A Week in Advance 28th July - 1st August 2008
By Keith Bowman | 25 Jul, 2008
This coming week sees the UK corporate second quarter/half year results season moving into full swing, whilst the economic calendar proves relatively quiet. Over in the USA, the corporate second quarter results season moves into top gear, whilst the economic focus shifts to the employment scene.
Economics
In the UK, the economic calendar appears relatively low key. The latest monthly survey from the Confederation for British Industry (CBI) – due on Tuesday – could prove a feature over the week. On the same day, the Building Societies Association’s latest lending data is due. Given the current difficulties in the credit markets, the figures provide a continuing gauge on the willingness of building societies to lend and the demand coming from consumers.
In the USA, the unemployment situation comes strongly back into focus. Monthly July employment statistics are due to be released on Friday. As of June, the US economy had lost jobs for the previous six consecutive months. An estimated 62,000 jobs were lost in June, marginally more than the 60,000 consensus estimate, although loss estimates for both April and May were revised downwards ie more job losses than first estimated.
The unemployment rate, taken from a separate survey of households, held steady at 5.5pc as broadly forecast in June. Economists have estimated that the economy needs to create about 100,000 jobs each month to keep up with the flow of new workers on to the employment scene, although an average of around 10,000 jobs per month have been created over the last 12 months. As always for investors, the figures remain critical, with revisions to previous month’s estimates often more important than the actual monthly figures.
Companies
On the corporate front, the sector at the front of the current difficulties, banking, begins to announce second quarter / half year results. On Wednesday, the season commences with Lloyds TSB. Back in early May, when the company provided its last trading update, management noted that the bank remained on track to deliver a ‘good performance’ over the first half of 2008. However, a write-down of £387m was made, the majority against credit related investments held. Nonetheless, founded on the group’s strong deposit base, management also noted that market share gains had been made in a number of business areas, including mortgage lending, whilst the group’s capital adequacy ratios remained strong.
Furthermore, management noted that the bank remained on track to achieve its £250m cost savings programme during 2008. Current consensus analyst estimates for .
half year operating profits stand at around £2.1 billion down 13.9pc over last year’s figure of £2.44 billion. However, the half year dividend is expected to receive a marginal increase (+2.6pc), coming in at around 11.5 pence.
The following day, the UK’s biggest mortgage provider, HBOS, is due to report its half year figures. The company has recently received significant investor attention, given the low acceptance of new shares issued in relation to its £4 billion fund raising. The group’s most recent trading update in mid June suggested that trading remained ‘resilient’ aided by higher repayment rates for borrowers.
Good sales of insurance products and higher interest rates on new loans were helping to offset a decline in overall lending levels across the group. However, management’s announcement that higher risk buy-to-let and self certification mortgages had seen a rise in arrears over the 5 months to the end of May 2008 (from 2.59pc to 3.09pc in arrears) overshadowed broad management reassurance. Concerns for arrears levels also rose as management increased its loss estimate for UK property prices over 2008 from 5pc to 9pc. As for the expected figures, consensus analyst estimates for half year operating profits focus around the £2.65 billion mark down 29.5pc over last year (£3.82 billion). Furthermore, as announced at the time of the rights issue back in April, the half year dividend is being scrapped in order to further conserve cash.
Other corporate announcements expected over the course of the week include results and trading updates from media concern and owner of the FT newspaper Pearson, oil mammoths BP and Royal Dutch Shell, along with consumer goods giants Reckitt Benckiser and Unilever, just to mention a few.
Week Ahead Diary
Full Year Results
Monday – n/a
Tuesday – n/a
Wednesday – n/a
Thursday – BSkyB
Friday – n/a
Half Year Results
Monday – Pearson, Reckitt Benckiser
Tuesday – British Petroleum, Bradford & Bingley,
Wednesday – Lloyds TSB Group, Rexam
Thursday – Anglo American, AstraZeneca, BT Group (Q1), BATs, Centrica, HBOS, William Hill, Prudential, Reed Elsevier,Royal Dutch Shell, Unilever
Friday – Alliance & Leicester, BAE Systems, British Airways (Q1)
Trading Updates
Monday – Marston’s, Northern Foods
Tuesday – n/a
Wednesday – Next, QinetiQ, Aviva (New business figures)
Thursday – Carphone Warehouse, SAB Miller
Friday – n/a
Economic Diary
Monday – n/a
Tuesday – CBI Trade survey, Building Society Association mortgage lending data
Wednesday – n/a
Thursday – n/a
Friday – US employment figures (July)
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.
