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Friday preview: UK lending, German Ifo, Fuller's results, Next enters Black Friday

By Oliver Haill

Date: Thursday 23 Nov 2017

LONDON (ShareCast) - (ShareCast News) - Friday offers a relatively peaceful end to the week in the financial calendar, with UK mortgage numbers, Germany's Ifo business climate survey and US PMI surveys to sate macro fans, results from Fuller Smith & Turner and Future, while those with some early Christmas shopping may be more focused on Black Friday.
A flash manufacturing PMI for Japan will be out overnight, while the S&P and Moody's sovereign rating review of South Africa on Friday "could be worth keeping an eye on given the threat of losing its investment grade status", said Deutsche Bank.

In the UK, mortgage approvals numbers, formerly from the BBA but now from the new UK Finance trade body, are forecast to ease off to 40,900 in October from 41,584 a month earlier.

After an relatively upbeat CBI survey, retailers will be hoping to continue the momentum with Black Friday promotions to inspire consumers to splash out. Calculations by IMRG showed UK consumers spent around 6.5bn during the whole Black Friday/Cyber Monday week in 2016.

Howard Archer, chief economic advisor to the EY ITEM Club, said research suggests that online sales are likely to benefit more than the high street.

Consumer anticipation surrounding Black Friday may have delayed a proportion of spending in October, said new consultancy Retail Economics, though its own recent research suggests "consumers appear to be less enthusiastic about the event and are expecting to spend less than last year".

Next is a new entrant into this year's retail phenomenon, while Sainsbury's Argos arm received 12m hits on the day alone last year and suggested Black Friday tends to be about "self-gifting" rather than the traditional Christmas "time for giving".

In Europe, the Ifo business climate was the day's only item worthy of a preview for most economists, with Germany in focus for many reasons. While the country's politicians struggle to form a government this month, the last quarter saw German GDP growth pick up by an unexpected 0.8%, helped by an upturn in industrial orders.

HSBC said the Ifo survey was likely to edge already up slightly further in November from the new all-time high of 116.7 last month.

On the other hand expect the consensus was for the headline Ifo number to tick down by two basis points to 116.5.

Morgan Stanley, which forecast 116.6, said this reflects mostly a mild decline in business expectations while the assessment of current conditions should remain unchanged at 124.8.

"Our forecast is consistent with a solid outlook for Germany. However, at such a high level, it is possible that the relationship between the surveys and what they imply for economic activity becomes non-linear, thus leading to a potential overestimation of the pace of growth."


London-based brewer and pub operator Fuller Smith & Turner is due to serve up interim results on Friday.

Having made a strong start to the financial year, with like-for-like sales growth up 6.6% for first 16 weeks, house broker Numis expects a "degree of slowdown" for the rest of the year.

Following a number of weak industry datapoints, analyst Tim Barrett revised downwards his LFL sales assumptions and trimmed EPS estimates as a result.

August's Coffer Peach business tracker showed a LFL sales decline of 1.5% in London pubs and other operators identified softer trading in certain London suburbs.

Barrett now assumes LFL sales growth of 3% for the remainder of the year, giving 4.1% on an annual basis, and for the first half expect LFL sales growth of 5% and 3.9% growth in net income per tenancy.

With a pick up in cost inflation similar to its peers, the analyst forecast a 1% increase in PBT, accentuated by a lower effective tax rate to give EPS of 33.4p, a 2% annual increase.

Ahead of its final results publisher Future gave a relatively detailed pre-close statement last month, confirming a strong end to the year.

Management said trading for the year would be ahead of expectations, with the media division performing strongly and seeing fast growth in both ecommerce and events, while the magazine arm benefits from the added scale and operational efficiencies of the Imagine Publishing, TeamRock and Home Interest acquisitions.

Numis, which is also broker to Future, noted the strong cash generation with net debt expected to be roughly equal to EBITDA.

"Having upgraded estimates at the pre-close there should be no major surprise to estimates, with outlook and current trading commentary of note," said analyst Gareth Davies, forecasting revenue of 82.5m, an adjusted PBT of 7.7m and an adjusted EPS of 16.4p.

Friday November 24

IFO Business Climate (GER) (08:00)
IFO Current Assessment (GER) (08:00)
IFO Expectations (GER) (08:00)

Mortgage Approvals (09:30)


Fuller Smith & Turner

K&C Reit

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