Next week on the stock market

Among the companies reporting next week:

• United Utilities looks to maintain its ‘bond proxy’ status despite political headwinds
• Royal Mail aims to trim costs in the face of opposition from workers
• William Hill’s focused on navigating regulatory changes and cracking the US

FTSE 350 stocks reporting next week

18-Nov
Diploma	Full Year Results

19-Nov
Big Yellow Group	Half Year Results
easyJet*	Full Year Results
EI Group	Full Year Results
Equiniti Group	Trading Update
Halma	Half Year Results
Homeserve	Half Year Results
Intermediate Capital Group	Half Year Results
Keller Group	Trading Statement
Melrose*	Trading Update
Polypipe Group	Trading Update
Spectris	Q3 Trading Statement
Telecom Plus	Half Year Results

20-Nov
Babcock International	Half Year Results
Direct Line*	Q3 Trading Statement
Kingfisher	Q3 Trading Statement
Mitchells & Butlers	Full Year Results
Sage Group	Full Year Results
SSP Group	Full Year Results
United Utilities*	Half Year Results

21-Nov
Centrica*	Q3 Trading Statement
Close Brothers	Q1 Trading Update
CLS Holdings	Trading Statement
Countryside Properties	Full Year Results
Euromoney	Full Year Results
Investec	Half Year Results
Johnson Matthey*	Half Year Results
NewRiver REIT	Half Year Results
Rotork	Trading Statement
Royal Mail  *	Half Year Results
Severn Trent*	Half Year Results
Syncona	Half Year Results
William Hill*	Q3 Trading Statement

22-Nov
Coats Group	Trading Statement

*Companies on which we will be writing research

United Utilities

The Labour Party policy to nationalise the water utilities means United Utilities (UU) has found itself in an unwelcome spotlight recently, especially with the election pending. Labour has suggested nationalisation might take place below market value, which could be painful for investors if they form the next government.

Given that headwind, it might be surprising to hear UU’s shares are higher today than they were six months ago. But that’s because there’s more at work in the market than domestic politics.

Utilities, including UU, fall into the category of shares sometimes called ‘bond proxies’. These reliable dividend payers are viewed by some investors as an alternative to bonds, and the low interest rates we’re seeing at the moment have made these companies more attractive. What’s more, the decision by the US central bank (The Federal Reserve) to cut rates at the end of October, suggests we could be stuck with super low interest rates for longer than many had expected.

With that in mind investors’ focus going forward will likely be the level of debt and dividend sustainability, since that ultimately underpins UU’s investment case. Bear in mind though that the political winds are outside the group’s control.

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Royal Mail

Royal Mail’s another company where operating performance is currently playing second fiddle to more political concerns. Members of the Communication Workers Union recently voted by an overwhelming majority to carry out industrial action over the key Christmas period. Royal Mail is challenging the strike in the courts, but if it goes ahead it would be hugely damaging, not only disrupting Christmas but also robbing the group of a bump from political mailings over the general election.

Royal Mail’s letters business has been in long term decline for years, and we don’t expect next week’s results to show anything different. However, the pace of decline is important, with the group forecasting a 5-7% decline this year. Royal Mail is ultimately looking to make up the difference with Parcels, international growth and cost savings – all of which will take time to deliver.

Those looking for more positive news should keep an eye on the cost base, where Royal Mail has some ambitious targets. Improved efficiency is a key reason to buy into the Royal Mail story, but it’s not been a smooth ride. Unfortunately we see the threat of strike action as evidence that future cost savings will be far harder to deliver.

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William Hill

Bookies came under attack from MPs again last week, who criticised online casinos for circumventing the £2 a spin limit imposed on high street gaming machines. William Hill generated 50% of its online revenues from gaming last year.

However, the more important questions next week will be around the effect of the £2 staking limit on the group’s high street estate and progress in the budding US sports betting market.

Early signs suggested the £2 staking limit has been less damaging than expected. And while 700 shop closures will inevitably dent revenues, it’ll hopefully provide some protection to profits too. We’ll be interested to see if that resilience has been maintained over the summer, and through the Rugby World Cup.

The other area that will attract investor attention is the US, where William Hill reckoned it enjoyed a 27% market share in the seven states it operated in at the half year. The group’s existing presence in Nevada gave it a head start in this rapidly developing market, but whether it’s maintained the lead as rivals ramp up activity remains to be seen.

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Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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