Nicholas Hyett, Equity Analyst 7 February 2019
With Valentine’s Day just around the corner, you could be forgiven for dwelling on the impending breakup of the UK with the EU. But investors can enjoy some fizz, of the non-alcoholic kind, with results from one of the world’s favourite drink brands instead. For those more interested in retail therapy, we’re also expecting news from an online retail giant.
For those looking for a distraction;
- ASOS needs to prove cost-saving plans are on track
- Coca-Cola spills the beans on its Costa deal
- RBS takes another step away from government ownership
FTSE 350 stocks reporting next week
|Acacia Mining||Full Year Results|
|TUI||Q1 Trading Statement|
|AA||Pre-Close Trading Statement|
|Activision Blizzard†||Q4 Trading Statement|
|Plus500||Full Year Results|
|Dunelm||Half Year Results|
|Galliford Try||Half Year Results|
|Heineken†||Full Year Results|
|Smurfit Kappa||Q4 Trading Statement|
|Tullow Oil*||Full Year Results|
|Ashmore||Half Year Results|
|AstraZeneca*||Full Year Results|
|Coca Cola HBC||Q4 Trading Statement|
|Coca-Cola†||Q4 Trading Statement|
|ConvaTec||Full Year Results|
|Indivior||Full Year Results|
|Lancashire Holdings||Q4 Trading Statement|
|Micro Focus||Full Year Results|
|Moneysupermarket.com||Full Year Results|
|Nestle†||Full Year Results|
|Safestore||Q1 Trading Statement|
|ASOS†||Q1 Trading Statement|
|Pepsi†||Full Year Results|
|Royal Bank of Scotland*||Full Year Results|
|Segro||Full Year Results|
*Companies on which we will be writing research
†Not a FTSE 350 stock but is covered by HL research
The most recent data from the Office for National Statistics, shows online sales now account for 20% of all shopping in the UK. That should be good news for ASOS, but it didn’t stop the group issuing a profit warning in December.
The slowdown’s being driven by competition from cheaper rivals. Cutting prices to keep pace means ASOS’ operating margins are expected to half to around 2% this year, and revenue guidance has been slashed too.
With that in mind, investors should focus on ASOS’ efforts to boost profitability where it can. In particular, the group’s progress in cutting capital expenditure is worth paying attention to.
It’s also worth bearing in mind that the UK is only part of ASOS’ story. Potential on the continent and the US remains substantial.
It’s all-change at Coca-Cola. Current chairman, Muhtar Kent, is stepping down in April. CEO – James Quincey – will take the reins, and it’s not just a management shakeup on its way.
The £3.9bn purchase of Costa is set to complete in the first half of 2019, so won’t directly impact results for the current financial year. But the deal marks a major departure for Coca-Cola, which doesn’t currently have a bricks and mortar presence to speak of. Details on the future of its new retail venture deserve scrutiny.
We’d expect ‘ready-to-drink’ coffee to be on the menu as the group looks to widen its portfolio more generally. Coca-Cola’s seen sales of bottled water and low sugar alternatives surge, as demand for healthier products swells.
Added to that, operating margins have been growing lately following the disposal of bottling operations in North and South America. We’re looking forward to more evidence the leaner operating structure is yielding results.
In January RBS announced it would seek investor approval to buy back shares directly from the government. At 62.3%, the UK taxpayer is still the bank’s single largest shareholder, and it will be years before that’s fully unwound. Nonetheless, a regular buyback would represent a major step forward.
Friday’s full year results will be an important measure of how much things have improved. Although growth seems to be slowing across the sector, low rates and high levels of employment should mean that bad loans remain low.
Brexit remains a cloud on the horizon, and we’d expect the bank to strike a cautious note in its outlook. However, with markets now pricing in an interest rate rise before the end of the year, usually good news for banks, the longer term outlook for RBS is looking rosier than it has for a long time.
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