Next week on the stock market

Among those currently scheduled to release results next week:

• Direct Line looks to steady the ship
• Can Inditex finish the year in style?
• Will Keywords move things up a level?

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

*Events on which we will be updating investors.

Direct Line – Matt Britzman, Equity Analyst

It’s been a rocky year so far for Direct Line and its investors, with the shares down over 20% year to date. January’s trading statement was bleak, as we heard fourth-quarter claims were significantly higher due to cold weather over December. Add the impact of rising costs to cover insurance claims, and lower profits are the result. An insurer's combined operating ratio measures the percentage of premiums that are paid out as claims or expenses. We’re now expecting a ratio over 100% for the year, into loss-making territory. This was the final domino to fall, and the full-year dividend’s been given the chop.

The second piece of troubling news came from the now-former CEO, Penny James, who stepped away from the business with immediate effect toward the end of January. Quick-fire changes at the helm are rarely good news, after all, if there’s one thing markets dislike it’s uncertainty - we’re hoping to hear an update on a long-term successor next week.

Penny James is also HL's Senior Independent Director

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Inditex – Aarin Chiekrie, Equity Analyst

Zara parent, Inditex, will be looking to cap off the year in style. The group’s enjoyed a stellar year so far, with sales over the first nine months up 20% to €23.1bn, ignoring exchange rates. In the face of continued supply chain disruption, Inditex built up higher than usual inventory. Initial signs showed the extra inventory was getting picked up by consumers, but we’re eager to see whether it’s been brought back down to more normal levels when Inditex reports next week.

Digital investment, as well as closing smaller stores and focusing on bigger ones in prime locations, has been helping the group to maintain its impressive margins. But since Inditex last reported, a dispute over worker’s pay has now been resolved. The agreement will see the average salary in its Spanish stores rise by 20%, with further increases over the next three years in line with inflation. Given that a third of the group’s employees work in Spain, this will have a material impact on the group’s costs. We’re keen to hear how management expect to maintain margins with this extra expense.

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Keywords Studios – Derren Nathan, Head of Equity Research

We’re expecting a strong set of results from the video game service provider, following two consecutive upgrades in its latest trading updates. Revenue for 2022 is expected to be up over 30% and underlying pre-tax profits should come in at about €112m. With such explicit guidance already in place, our focus will be on the 2023 outlook, where organic revenue growth is already anticipated to moderate. Just by how much remains to be seen.

We’ll also be keen to hear how well recent acquisitions are doing. The company completed five in 2022, and last month announced it had bought 47 Communications LLC, a leading US-based PR and communications agency with expertise in the video game, technology, entertainment and digital lifestyle sectors. Given Keywords’ history of snapping up complementary bolt-on companies, we wouldn’t be surprised to hear of more deals on the table.

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