Thursday preview: Capita guidance and UK public sector debt under spotlight
Thursday in Europe will initially see any fallout from the US policy adjustments overnight, while in the UK Capita and Mitchells & Butlers investors have results to pore over, with an update on the public deficit later in the morning.
The Bank of Japan is not expected to adjust monetary policy, though those that care will keep a close eye on Governor Haruhiko Kuroda's post-announcement conference, while the South African Reserve Bank is forecast to announce another 25 basis point cut in the interest rate.
Ryanair boss Michael O'Leary faces shareholders after a month where the stock has fallen 10%, hoping not too many of them are among the many thousands of customers affected by the cancellation of 2,000 flights across Europe this week.
Capita, which was booted out of the FTSE 100 earlier this year, will report first-half results that were delayed due to changing reporting format to be IFRS-15-compliant, where revenue is phased over the lifetime of contracts and so early stages of long-term contracts are lower-margin or lossmaking.
Management said it expects performance, "including the impact of higher resourcing costs in PCSE", to be "no lower than the second half of 2016, reported under previous GAAP accounting standards, excluding the write-down of accrued income and potential impact from disposals".
Analysts at UBS noted that there is "wide uncertainty" over the outlook for consensus given the change in reporting format and so "any guidance will be in focus", having in June flagged that profitability was expected to improve in the second half.
Under previous accounting, consensus forecasts stabilising organic revenue growth and margins, forecasting adjusted PBT of £420m in FY17, £437m in FY18, and £467m in FY19.
For the first half Morgan Stanley forecasts EBITA of £238.7m excluding the 'discontinued' CAS and Specialist Recruitment segments, with PBT of £200.5m and analysts also focus on clarity around full year guidance
Bid pipeline and order book will also be under the microscope, with Capita announcing £318m of contracts wins at its first quarter update with a bid pipeline flat at £3.8bn.
After Capita's IFRS restatement, Deutsche Bank said it believed investors "will focus much more on cash based valuation metrics and on future order book rather than earnings based measures. Such is the scale of timing impacts on profit growth that bridging the sequential trading performance will be much harder going forward.
"For example under IFRS last year H2 was more profitable than H1 but previously under GAAP the company warned on profits in H2."
Mitchells & Butlers will report a year-end trading update, following a glass-half-full third-quarter update where like-for-like sales grew 2.6% versus a weak comparative period, with drink sales up but softer food sales amid hotter weather.
M&B's pub improvement programme has seen a LFL sales uplift of around 10%, with management hopeful this level of sales growth can continue as it rolls out its investment programme over 15-20% of the estate each year.
Morgan Stanley estimates 1.5% LFL sales growth in the final 10 weeks of what is a 53-week financial year, a slowdown from 2.6% in Q3 and 2.0% in the first 43 weeks.
The Coffer Peach Tracker report for pubs saw circa 0.4% LFL growth in July, but MS analysts think August "must have been poor given Greene King's warning".
For the full year, the consensus is for £2.1bn, £310m and 34.4p, not including the 53rd week.
IG Group, the online broker, is expected to deliver a trading update alongside its annual shareholder meeting.
House broker Numis forecast 5% growth in income to £117m in what has been a quiet period for markets and where volatility has remained consistently low.
"We expect continued strong progress in the RoW with growth from Nadex in the US and the newer markets driving this. We also expect growth in non-CFD revenues to be strong as the growth in Nadex is supported by the continued growth in stockbroking services revenues."
Brooks Macdonald is due to report final results that come after its late-July update where funds under management were reported 11% higher over the previous 12 months.
Numis expects Brooks to report gross revenues up 14% to £93m with adjusted PBT increased 24% to £19.3m.
"We favour Brooks as we believe it will continue to generate one of the highest organic growth rates in the sector," analysts said, while adding that "much of this is already reflected in the current share price".
UK PUBLIC SECTOR DEBT
A month ago, public sector borrowing jumped to its first July surplus in 15 years thanks to a one-off spike in self-assessment tax receipts.
Public sector net borrowing excluding government stakes in banking groups moved to a £0.18bn surplus compared to a deficit of £0.31bn in July last year and a consensus forecast for a £1.0bn deficit.
There was also a downward revision to the full-year outturn for 2016/17, taking the deficit to 2.3% of GDP, down from a 10% peak in 2009/10 and the lowest since 2003/04.
For August the public sector deficit is expected to have run to £6.5bn.
RBC Capital Markets predicted a £7bn PSBR excluding banking groups, which would leave the fiscal-year-to-date deficit around £30bn, very close to the benchmark path consistent with meeting the full year deficit target of £58bn.
"However, this target is likely to be revised at the Budget, which we now know will be on 22 November."
Thursday September 21
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (12:30)
UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)
Public Sector Net Borrowing (09:30)
Kier Group, Pan African Resources
Capita Group, Brooks MacDonald, Cambridge Cognition Holdings, Elektron Technology, Mission Marketing Group, Quixant, Safestyle UK, Scisys, Venture Life Group
Mitchells & Butlers, NCC Group
INTERIM DIVIDEND PAYMENT DATE
Cineworld Group, Fidessa Group, Hochschild Mining, Legal & General Group, Rio Tinto, Schroders, Schroders (Non-Voting), Ultra Electronics Holdings
INTERIM EX-DIVIDEND DATE
Applegreen, Bovis Homes Group, Crest Nicholson Holdings, Dignity, Drax Group, EMIS Group, Epwin Group, Forterra, Franchise Brands, Gamma Communications, Good Energy Group, GVC Holdings, Henry Boot, HGCapital Trust, Hunters Property , Irish Continental Group Units, John Laing Infrastructure Fund Ltd, Ladbrokes Coral Group, Luceco , Macfarlane Group, Maintel Holdings, Midwich Group, Non-Standard Finance, Old Mutual, Pendragon, Petrofac Ltd., Playtech, Property Franchise Group, Servelec Group , Stadium Group, Taylor Wimpey, Vitec Group, Weir Group, XLMedia
QUARTERLY PAYMENT DATE
Fair Oaks Income Limited 2014 Shs NPV, Fair Oaks Income Limited 2017 Shs NPV
QUARTERLY EX-DIVIDEND DATE
Funding Circle SME Income Fund
Accsys Technologies, Auto Trader Group , Begbies Traynor Group, Cambium Global Timberland Ltd., Circle Property , F&C Managed Portfolio Trust Income Shares, First Property Group, Gloo Networks, IG Group Holdings, NCC Group, Park Group, Ryanair Holdings, Twentyfour Income Fund Limited Ord Red, VietNam Holding Ltd, WYG
FINAL EX-DIVIDEND DATE
1pm, AdEPT Telecom, Consort Medical, Coral Products, Dart Group, Hargreaves Services, Joules Group, K3 Capital Group , Kainos Group , Mattioli Woods, Oxford Instruments, Pembroke Vct, Pembroke Vct B, Rank Group, Redrow, Renishaw, Stewart & Wight, Van Elle Holdings