expectations that inflation may now have peaked, have grown rapidly.

Away from inflation figures, data which very much gauges economic ills for the population as a whole – unemployment numbers (for September) – are due to be released on Wednesday. In August, the number of people claiming unemployment benefit rose by its biggest amount since December 1992, marking an increase for the seventh consecutive month. The claimant count jumped by 32,500 in August, more than forecast, with July's count also being revised upwards by more than 7,000. The numbers are likely to add weight to the Bank of England’s recent decision to cut the UK’s bank base rate by 0.5pc.

In the USA, whilst the wait continues for the recently passed $700 billion bail-out plan to begin taking effect, investor attention is likely to switch back to economic announcements. Like the UK, inflation data is also scheduled to be released over the course of Wednesday and Thursday. As with investors almost globally, expectations are now that inflation pressures should begin to subside, as energy and commodity prices have retreated from highs reached earlier this year.

Also on Wednesday, the US Central Bank’s economic regional survey and known as the ‘Beige Book’ comments are scheduled for release. Any comments in relation to current corporate trading and health will be of particular interest, as investors continue to assess the impact on the wider corporate world from the fall-out in financial markets. Finally, and in a similar vein, industrial production figures – due to be announced on Thursday – should help provide another gauge of the impact on the wider corporate world of the financial crisis, along with ongoing third quarter results being announced. 

Companies

On the corporate front, hospitality group Whitbread is due to announce its half year results on Tuesday. The company, which owns such businesses as Premier Inns, Costa Coffee and Beefeater pub restaurants, issued a reassuring trading update back in early September. At the time, the company’s Beefeater chain appeared to be benefiting from an element of ‘trading down’ by cost conscious consumers (like-for-like sales up 4.4pc), whilst aggressive expansion and brand awareness looked to be underlying momentum at Costa (total sales up 23.6pc).

As for Premier Inns, in conjunction with a marked expansion policy – over 4000 new rooms are targeted this financial year – cost awareness on behalf of both corporate and retail travellers appeared to be underwriting ongoing progress. With the fall-out in financial markets increasing over recent weeks, investors will be eager to assess whether the group’s ‘value attributes’ have continued to see the company progressing or whether even the value end of the hospitality market has begun to suffer.

On the same day (Tuesday), investors will be provided with the latest opportunity to gauge the health of the UK housing market, as housebuilding group Bellway is due to announce its full year results. The group’s trading update back in mid August saw activity levels continue to deteriorate. Reservations had fallen by around 45pc for the second half of the financial year, compared to the same period in 2007, whilst completed sales had dropped by 14.2pc to a total of 6,556.

In addition, given additional incentives in selling properties, the group’s operating profit margin was expected to decline from 18.7pc over 2007 to anything up to 3pc over the current financial year. That said, unlike some rival builders, the group had so far decided not to write-down the value of landbank holdings in the face of falling land valuations, although the situation was being closely monitored by management. Investor attention for the coming results is likely to focus on management’s current assessment of the need for a land value write-down, the declared fall in the operating profit margin and the strength of current trading. Current market consensus opinion is neutral in tone.

Other corporate announcements expected over the course of the week include a trading update from Midlands based pub group Marston’s and full year results from support services group Connaught.

Week Ahead Diary

Interim Results

Monday – n/a
Tuesday – Whitbread
Wednesday – n/a 
Thursday – n/a
Friday – n/a

Full Year Results

Monday – n/a
Tuesday – Bellway, Connaught
Wednesday – n/a 
Thursday – n/a
Friday – n/a

Trading Statements

Monday – n/a
Tuesday – n/a
Wednesday – Marston’s
Thursday – n/a
Friday – n/a

Economic Diary

Monday – UK Producer Price Indicators
Tuesday – UK Consumer Price Index (Inflation data)
Wednesday – UK Unemployment data (Sept), US Beige Book comments, US Producer Price Indicators, US Retail sales
Thursday – US Consumer Price Index (Inflation data)
Friday – n/a

Note: This list represents what we believe are the highlights of the coming week and is not an exhaustive list of company announcements or economic events. Source: Digital Look.