Next week on the stock market

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

• Taylor Wimpey & Persimmon will tell us how the housebuilders plan to handle Lockdown II
• Burberry will shed some light on how sales have done since peak lockdown
• All eyes will be on corporate advertising spend at ITV

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

*Companies on which we will be writing research.

Taylor Wimpey & Persimmon – Sophie Lund-Yates, Equity Analyst

We’ve been surprised by the strength of the UK’s housing market this year. On average, house prices are up around 6-7% year-on-year depending on which index you look at. It’s possible that this lockdown will be the straw that breaks the market’s back, but we doubt it. The furlough scheme is still going, so while some people are struggling, enough seem to feel secure enough to buy a new house.

However, sales rates collapsed during the first lockdown, and we’d expect they’ll still struggle a bit this time. People usually like to visit houses before committing to buying them, and while online shopping is gobbling up traditional retail we doubt houses are quite ready for that. A surge of pent up demand was unleashed when the lockdown ended though, so the builders may be able to look forward to that. Furthermore, construction activity was halted during the last lockdown but looks set to forge ahead this time.

Next week’s trading updates will give a little more detail on just how Taylor Wimpey and Persimmon plan to navigate the new lockdown. We suspect both management teams will feel more confident the second time around.

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Burberry – Sophie Lund-Yates, Equity Analyst

Like most retailers, Burberry was hit hard by lockdowns – first quarter revenues fell by 49% as its stores were forced to close. And while trends were expected to get a bit better, second quarter revenues are predicted to be down 15-20%. That means the net effect in half year results will be a negative sales performance. Just how negative will be the key thing we’re watching.

If the group can stay within its -15% to -20% range it will signal its products are resonating well with customers, as they seemed to be before the pandemic. A more dramatic-than-planned fall would throw up some questions.

We’d previously said Burberry was in a relatively good position despite the pandemic – but further lockdowns would spell trouble. New lockdowns in Europe and the UK are largely too recent to have any real effect on half year numbers, but we’ll be reading the wider commentary carefully. If Burberry’s outlook has materially suffered, the group is likely to want to preserve cash. That could throw the ongoing stylistic and strategic turnaround off track.

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ITV – Nicholas Hyett, Equity Analyst

The all-consuming question where ITV is concerned is what has happened to corporate advertising spend. Advertising spend fell 43% in the second quarter, and while we know online advertising has recovered more recently, whether that extends to more traditional advertising venues is as yet unclear.

We are more hopeful about the performance of ITV’s Studios business, which produces both scripted and unscripted content for ITV and third party broadcasters at home and abroad. While the first lockdown meant many productions were put on hold, we suspect it will also have seen viewers burn through back-catalogue material, increasing demand for new content. ITV will be hoping that boosts activity going forwards.

Unfortunately a second wave of lockdowns around the world won’t be doing the group any favours. And honestly we think these results could be pretty difficult. The debt position at the half year wasn’t dreadful, at 1.3 times cash profits, but the group can ill afford more cash outflows this quarter if conditions remain challenging going into 2021.

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