Nicholas Hyett 24 May 2018
After an action-packed few weeks of full year results (as well as a few surprise takeover announcements) the corporate calendar takes a break next week.
However, that means the spotlight is shining all the brighter on those that are reporting.
- Sales have been growing at Card Factory, but with margins struggling profits have shrunk. Reversing that trend is the challenge.
- Having rebuffed a takeover approach, all eyes will be on First Group's full year results on Thursday.
- Johnson Matthey's a game of two halves at the moment. Some market share gains in catalytic converters would be good in the near term, but batteries is the real money play.
FTSE 350 stocks reporting next week
|No FTSE 350 reporters|
|London Metric Property||Full Year Results|
|Card Factory||Q1 Trading Statement|
|First Group||Full Year Results|
|Johnson Matthey*||Q4 trading statement|
|No FTSE 350 reporters|
*Companies on which HL offer research
Card Factory's continued to see sales climb in recent results, driven largely by new store openings. Unfortunately the increased cost of stock, as a result of lower sterling, and a higher wage bill mean those sales aren’t finding their way through to profits.
With profits struggling and debt considerably higher than it has been in the past, the group’s expecting to cut the size of special dividends going forwards. Even at this new level, it’s important the group gets margins moving in the right direction again.
That makes sales mix a key factor to keep an eye on this time out. Non-card sales are significantly lower margin than card sales, and they’ve been the driving force behind recent growth. Given the tough consumer backdrop and Royal Mail reporting a continuing fall in letter volumes, rising card sales could be a tough ask.
First Group has only just batted off takeover interest from private equity group Apollo, arguing it fundamentally undervalued the Company and is opportunistic in nature. These results will give the group an opportunity to show why.
Improvements in the US longhaul coach service Greyhound, which has come under increased pressure from budget airlines, will be high up the wish-list. We might not see it in these numbers, but management will hope a higher oil price, which should translate to higher fuel costs, will take some of the wind out of the airlines’ sales in time.
There’s been no sign of the dividend since the group was forced into a rights issue in 2013. While the board has an eye on restarting payments ‘at the appropriate time’ the jury’s out on whether that time is now.
A solid set of half year numbers means JMAT is going into the full year with some high expectations.
Clean Air, which includes the group’s automotive catalyst business, is the key driver of profits. Growth is likely to be steady rather than spectacular, but market share gains would be welcome, especially in light duty vehicles.
Longer-term JMAT is pinning its hopes on its budding battery components business, since electric vehicles don’t need catalytic converters. JMAT has focussed on the development of high energy battery materials – specifically enhanced lithium nickel oxide.
Early tests of JMAT’s technology have reportedly delivered some very positive results. Initial trials are underway with six customers, with a pilot production plant being developed. Further progress on this front will be well received.
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