Please remember the value of your investment can go down as well as up and you may not get back the full amount you invest. We don't provide advice so if you are in any doubt about buying and selling shares or making your own investment decisions we recommend you seek advice from a suitably qualified Financial Advisor.

Tuesday preview: Public finances, results from CRH, Easyjet, Kingfisher and Johnson Matthey

By Oliver Haill

Date: Monday 20 Nov 2017

LONDON (ShareCast) - (ShareCast News) - Tuesday offers a prelude to a particularly keenly watched Autumn Budget the follow day from Philip Hammond, while it's a busy day of corporate results are due from the likes of CRH, Easyjet, Kingfisher and Johnson Matthey.
Before the Chancellor nervously goes through his Budget sums one last time, he will have fresh data on public sector net borrowing to perhaps help or hinder him.

A month ago the public deficit stood at £4.9bn - the lowest September borrowing for a decade, with public sector net borrowing excluding stakes in banks (PSNBx) of £5.9bn.

Against the background of high employment supporting robust national insurance contributions and income tax receipts, we expect the pattern of better-than-expected revenues to be repeated, economists at Morgan Stanley said the deficit is likely to stay below last year's level, forecasting £6.5bn.

The consensus is for a total deficit of £6.6bn and PSNBx of £7.2bn.

"So far, budget execution has been ahead but we expect such effort to be relaxed over the remained of the year and monthly PSNBx to print higher again," said Barclays, predicting £7.0bn.


DIY retailer Kingfisher will publish a third quarter trading update on Tuesday, two months after a strong set of first-half results.

In the first six months of the year, the B&Q and Castorama owner lifted total sales 4.5% but like-for-like sales fell 1.3% due to weaker sales in France and disruption to its UK business from product availability.

"Looking across our markets, we have seen solid growth at Screwfix and Poland, offset by continued weaker sales in France and some business disruption, principally reflecting product availability and clearance. We are aware of and are acting on the causes of this disruption, which we are confident will ease," said chief executive Véronique Laury, who is not yet halfway through her five-year 'One Kingfisher' transformation plan.

Goldman Sachs gave Laury a boost, saying the market is too sceptical on her strategy and that while the plan may appear ambitious, its analysis suggests that Kingfisher should be able to deliver £300m of cost savings by FY21, versus Reuters consensus of around £250m and company guidance of £500m.

Furthermore, RBC Capital Markets predicted Kingfisher is now "better positioned versus the sector" given the broadening housing recovery in France and Laury's accelerated plans to improve French ecommerce, on top of the fast-growing Screwfix and Poland businesses.

For the third quarter, Barclays forecast a fall in constant currency sales for UK & Ireland of 0.2%, with France down by 3% and other international sales up 2.7% but a benefit from the pound's translation with the euro and zloty.

AO World, which has not updated the market since July, is due to put out its interim numbers and is another retailer exposed to the under-pressure UK homeowner.

The online white-goods retailer reported UK sales growth of 6.2% for the first quarter, which was well below the run-rate the previous year of 14.5% and followed comments from management at the full-year results in early June that it expected the quarterly growth rate to "slow significantly year on year".

Although industry volumes for major domestic appliances were under significant pressure in the first quarter, broker Numis said it expects sales growth to accelerate from the second quarter as the Stamp Duty boost from last year annualises and comparatives ease.

Numis forecasts second-quarter UK growth in the region of 10%, supporting first-half UK EBITDA in the region of £10m, below that recorded last year, reflecting a normalisation in margin after the above-trend result last year and the additional marketing expense associated with sponsoring 'Britain's Got Talent'.

Fresh from cementing a new US acquisition, building materials group CRH will report its third quarter with a chorus of bullish analyst notes helping lifting the shares away from what was close to a seven-month low earlier this month.

Barclays and Morgan Stanley both made the stock their top pick in the sector, with shareholder approval of the purchase of Ash Grove last month adding to the story.

Investors continue to focus too much on short-term headwinds such as the US weather, said Barclays, saying investors are overlooking the benefits of the ongoing M&A strategy and improving outlook in US and Europe.

While the third quarter "might still be impacted by adverse weather in the US", admittedly leading Barclays to lower full year EPS by 3%, analysts see the mid-term potential strengthened thanks to construction markets likely firming up in the US and Europe and the accretive impact of recent acquisitions, with synergies potentially announced on Tuesday.

Morgan Stanley also expects CRH to give more colour on Ash Grove's profitability and targets in the trading update, initially estimating at least €100m of synergies thanks to balance sheet optimistion and a good geographical fit. "Coupled with continued positive contribution from building, this should result in 2-3% volume growth per annum near-term for cement and aggregates."


EasyJet reports final results fresh from appointing Johan Lundgren as its new chief executive, former deputy CEO of TUI to replace Carolyn McCall in the captain's seat after she leaves in January.

In October the company said the fourth quarter had seen record passenger numbers, although revenue per seat fell back 3.7%, and profits guidance for the full year was upped to £405-410m before tax, though this is down from the £495m last year.

UBS forecasts revenues of £4.85bn up from £3.67bn last time and PBT of £407m.

As well as the appointment of Lundgren, the budget carrier picked up €40m of aircraft, staff and slots from Air Berlin and also has a bid lodged for some of Alitalia's assets.

"EasyJet is clearly sticking with its growth plans despite the capacity squeeze taking other airline out of the skies," said broker Hargreaves Lansdown. "Recent passenger statistics suggest that may be paying off."

Compass, the corporate caterer, also serves up full year numbers, with its own succession plans also sewn up.

It was announced in September that chief executive Richard Cousins, CEO for the last 11 years, will hand over to Dominic Blakemore, who has been promoted from chief operating officer for the European business and is working as deputy CEO until Cousins leaves at the end of March.

Results should show Compass returning to solid low to mid-single digit percentage growth for the year, with the group saying growth will be weighted to the second half.

The consensus forecast is for sales of £22.7bn and EBIT of around £1.7bn.


Interims are due from Johnson Matthey, which lifted its shares off the summer's near-18-month lows with September's announcement that it was going to ramp up its investment in materials for the electric car market.

For the current financial year, which runs to the end of March 2018, management expect foreign exchange to benefit operating profit by £13m, with estimated restructuring benefits in this financial year of £10m.

The company also expects a further £50m of savings, mostly from procurement, over the three years beginning in financial year 2018/19. It plans to reinvest most of the savings, with the balance for margin expansion.

For Tuesday's interim numbers Deutsche Bank forecasts PBT to increase 5% to £231m. "On outlook, we expect management to reiterate its guidance of circa 6% underlying sales growth and to provide an update on cost savings initiatives and more recent developments in Battery Materials."

Defence contractor Babcock will also report interim results, fresh from winning three major contracts from the UK Ministry of Defence to provide technical support services to the Royal Air Force.

Broker Shore Capital said that given the stability and visibility of its operating base, numbers should come in as expected.

"The focus is set to be on market conditions with budgets tight for the group's main client in the UK's MoD. Our view is that, with new procurement programmes under pressure, existing assets must be maintained in the field, potentially with longer service lives - we do not see any negatives here for Babcock therefore.

Investors will be hoping that management can restore some confidence in the company after recent concerns over potential delays to defence contracts, said the Share Centre's Spooner, suggesting investors will be concentrating on the outlook for 2018, its order book and bid pipeline.

Generator rental group Aggreko is expected to release a short trading update covering trading from July to September.

UBS expects a small improvement in revenue trends, but said the focus will likely be on the order intake trends and particularly newsflow on Bangladesh or Puerto Rico contracts; "if Aggreko fails to get either contract, we see downside risk to consensus in FY18e.

After first-half revenue growth of 0%, the bank's analysts expect 4% growth in the second half and so look for an improving revenue trend in this third quarter.

Tuesday November 21

Existing Home Sales (US) (14:00)

CBI Industrial Trends Surveys (11:00)
Public Sector Net Borrowing (09:30)

AFI Development, Aggreko, CRH, Equiniti Group, Frutarom Industries Ltd GDR (Reg S), Intertek Group, Kingfisher, SIG, Spectris, Spirax-Sarco Engineering

AO World, Babcock International Group, Big Yellow Group, CML Microsystems, De La Rue, Halma, Homeserve, IMImobile , Johnson Matthey, Scapa Group, Severfield, Solid State, Telecom Plus, VP

Compass Group, CYBG , easyJet, Focusrite, Renew Holdings, Stride Gaming, Utilitywise plc

Artemis VCT

Diurnal Group, Dunelm Group, Harvest Minerals Limited (DI), Jupiter US Smaller Companies , Pan African Resources, Tiso Blackstar Group SE

Close Brothers Group

Intu Properties, Konami Holdings Corporation, Stilo International