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Thursday preview: Results from DMGT, Greene King and Marston's; Eurozone inflation, UK confidence

By Oliver Haill

Date: Wednesday 29 Nov 2017

LONDON (ShareCast) - (ShareCast News) - Companies reporting on Thursday include DMGT, Grainger, Greene King and Marston's, while the big macro data will be European consumer prices, along with some official Chinese data, German unemployment and US PCE inflation.
The European session will open after China's official manufacturing and non-manufacturing purchasing purchasing managers' index surveys are released, which can have strong effects on global commodity prices in particular.

The stand out data point in the eurozone will be the preliminary, or 'flash', core (HICP) inflation figures for November, which will be preceded by a number of national figures, including France and Italy. Germany's HICP reading came out higher than expected at 0.3% month-on-month on Wednesday.

With the ECB having already hinted that the headline inflation measure is likely to fall towards the end of the year as its underlying trend.

However, year on year growth in headline inflation is forecast to pick up 1.6% from the 1.4% last month, according to the consensus estimate, while HICP inflation is seen strengthening to 1.1% from 0.9%.

Barclays said risks to forecast are skewed to the downside, with headline and core inflation expected to print 1.57% and 0.97%, respectively.

Danske bank said: "We do not see the October dip as the beginning of a declining trend, but instead expect core inflation to bounce back to 1.1% y/y in November. The combination of a rebound in core inflation and higher energy prices driven by the recent pickup in oil prices leaves us to project an increase in the headline measure to 1.6% y/y."

In the US, the PCE deflator and core readings of inflation are the highlights, along with personal income and spending, November Chicago PMI, and a speech from Fed chief designate Jerome Powell.

As Governor Powell has only infrequently commented on monetary policy, markets will pay close attention to his views on the pace of policy normalisation, said Investec, with screens tuned into his talk at the University of Maryland.

GfK's survey on consumer confidence in the UK, will receive attention even though it is a component of the European Commission's sentiment survey released the day before.

It is unclear how much macroeconomic information will emerge from the Bank of England hosting Grayson Perry for a One Bank Flagship seminar entitled "I've Read All the Academic Papers on Empathy".


Outside of results, life insurer Aviva is hosting a capital markets day for investors and analysts, a couple of days after its shares were boosted by rumours suggesting a 1bn buyback of its stock was planned.

The reports may have been derived from research from UBS, which forecast Aviva has excess deployable capital of around 4bn out to the 2020 financial year, enough to drive both a sector-leading dividend and make a multi-year share buyback of 0.5bn per year in 2018 and 2019.

"Further capital deployment through reinvestment/M&A (1bn over 2018/19E) and debt reduction (1.1bn 2018/19E) can position the business to generate growth in shareholder value and drive higher capital returns over the medium term."

The Swiss bank's analysts also expect the capital markets day to go through an update on strategy, financials and a closer look at Aviva's international businesses, plus an update on the digital strategy.

The main investor focus is expected to be on how much capital will be deployed, and how, along with earnings growth momentum following a number of recent disposals.

JPMorgan Cazenove said a 1bn buyback compared with its expectation of 0.3bn per annum for 2017-2019.

If a share buyback is announced, analysts said they believed it would be "imply that management is looking to accelerate the cash flow deployment plan from cash received from recent disposals and strong subsidiary cash flows" as well as helping support earning per share growth that has been recently impacted by disposals of some European businesses.

Ahead of its final results, Daily Mail owner DMGT has already released a detailed pre-close statement, so there is not expected to be many significant surprises.

The key focus will be an update on strategy, current trading and outlook, said broker Numis.

Management noted an expectation that PBT for the year would be towards the bottom end of the published range, with adjusted EPS towards the top end of range, and net debt to EBITDA below 1.5 times.

"In terms of specific estimates we are at revenues of 1.67bn, adjusted operating profit of 188.9m, an adjusted PBT of 213.9m, an adjusted diluted EPS of 52p and a dividend of 23p."

Residential landlord Grainger indicated it was making good progress in 2017 in its September trading update.

Numis forecast the group will show roughly 30% growth in trading profit, as management actions to reduce operating and finance costs continue to benefit.

"We forecast that the net rent roll will grow circa 10% and the profit on the sale of property will be broadly flat on the strong comparative from last year. We will predominantly focus on management's assessment of current market conditions and the progress in the PRS pipeline."

In September Greene King was crying into its beer as takings from its pubs shrank in the first 18 weeks of the year and it expressed caution about the coming months due weaker consumer confidence, increased costs and increasing competition.

Managed pubs saw like-for-like sales fall by 1.2% including a slide of 2.4% in July and August.

The pub company is targeting 45m of cost savings this year to offset the 60m of cost inflation expected.

Deutsche Bank said it believed initial reaction will be led by the LFL sales trend and any change in outlook and further comment on UK consumer and competitive landscape, plus comment on effects of weather and cost savings. Analysts forecast a 9% fall in PBT to 127m and EPS of 33p.

"We think Greene King should be better positioned (scale, cash flow, balance sheet) to weather a more difficult consumer environment, with the Spirit acquisition a useful source of ongoing integration and investment upside."

Numis added: "The company is gradually converting sites from the underperforming Fayre & Square brand, but with circa 20% of its estate in the family/value dining segment, we see it as disproportionately exposed to the weakest part of the casual dining market."

For the half, the broker forecasts a 5% fall in group EBIT and 6.5% reduction in PBT.

Rival Marston's said last month that the final 10 weeks of its fiscal year had lost their fizz, with both sales growth slowing and margins squeezed, though it had identified 5m of cost savings to help boost margins.

Sales and profits for the year were confirmed as being ahead of last year but management has trimmed its openings programme for 2018 due to "a degree of caution given recent subdued market conditions".

Like-for-like sales in the 12 months to 30 September at its Destination & Premium pubs, which represent around half of revenues, were 0.9% above last year, down from the 1.3% in the first 42 weeks of the year.

A Numis client, Marston's is forecasts to generate full year PBT of 110m.

Thursday November 30

Chicago PMI (US) (14:45)
Continuing Claims (US) (13:30)
Import Price Index (GER) (06:00)
Initial Jobless Claims (US) (13:30)
Personal Consumption Expenditures (US) (13:30)
Personal Income (US) (13:30)
Personal Spending (US) (13:30)
Retail Sales (GER) (07:00)
Unemployment Rate (EU) (10:00)
Unemployment Rate (GER) (09:00)

Daily Mail and General Trust A (Non.V), Grainger, Marston's, On The Beach Group , Premier Asset Management Group

Greene King, OPG Power Ventures, PayPoint, Torotrak

Go-Ahead Group

Diverse Income Trust (The), TR European Growth Trust

Keystone Inv Trust

Agriterra LD, ASOS, Baillie Gifford Japan Trust, CVS Group, Dukemount Capital, European Metals Holding Limited (DI), Feedback, Ferrum Crescent Ltd NPV (DI), Greatland Gold, JPEL Private Equity USD Equity Shares , JPMorgan Global Convertibles Income Fund Ltd, Revolution Bars Group

Diverse Income Trust (The), New Star Investment Trust, Thorpe (F.W.), TR European Growth Trust, Wetherspoon (J.D.)

Aviva 8 3/4% Cumulative Irrd Preference 1, Bellway, Brunner Investment 5% Prf, Diploma, Downing Three VCT D Share , Downing Three VCT E Share, Euromoney Institutional Investor, GBGI Limited, General Accident 'A', Keystone Inv Trust, Lok'n Store Group, Origin Enterprises, YouGov

BAE Systems, Bloomsbury Publishing, British American Inv Trust, Capita, Centrica, RTC Group, Senior, Strix Group , William Hill

Bilby, Caledonia Investments, CMC Markets, CML Microsystems, Creightons, Cropper (James), Dunedin Enterprise Investment Trust, Electrocomponents, Establishment Inv Trust, Funding Circle SME Income Fund C Shs NPV, Headlam Group, Hill & Smith Holdings, International Consolidated Airlines Group SA (CDI), JD Sports Fashion, Johnson Matthey, Liontrust Asset Management, LXI Reit , Majestic Wine, Martin Currie Asia Unconstrained Trust , NB Distressed Debt Investment Fund Limited, NB Distressed Debt Investment Fund Limited Ext Shs, NB Distressed Debt Investment Fund Limited Red Ord, Norcros, Octagonal, Record, Renewi , Severn Trent, Tarsus Group, Tate & Lyle, Telecom Plus, TR Property Inv Trust, Triad Group, VP

City of London Inv Trust, Civitas Social Housing , Custodian Reit , F&C Commercial Property Trust Ltd., Impact Healthcare Reit , Picton Property Income Ltd

Albion Technology & General VCT, Alpha Real Trust Ltd., Land Securities Group, RM Secured Direct Lending, Volta Finance Limited