Must read: Autumn Budget preview, Kingfisher, easyJet

AUTUMN BUDGET – WED 26 NOVEMBER

Craig Rickman, Personal Finance Editor, interactive investor, says, “An unwanted episode of déjà vu has dominated the lead up to Rachel Reeves’s second Budget as chancellor.

For the second set-piece fiscal event on the bounce, speculation of painful tax hikes has run wild, with reports that another multi-billion-pound deficit in public finances has emerged.

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As the chancellor has remained wedded to her iron-clad fiscal rules, a further round of tax increases, in addition to the £40 billion package delivered last year, seems inevitable. What’s less clear is where the axe will land, though the rumour mill offers some clues.

Reeves was apparently weighing up whether to increase basic-rate income tax by 2p in the pound and cut the main rate of employee national insurance (NI) by the same amount. It was a roundabout ploy to raise £6 billion but maintain the government’s manifesto pledge not to raise taxes on working people.

Recent reports, however, suggest the chancellor has backed away from this controversial measure, after fresh OBR forecasts put the fiscal “black hole” at £20 billion, some £10 billion lower than previous calculations. That said, if Reeves extends the deep freeze on income tax and NI thresholds beyond the current 2028 schedule, our HMRC bills will creep up regardless. Prolonging fiscal drag, as it is known, by a further two years could pocket the Treasury £16 billion as more people trip into higher tax brackets as their incomes rise.

Elsewhere, mooted reforms to the retirement landscape have again been rife. While it appears savers can breathe a sigh of relief with Reeves set to leave pension tax-free cash alone, rumours are swirling that salary sacrifice is in the firing line - notably that a £2,000 cap will be imposed. This could hurt both workers and businesses who use salary sacrifice on pension contributions to trim NI bills.

Talk of cuts to the annual cash ISA limit have also occupied the headlines, as part of the government’s broad push to entice savers into the stock market to improve their returns and boost economic growth. But the idea has faced fierce opposition, notably from building societies.

More speculation will no doubt surface as the event draws closer, but we’ll have to wait until around 1:30pm on 26 November to learn for sure how the UK tax regime will be shaken up.”

KINGFISHER Q3 – TUES 25 NOVEMBER

Richard Hunter, Head of Markets, interactive investor says, “Kingfisher (LSE:KGF) will be under some pressure to maintain the momentum shown at the half-year results in September, after a previously cautious first-quarter update in May.

The group reported a 2% increase in like-for-like sales in its biggest market of the UK and Ireland. At the same time, Kingfisher raised its full-year profit outlook, targeting the upper range of the £480 million to £540 million previously estimated.

Within the UK business, Screwfix, long since Kingfisher’s jewel in the crown, continued to hold its own with the format in the early stages of being extended abroad with a longer-term ambition of 600 stores in France compared to the current 30. In the meantime, like-for like sales growth of 3% came against ever-stronger comparatives.

However, challenges are never far away for the retailer. Cost pressures and wage inflation (increased taxes in the UK and France are estimated to have added an additional £145 million to costs) run alongside consumer sentiment uncertainty and UK labour market weakness ahead of the Autumn Budget.

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These headwinds are in addition to the underperforming French operation which accounts for 29% of group sales which saw a further drop of 1.2% in same store revenues. The long-suffering Castorama unit, where pressure has been in evidence for some time, remains in focus as the group simplifies and modernises the store estate, although this restructure is a slow burner. Political instability in France and potential job losses further cloud the picture.

There are some signs which give reasons for optimism, however. The robust half-year numbers were well-received at the time, contributing to a share price rise of 18% in the year to date, although over the last 12 months a gain of 2% is rather more pedestrian. A dividend yield of 4.3%, alongside an ongoing £300 million share buyback programme are price supportive, but there is much further to go, with the shares some 21% lower than the more recent highs achieved in July 2021.”

EASYJET FY – TUES 25 NOVEMBER

Richard Hunter says, “Revenues of £2.91 billion for the third quarter represented an increase of 10.9% from the corresponding period, with pre-tax profit rising by 21.2% to £286 million. Higher fuel costs will add an estimated £10 million to the group’s bill and the earlier French air traffic controllers’ industrial action a further £15 million.

In addition, the benefit of increasing ancillary revenues, which include the likes of customer payments for personally allocated seats, baggage and food, were in evidence. Now accounting for 25% of group revenue, easyJet (LSE:EZJ) customers are clearly still readily prepared to pay for these extras, while also adding another string to the group’s revenue bow.

However, it was the easyJet holidays business which again stole the show for the quarter. This is a burgeoning business which seems to have come at the right time with cost-conscious consumers searching for value packages. The group has high hopes for the unit’s longer-term contribution to overall profits, which currently accounts for 15% of total group revenue en route to a medium-term target of more than £250 million of annual pre-tax profit. Indeed, that aim is coming into view with an estimated full-year pre-tax profit of over £235 million, bolstered by a third quarter profit of £86 million which was an improvement of 18% year-on-year, alongside a 27.4% rise in revenues to £428 million.

This also chimes with the group’s value-conscious appeal and the increasing body of evidence which tends to suggest that the family holiday remains almost sacrosanct and outside of normal budgetary restraints.

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In terms of outlook, the group remained positive for the remainder of the year and the peak summer season, although it also recognised the increasing trend towards last minute bookings, as experienced by many of its rivals.

For all the progress, the shares have fallen by 18% so far this year, putting easyJet potentially in the firing line for demotion from the FTSE100 in the upcoming December reshuffle. Indeed, the share price remains down by 62% from pre-pandemic levels, let alone the record highs of ten years ago, since which time the shares have fallen by 71%, resulting in the group flitting in and out of the premier index. A 55% increase in the share price of British Airways owner International Consolidated Airlines Group SA (LSE:IAG) over the last year underlines where investors’ priorities have been.”