A week in advance 25th - 29th August 2008
By Keith Bowman | 22 Aug, 2008
This coming week sees an upturn in the number of UK corporate second quarter/half year results being announced, whilst the economic calendar lacks a major focus. In the US, the second quarter corporate results season has now finished, whilst economic events may well again focus on interest rate considerations.
Economics
In the USA, the highlight of the week may well prove to be the release of minutes from the US Central Bank’s last interest rate policy meeting, also expected on Tuesday. Comments accompanying the Bank’s unchanged decision (staying at 2pc) back in early August, appeared to suggest that downside concerns in relation to the health of the US economy remained equally balanced with the rising trend of US and global inflation. The minutes are likely to be closely scrutinised by investors for further clues as to the potential direction and timing of the next interest rate policy move. The coming US Presidential elections in November, continue to complicate matters, with the US Central Bank historically reluctant to execute changes close to the election itself.
Companies
On the corporate front, further half year results from UK housebuilders lie in prospect. The housebuilder which has achieved the highest profit margin across the industry, Bovis Homes, is due to report on Tuesday. In early July, the company noted in a trading statement that ‘the worst market backdrop in many years’ will cause it to slash its coming interim dividend payment by 75pc to 5 pence per share. Sales volumes had dropped by over 30pc and management reiterated the negative impact this will have on profits. The company now expects to deliver a gross housing profit margin of approximately 26pc for the first-half, down 6pc from last year.
The following day, the biggest builder by volumes in recent years and a company which has expanded into both the US and Spanish housing markets, Taylor Wimpey, is due to report its half year figures. The group which has net debt of around £1.7 billion, failed to secure additional funding back in early July. Management have already announced their intention to completely cut the half year dividend payment. Furthermore, unlike its rivals in the UK, the company has confirmed that it will be writing down the value of its land and work in progress by £660m during 2008. As with the wider sector, cashflow has rapidly overtaken profit generation as the priority for the group’s management over recent months. Market consensus opinion for Taylor Wimpey is currently negative in tone.
Away from the housebuilding sector, the world’s biggest spirits manufacturer, Diageo, is scheduled to report its full year results on Thursday. At a trading update back in early May, management maintained its full-year guidance for 9 percent organic operating profit growth after trading in the third-quarter continued in line with the first half. In the nine month period to the end of March, the group achieved 7pc organic net sales growth, in line with the performance seen over the first half. Current consensus analyst estimates for full year pre-tax profits stand at around £2.2 billion (+5.3pc), whilst the dividend is expected to enjoy a similar increase to 34.5 pence per share. Market consensus opinion is currently cautiously positive in tone.
Other corporate announcements expected over the course of the week include results and trading updates from mining mammoth Rio Tinto, cash handling group G4S and mortgage bank Bradford & Bingley.
Week Ahead Diary
Half Year Results
• Monday – n/a
• Tuesday – Bovis Homes Group, Bunzl, Cairn Energy
• Wednesday – Antofagasta, G4S, Serco Group, Taylor Wimpey, Tullow Oil
• Thursday – AMEC, Cattles, Ferrexpo,
• Friday – Bradford & Bingley
Full Year Results
• Monday – n/a
• Tuesday – n/a
• Wednesday – n/a
• Thursday – Diageo
• Friday – n/a
Economic Diary
• Monday – n/a
• Tuesday – US Central Bank interest rate policy meeting minutes
• Wednesday – n/a
• Thursday – n/a
• 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.
