The coming week looks set to be a slightly quieter one in terms of corporate news, although results from housebuilder Persimmon PLC (LON:PSN), mining trio BHP Group PLC (LON:BHP), Hochschild Mining PLC (LON:HOC) and Antofagasta PLC (LON:ANTO), and delayed figures from Mike Ashley’s Frasers Group PLC (LON:FRAS) look set to be the key stories.
Meanwhile, the macro calendar will be eyed for UK inflation data on Wednesday while retail sales, consumer confidence and flash PMI are set to close out the week.
Persimmon eyes ‘mini boom’ for housebuilders
It has already revealed that half-year revenues were down 33% to £1.1bn after 4,900 house sales were completed, down from 7,584 last year, but there was a 30% increase in the six weeks to June 30, 2020.
The housebuilder, where boss David Jenkinson has given his notice and will be replaced by Dean Finch at the end of the year, has also revealed that it had net cash of £830mln, plus ample credit facilities on top.
Analysts at UBS expect Persimmon to report first-half profit before tax and one-offs of £286mln, down from £513mln a year ago.
After the spike in June, the sales rates in July and August is “key”, with the analysts expecting a flattening-off “as other homebuilders have regained normal market shares”.
With Persimmon having cancelled a proposed April 125p per share interim dividend and saying it will re-evaluate the postponed final dividend of 110p per share due for last year in the coming months, UBS expects an interim dividend for 2020 of 110p.
Trading in the past month and in the coming months should be boosted by a ‘mini boom’ in the housing market, with prices reported to be on the rise by Nationwide and Halifax helped by the government’s stamp duty holiday, though a RICS report this week found surveyors are not optimistic about the market for the coming year.
“We’ve said for some time that the housebuilding sector will stand or fall with the economy and so far the sector has held up, but the next few months will be crucial,” according to analyst William Ryder at Hargreaves Lansdown.
“The recovery could be beset by a second wave of coronavirus infections, the end of the furlough scheme or some other unfortunate development. So far the news has been encouraging on balance, but the sector still feels higher-risk to us – and will until we know how the recovery shakes out,” Ryder added.
John Wood Group not surprising market with interims
John Wood Group PLC’s (LON:WG.) half-year results on Tuesday shouldn’t come as a surprise following an update in June.
The energy services company guided for a revenue drop of 11% in the six months to June 30, 2020, with adjusted underlying earnings (EBITDA) down 19% to US$295-305mln.
Revenue was estimated to be around US$4.1bn, with operating profit before exceptional items around US$80mln-90mln.
Investors will also want to know how the US$200mln cost savings goal for the full year is progressing, alongside the debt position and how the second half is expected to pick up.
Trio of major miners to unearth numbers
Following its full-year production update, investors have already had a preview of what to expect in the results, with production and volumes having risen in the company’s important iron ore division, which accounted for just over half of its profits last year.
However, the firm faces pressure in some of its other business lines, notably copper, petroleum and coal which have all seen assets hit by the coronavirus pandemic and an oil price crash earlier this year.
Costs and debt control are likely to be eyed after BHP predicted the latter will come in at the lower end of its US$12bn-US$17bn target range, which should bode well for its dividend payments.
There is also likely to be interest in the company’s future spending plans, particularly whether pressure from investors to decarbonise may drive the company away from petroleum exposure.
In its production update for the six months to June 30, 2020, the metals group reported that it had mined around 93.6 kilo ounces (koz) of gold in the period, down from 162.2 koz in 2019, while silver production dropped to 5,018 koz from 10,237 koz.
The group also reported steep declines in production during its second quarter at the height of the pandemic, with gold production falling to 25.17 koz from 68.42 koz year-on-year while silver output dropped to 1,482 koz from 3,536 koz.
Hochschild said a number of its operations are currently halted due to the coronavirus panndemic, so any updates on reopening plans are likely to be watched closely, as well as any new information of output from the group’s Inmaculada gold and silver mine in Peru which reopened in late July.
Given copper is often seen as a key macroeconomic barometer, investors will be eyeing the results as a possible check on the health of the global economy.
Meanwhile, the company will also be eyed for an update on the state of coronavirus in Chile, after warning at its AGM in May that an outbreak could hit production, although at the time output was still running near to target levels. Social unrest and political debates over a new constitution in the country may also have knock-on effects further down the line.
However, in the immediate term, investors will be looking to production and its associated costs, as well as how steep the company’s profit decline has been, with analyst predicting it will fall by half in the full year. The interim dividend is also likely to be closely watched for signs of further cuts due to the pandemic.
Frasers to release some pandemic numbers
After delaying its results last Thursday with two days’ notice, Frasers Group PLC (LON:FRAS) is planning to release its finals on the coming Thursday, when investors should get a clearer picture of how trading has been since the reopening of shops and how the previous coronavirus crisis closures hit the retailer’s accounts.
Analysts at Hargreaves Lansdown expect online sales of sports equipment and workout gear to have aided dismal trading, however, it is hard to quantify.
However, given the retailer’s financial year ended in April, including just over a month of lockdown, all eyes will be on the outlook statement.
The former Sports Direct chain wants to turn into “the Selfridges of Sport”, a plan that may have been hindered by lower spending during the pandemic.
“The strategy’s behind the eclectic mix of high street acquisitions in recent years. And at the end of June the group acquired a 6.1% stake in Hugo Boss,” analyst Sophie Lund-Yates commented in a preview.
“We’d like to hear more behind the rationale for this deal, and how a growing relationship with this higher-end name fits into the story.”
Nvidia hopes to level up as it bids for ARM
Across the Atlantic, Wednesday will bring second-quarter figures for Nvidia Corporation (NASDAQ:NVDA), which makes computer graphics processors and other chipsets.
The boom in home working and demand for video gaming as a result of the pandemic lockdown has likely boosted Nvidia’s fortunes, while a shift towards cloud computing is also likely to bode well for its data centres.
The boost also comes at an opportune time as the company negotiates a possible purchase of UK semiconductor giant ARM from Softbank. Given it is already a market leader in computer chips, the addition of ARM would likely prove a winning move for Nvidia, provided it can handle the likely multi-billion-dollar cost of the purchase.
The coming week’s macro diary offers a few events to give some economic context for financial markets.
Perhaps most eyes will be on Friday’s ‘flash’ purchasing managers’ index (PMI) surveys which will be “a key highlight in terms of how the global economy has performed into August”, according to economists at Deutsche Bank.
For July’s PMIs all major countries except for Japan had readings above the 50-mark that separates expansion from contraction. For Friday’s UK flash PMI, the manufacturing reading is expected to inch up to 53.6 from 53.3, while services is forecast to improve to 57.0 from 56.5 in July.
For the UK, other data releases include Rightmove house prices on Monday, inflation and official house prices on Wednesday and the CBI industrial trends survey on Thursday.
Some headlines are likely to emerge from another round of Brexit negotiations on the future relationship with the EU, where chief UK negotiator David Frost recently said “an agreement can be reached in September and we will work to achieve this if we can.”
In the US, the Federal Reserve will publish minutes from its recent meetings and there will be some attention on politics with the Democratic convention being held, where Barrak Obama’s former vice president, Joe Biden will formally accept his party’s nomination for President, there will also be housing starts, building permits and existing home sales, plus the weekly initial jobless claims on Thursday.
The European Central Bank also releases its council meeting minutes on Thursday.
Significant announcements expected for week ending August 21:
Monday August: 17
Tuesday August 18:
Interims: Persimmon PLC (LON:PSN), John Wood Group PLC (LON:WG.), KAZ Minerals PLC (LON:KAZ), Network International Holdings PLC (LON:NETW), Marshall Motor Holdings Plc (LON:MMH), Mears Group PLC (LON:MER), TBC Bank Group PLC (LON:TBCG), Telit Communications PLC (LON:TCM), TI Fluid Systems PLC (LON:TIFS)
Wednesday August 19:
Economic data: UK inflation, UK PPI, US Fed minutes
Thursday August 21:
FTSE 100 ex-dividends to knock 6.99 points off the index: Imperial Brands PLC (LON:IMB), Croda International PLC (LON:CRDA), Reckitt Benckiser Group PLC (LON:RB.), Schroders PLC (LON:SDR), Anglo American PLC (LON:AAL), London Stock Exchange Group PLC (LON:LSE), Mondi PLC (LON:MNDI), Evraz PLC (LON:EVR), Standard Life Aberdeen PLC (LON:SLA), Hikma Pharmaceuticals PLC (LON:HIK), Prudential PLC (LON:PRU), M&G PLC (LON:MNG)
Economic data: US jobless claims
Friday August 21:
Economic data: UK retail sales, UK consumer confidence, UK flash PMIs, US flash PMIs