Reporting season is picking up steam and there are some interesting results worth watching very closely, writes Lee Wild.
Monday 9 July
Tuesday 10 July
Waiting for Ocado Group's promised overseas deals tested investors' patience, but the grocery delivery firm has finally nailed a string of contracts with big international supermarket chains. The contract with Kroger in America, a company with over $120 billion of annual sales, is the big one for Ocado. It won’t contribute much during the current financial year, but this vindication of both its strategy and technology is priceless.
These half-year results are not about the numbers - Ocado is not expected to make a reasonable annual profit until 2020. But look for a steer on progress toward £1.7 billion of sales in the year to November and an adjusted pre-tax loss of around £10 million.
Since topping £10 last month, the share price has traded sideways. A lot of good news is clearly in the price, and investors will demand more detail on the Kroger contract and others before loading up on more of these expensive shares. Longer-term, however, Ocado has won over many doubters with the Kroger deal, and the potential for both profits and the share price to rally is more obvious.
Marks & Spencer
Many have tried and failed to transform Marks & Spencer Group. Now it’s the turn of Steve Rowe and his team to turn the struggling former high street favourite into a "faster, lower cost, more commercial, more digital business".
It's only seven weeks since the last update and dragging this lumbering beast into the 21st century will take time, but the shift from high street stores to online is underway and will be a clear boon to future profits. Don't expect much progress in these first-quarter results though. Clothing & Home is not expected to improve margin much over the entire year, and certainly not in the first half when the flagship food business will also likely suffer some margin erosion.
It will also be interesting to see how the heatwave has affected traffic at both the grocery and clothes businesses. The summer sale has only just begun, but did Marks manage to sell enough full-price clothes to shoppers who didn’t ditch the high street for the seaside? It’s food aisles are not necessarily the first stop for barbecue fans or World Cup beer drinkers either.
M&S shares trade on a modest valuation multiple and maintaining the level of dividend at the full-year results means a yield above 6% is among the best around. There’s execution risk here, and a wider downturn in the economy could also put the payout in danger, but generating cash at the current rate should guarantee its safety.
Marks & Spencer, Kier Group, Ocado, Photo-Me International, AdEPT Telecom, Collagen Solutions, Begbies Traynor
Assura Group, Marks & Spencer, Plus500
Wednesday 11 July
The housebuilding sector has been the unlikely star of the post-EU referendum rally, doubling in value and easily outperforming the wider market. Low interest rates, undersupply of new housing, government support for homebuyers and a domestic business seemingly immune from Brexit were multiple tailwinds for the sector.
Now, the post-EU referendum rally is unwinding in pretty spectacular fashion amid weak economic data, higher costs, falling house prices and the growing possibility of an interest rate rise as early as next month.
Updates from Bovis Homes Group and Persimmon have been broadly encouraging, however, and most housebuilders trade on attractive valuation multiples and yield over 5%. Barratt Developments is the UK's largest housebuilder, yields almost 9% and trades on a forward price/earnings multiple of less than 8.
But after peaking at over 700p in October, its shares have plunged 16% in the past month, despite recently flagging these full-year results would meet expectations and that plans to improve margins are on track. While the business may be in decent shape and the shares on attractive valuations, a wider industry slowdown will have implications for all players.
PageGroup, Barratt Developments, Low & Bonar, Burberry, Micro Focus International
Onthemarket, Air Partner, AVEVA, Audioboom, BT, Fishing Republic
Thursday 12 July
ASOS, Dunelm, Premier Oil, Ten Entertainment
Pets At Home, Templeton Emerging Markets Investment Trust, Oxford Technology 3 VCT, Land Securities Group, Helical Bar, Oxford Technology Venture Capital Trust, Oxford Technology 4 VCT, Oxford Technology 2 VCT
Friday 13 July
Workspace Group, Hays, Ashmore Group
Workspace Group, Gulf Keystone Petroleum, RhythmOne
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