A week in advance. 21st April - 25th April 2008
By Keith Bowman | 18 Apr, 2008
A week in advance
Our Equity Analyst, Keith Bowman provides you with his summary of what to look out for in the coming week.
This coming week sees a further steady flow of UK corporate announcements, whilst the US first quarter results season remains ongoing. On an economic basis, events may prove a little quieter against recent weeks.
Economics
In the UK, further explanation will be provided in relation to the Central Banks early April decision to cut interest rates (by 1/4pc to 5.0pc). Minutes from the meeting are due to be released on Wednesday.
With March annual headline inflation data recently coming in unchanged at 2.5pc, as increases in air travel and energy prices were offset by falls in furniture prices, the Bank of England’s Monetary Policy Committee (MPC) may have just gained enough leeway to allow it to cut rates – consensus forecasts were for a rise to 2.6pc. Although Deputy Bank of England Governor John Gieve and fellow committee member David Blanchflower are expected to have voted in favour of a cut – as at the March meeting - markets will be interested to see which way Governor Mervyn King’s vote fell. Mr King has traditionally voted on the side of caution, highlighting concerns for elevated inflation. A ‘yes’ vote by the Governor could see markets interpret the action as increasing the likelihood of further near term interest rate cuts, possibly as early as May, with Mr King then appearing to adopt the position of his US counterpart in believing that credit strains on the economy will eventually reduce inflation pressures.
In the USA, further housing data is scheduled to be released – Wednesday sees existing home sales data, whilst Thursday sees the announcement of new home sales data. Thursday also provides a broad gauge on economic activity, with a so called lagging indicator i.e. looking backwards, with the release of durable goods data for March. Durable goods are those with a working life of over 12 months and provide a demand measure for higher value items in the economy.
Companies
On the corporate front, food manufacturer and owner of discount clothing retailer Primark, Associated British Foods, is due to report its half year results on Tuesday. At the group’s most recent trading update back in late February, management suggested that progress was continuing to be made, with first-half results set to show good growth in adjusted operating profit compared with the £272m achieved in the same period last year. Management noted that strong growth in its agricultural (animal feed services), grocery and Primark retail chain should more than offset an expected and previously reported decline in the company’s sugar business. Branded products manufactured by the group include Allinsons and Kingsmill bread, Twinings tea, Ovaltine, Mazola, Silver Spoon sugar and Ryvita crackers. Current consensus forecasts for adjusted half year operating profits focus around the £297m marker (+9pc), with the dividend expected to increase by approximately 8pc. As a footnote, whilst Primark is expected to have enjoyed positive like-for-like sales growth, the level of growth will be closely scrutinized in light of the broader concerns for UK consumers who are curbing their spending.
Later on in the week, household cleaning goods giant Reckitt Benckiser is due to report first quarter results. The group’s fourth quarter and full year results announced back in mid February saw the company benefiting from both the launch of new products such as Air Wick Freshmatic and Vanish Oxi Action Multi, along with strong growth of former Boots Healthcare International (BHI) brands Nurofen, Strepsils, and Clearasil. Despite strong trading to date, broader concerns of consumers trading down to non-labelled goods have been raised, although management have been showing no signs of such concern. Current consensus analyst estimates for first quarter pre-tax profits stand at around £280.0m, up nearly 19pc over last year. Market consensus opinion for time being remains highly positive in tone.
Other corporate announcements expected over the course of the week include results and trading updates from pharmaceutical groups GlaxoSmithKline and AstraZeneca, former building society Bradford & Bingley and advertising giant WPP.
Week Ahead Diary
Full Year Results
Monday – n/a
Tuesday – Game Group, Tanfield Group
Wednesday – n/a
Thursday – Aquarius Platinum (Q3)
Friday – n/a
Half Year Results
Monday – n/a
Tuesday – Associated British Foods
Wednesday – GlaxoSmithKline (Q1)
Thursday – AstraZeneca (Q1), Reckitt Benckiser (Q1), Punch Taverns
Friday – WPP (Q1)
Trading Statements
Monday – n/a
Tuesday – Bradford & Bingley
Wednesday –
Thursday – Persimmon
Friday – Aviva (Q1 New business figures)
Economic Diary
Monday – Rightmove (April) house price survey
Tuesday – n/a
Wednesday – Minutes from the BOE meeting (9/10 April), US Existing homes sales data
Thursday – US New home sales data, US Durable goods 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.
