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Next week on the stock market

What to expect from a selection of FTSE 100, FTSE 250 and selected overseas shares reporting next week.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Among FTSE 100, FTSE 250 and selected other companies scheduled to report next week:

FTSE 100, FTSE 250 and selected other stocks scheduled to report next week

08-Jun
No FTSE 100 or FTSE 250 reporters
09-Jun
AVEVA Full Year Results
Bellway Trading Update
Big Yellow Group Full Year Results
British American Tobacco* First Quarter Trading Update
Oxford Instruments Full Year Results
10-Jun
Inditex* First Quarter Results
LondonMetric Property Full Year Results
Paragon Banking Group Half Year Results
Shaftesbury Half Year Results
11-Jun
Babcock International Full Year Results
Halma Full Year Results
Johnson Matthey* Full Year Results
TalkTalk Telecom Full Year Results
12-Jun
No FTSE 100 or FTSE 250 reporters

*Companies on which we will be writing research.

British American Tobacco (BATS), Nicholas Hyett, Equity Analyst

Tobacco is a defensive sector as demand is predictable and largely unaffected by the economic environment. The pandemic has done little to change that so far, and BATS has reported limited impact on its operations. Duty free sales are down as expected, but only account for 1% of the group’s revenue. Tobacco volumes are still expected to fall by around 5% this year, but BATS expects revenue to grow nevertheless, albeit towards the lower end of the targeted 3-5% range.

New Categories, which includes vapour and oral products, is an area to look out for. While hopes of explosive growth have been dashed by increased regulation and health concerns, BATS is still targeting £5bn in revenue by 2023/24. Last year revenue grew 32.4% to £1.2bn, so there’s still some way to go before hitting the target.

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Inditex – Sophie Lund-Yates, Equity Analyst

We expect Inditex to report similar trends to other retailers in its first quarter trading update. Sales will have suffered as stores were forced to close, falling 24.1% between 1 and 16 March.

To understand what Inditex’s recovery is going to look like it’s important to look at the performance of re-opened stores in areas where lockdowns have eased. The group’s biggest brand, Zara, is known as a place for the latest must haves, potentially providing a boost for fashion fans stocking up. But we’re also mindful that a lot of the group’s shops are in touristy locations, and footfall is likely to be hampered by travel restrictions.

The final thing to look for is any discussion of inventory. Excess stock can hurt profits if it turns out to be worth less than originally thought. Inditex has historically run a very tight ship when it comes to inventory, being more reactive than a lot of its peers. We’re hoping the status quo hasn’t been interrupted in this regard.

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Johnson Matthey – Nicholas Hyett, Equity Analyst

Automotive catalysts accounted for some 64% of Johnson Matthey’s operating profits last year. And while results for the last full year, which ended on 31 March, should have avoided the worst effects of lockdowns, the more recent impact will be severe.

Car sales have collapsed around the world and most of the Clean Air division’s manufacturing plants are shut. While the group’s cost base is relatively flexible, which should help to limit losses, even the best management team can’t deliver profits without any sales.

Access to around £1bn of short term liquidity should help the group weather the immediate disruption – and underpins the commitment not to furlough staff or make redundancies until June 2020. However, our real concern is what current disruption does to longer term demand.

Car sales are cyclical, meaning they rise and fall with the wider economy. It increasingly feels like, regardless of the speed lockdowns come to an end, a nasty recession is on the way. Given the likelihood that electric cars, which don’t need catalysts, ultimately replace traditional fuels anything that pushes demand out into future years is very unwelcome.

The fledgling battery materials business is also worth paying attention to. It’s loss making at present, but given the importance of achieving scale in time for any shift away from conventional fuels, disruption to progress could be costly in the future.

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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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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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