Nicholas Hyett 19 October 2017
Next week sees a marked uptick in reporting, including quarterly results from three of the FTSE 100’s five listed banks. Below, we focus on three FTSE 100 companies with a combined market capitalisation of over £130bn.
- With plenty going on in the wider Consumer Healthcare market, we’ll be putting GSK’s consumer business under the microscope.
- It should be business as usual at Lloyds, but there are still hurdles for the bank to clear.
- Capacity in the airline industry is snaking up, but it should be cost control that takes centre stage in British Airways owner IAG’s third quarter results.
FTSE 350 stocks reporting next week
|Essentra||Q3 Trading Statement|
|Anglo American||Q3 Production Report|
|Bunzl||Q3 Trading Statement|
|International Personal Finance||Q3 Trading Statement|
|St James's Place||Q3 New Business Announcement|
|Whitbread*||Half Year Earnings Release|
|Antofagasta||Q3 Production Report|
|GlaxoSmithKline*||Q3 Earnings Release|
|Lloyds Banking Group*||Q3 Trading Statement|
|Metro Bank||Q3 Trading Statement|
|Barclays*||Q3 Earnings Release|
|Debenhams*||Full Year Earnings Release|
|Inchcape||Q3 Trading Statement|
|KAZ Minerals||Q3 Interim Management Statement|
|National Express Group||Q3 Trading Statement|
|Redefine International||Full Year Earnings Release|
|RELX||Q3 Trading Statement|
|International Consolidated Airlines Group*||Q3 Trading Statement|
|Royal Bank of Scotland Group*||Q3 Trading Statement|
|Shire*||Q3 Trading Statement|
*Hargreaves Lansdown provides research updates on these stocks
We’ll be paying particular attention to the Consumer Healthcare division in Q3 results. Recent performances from elsewhere in the sector have been lacklustre. Reckitt Benckiser reported a 2% decline in like-for-like sales in its Health division on Wednesday, and both Pfizer and Merck are rumoured to be looking at selling their consumer operations.
As the former head of the consumer division, GSK’s new CEO, Emma Walmsley, has a particular interest in the division’s fortunes. A solid performance this quarter would not only bode well for the strength of the current brands, but might also open speculation GSK will go looking to pick up unwanted assets from rivals.
Elsewhere in the business, GSK will be seeking to deliver continued growth from new respiratory products to offset declines in Advair/Seretide, as well as hoping for another healthy performance from HIV treatments Tivicay and Triumeq.
We’re not expecting any surprises from Lloyds this quarter. Steady income growth should continue, which combined with a market-leading cost-to-income ratio has kept underlying profits moving forwards in recent years. However, there are a couple of banana skins out there which could cause the bank to slip up.
Foremost among these is an unexpected rise in bad loans. That’s more of a worry now the group has a larger position in the notoriously volatile credit card sector, although recent results from challenger bank Virgin Money suggests arrears levels remain stable. Conduct costs, such as PPI redress, are another potential sore point. Investors will be hoping for a clean slate.
Core banking operations aside, Lloyds recently announced that its Scottish Widows pensions and savings business has agreed to acquire Zurich’s £19bn workplace saving operation. It’s an interesting strategic move by a historically unloved division. Look out for any additional commentary about the bank’s plans in this sphere.
We’re in the midst of a brutal punch up in the airline sector and Monarch, Alitalia and Air Berlin have already hit the canvas. However, IAG’s exposure to long-haul destinations and focus on international business travel have so far helped it soar above the dogfight.
Keeping costs under tight control is a key theme at present. Cheap fuel is providing a decent tailwind, but of course the oil price is out of IAG’s hands. This means investors’ attention is more likely going to be focussed on non-fuel operating costs. At the half-year stage, constant currency non-fuel unit costs increased 2.5%, although that did include the financial impact of the power failure which affected British Airways customers.
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