Britain’s obsession with property extends to investing in housebuilders, with a trio of residential construction groups posting results in the coming week.
In a trading update for the year ended June 30, the company said it completed a total 17,856 homes, compared to 17,579 last year.
The company expects total pre-tax profit for the year of £910mln, up from £835.5mln in 2018.
Given that the results for 2019 are already known, the focus will be on the housebuilder’s trading since year-end and its forecasts for the new fiscal year.
“We expect sales per site per week over July/August to be broadly flat year on year and thus the stable trend of the first half of 2019 to be prolonged,” analysts at UBS said.
For the new financial year, they expect 3.1% volume growth excluding joint ventures, with average selling prices (ASP) up 0.2% allowing operating margins to expand 20 basis points to 19.0%, which all results in pre-tax profit rising to £929mln from £910mln.
Redrow’s Tutte steps up
That was one of chairman and founder Steve Morgan’s last acts before he stepped down from his second stint at the group, with the revelation that tough trading at the turn of the year had seen a bounce-back with reservations running at similar levels to the strong market activity last year.
As this was some time ago, investors will be keen to see if that strength has continued with former CEO John Tutte now executive chairman.
For the full year, UBS expects 10.0% volume growth to 6,287 and ASP down 0.7% to £329,900, resulting in 9% revenue growth to £2.1bn.
Estimating margins have tightened slightly, operating profit is seen coming in at £408mln for EPS to be up 7% to 91p.
“We expect long-term guidance beyond FY19 and more granularity into FY20/21 targets. For FY20E, we expect revenues of £2.2bn, PBT of £411m and EPS of 97p.”
Berkeley margins under the microscope
In the year to April, PBT shrank 21% to £775.2mln as margins came under pressure from rising costs and Brexit uncertainty.
While the broader housing market has seen growth weaken over the past three years amid that uncertainty, the slowdown has particularly affected London and the south-east East, where Berkeley specialises.
The company said that margins would continue to be squeezed this year and the upcoming trading statement is not likely to reveal major changes, though there is likely to be some detail given on activity in the land market and general sales environment.
UBS expects the company’s mid-term guidance for fiscal year 20/21 of £500mn pre-tax profit to remain unchanged, seeing scope for guidance to be raised going forward, depending on the outcome of Brexit.
Almost a year and a half after winning the bitter battle to buy engineer GKN but with disquiet still ringing in its ears, Melrose Industries PLC (LON:MRO) will post half-year results on Thursday.
Last year a £629mln write-down of poorly performing contracts that came with GKN resulted in a big loss, while this year the group has been accused of breaking pledges made during the hostile takeover process after announcing it was now planning to close down a civil aircraft parts factory in Birmingham.
MPs and unions voiced concerns about asset-stripping and UK operations being run down that were difficult to reconcile with earlier commitments directors had made about GKN.
Potential GKN disposals of Ergotron and Powder Metallurgy were abandoned last year, making the turnaround is not quite going exactly to plan.
In May, with the board also the being criticised by investor groups over executive pay, the turnaround specialist assured that trading so far this year had been in line with management expectations.
One of that management group, co-founder David Roper, has decided to step down, while the annual shareholder meeting saw 23% of votes were against the boardroom pay policy.
For the interims, analysts at RBC Capital Markets expect the “in line” message to continue, while there will be “a bit of leeway” in their outlook comments.
RBC forecast group sales for the half of £6.1bn, as auto sales down 6% in the half but aerospace a “continued buffer”, with underlying earnings at £500mln and headline earnings per share at 6.2p as cost savings support margins.
“We continue to see Melrose as an attractive self-help story and believe that markets worries around automotive risks are overdone creating a highly attractive valuation.”
Special divi for Dunelm?
With Dunelm Group PLC’s (LON:DNLM) management recently repeating its view that profits will grow by around 20% this year to between £124-126mln, analysts aren’t expecting many bombshells in the retailer’s full-year results on Wednesday.
Instead, investors should be looking for any news on a potential special dividend, which City broker Peel Hunt thinks will definitely come later this year, and could possibly be announced alongside the full-year numbers.
“The only question is timing; without Brexit uncertainty, we would have been betting on an autumn announcement, maybe even with the final results, although given that uncertainty, management may decide to hold fire for now,” analysts said in a note to clients.
As ever, guidance will also be key, especially given that Dunelm will face a sterner test in the year ahead as the comparatives get stronger.
Wagamama needs to deliver again for Restaurant Group
The shares have traded sideways so far this year as doubts over last year’s £550mln acquisition of Wagamama and the wider UK casual dining market linger.
With an abundance of restaurants to choose from, diners have been picky eaters, forcing the industry to cut prices and offer up more deals.
That has wreaked havoc for many eateries, although Wagamama has fared better than most and is a key part of Restaurant Group’s future growth plans.
Investors will want to see more good numbers from the chain if it is to justify the hefty price tag.
Things have been less rosy at Frankie & Benny’s in recent years, so look out for an update on what new CEO Hornby has in store here.
Peel Hunt forecasts first-half PBT to be up 38% to £27.8mln due to Wagamama, with like-for-like sales benefiting from favourable weather and a softer comparative last year.
North America competition eyed at Dechra
A trading update from vet supplies group Dechra Pharmaceuticals PLC (LON:DPH) last month means there shouldn’t be too many surprises in Monday’s full-year results.
Revenue in the year to the end of June rose 17%, boosted by a couple of acquisitions in New Zealand and Australia and Brazil.
There was a slowdown in the second half of the year though, particularly in the US, where a new competitor product nibbled into sales.
Investors will want to see if that trend has continued into the opening weeks of the new financial year.
Dechra has a history of making decent acquisitions, and it opened the chequebook again recently to buy US animal drugs maker Ampharmco for US$30mln. Look out for more detail on the plans for this business.
Can McBride clean itself up?
The maker of own-brand cleaning products for supermarkets said in July that full-year results, which will be published this Thursday, will be “broadly in line” with earlier guidance despite “marginally weaker than expected” performance in the second half.
With sales particularly poor in the UK and France, the group warned that weaker demand across “a number of markets” would also mean the new financial year would fare no better.
Together with the major loss of customers after last year’s price hikes the company was forced to make in a highly competitive retail market across Europe, analysts said the lower rate of demand suggested that higher promotional intensity from branded players, is drawing consumers away from private label.
Broker Liberum even said that private label businesses such as McBride “seem to not be very suited for public listings” as external factors such as commodity costs, logistics costs, tough customers “are often not best played out in the public glare”.
But as McBride remains market leader in private label in Europe, a takeout strategy might not work either.
Major announcements due
Monday September 2:
Finals: Dechra Pharmaceuticals PLC (LON:DPH)
Interims: Centralnic PLC (LON:CNIC), Globaltrans S PLC (LON:GLTR)
Economic data: Markit UK manufacturing PMI, BRC sales
Tuesday September 3:
Interims: Alfa Financial Software Holdings PLC (LON:ALFA), Dalata Hotel Group Plc (LON:DAL), Frenkel Topping PLC (LON:FEN), Gamma Communications PLC (LON:GAMA), Impact Health PLC (LON:IHR), India Cap PLC (LON:IGC), IQE PLC (LON:IQE), Johnson Service PLC (LON:JSG), Michelmersh Brick Holdings Plc (LON:MBH), Restaurant Group PLC (LON:RTN), STV Group PLC (LON:STVG), Wentworth Resources PLC (LON:WEN)
Economic data: Markit UK construction PMI, Markit US manufacturing PMI, ISM US manufacturing
Wednesday September 4:
Economic data: Caixin China PMI composite, Markit UK services PMI, MBA US weekly mortgage applications
Thursday September 5:
Trading announcements: Dixons Carphone Plc (LON:DC.)
FTSE 100 ex-dividends: BHP Group PLC (LON:BHP), Admiral Group PLC (LON:ADM), CRH PLC (LON:CRH), Flutter Entertainment PLC (LON:FLTR), Micro Focus International PLC (LON:MCRO), RSA Insurance PLC (LON:RSA), Land Securities PLC (LON:LAND), Glencore PLC (LON:GLEN)
Economic data: US weekly jobless claims, ADP US employment change, Markit US services PMI, US factory and durable goods orders, ISM US non-manufacturing composite
Friday September 6:
Trading announcements: Berkeley Group PLC (LON:BKG)
Economic data: Halifax UK house prices, US non-farm payrolls