Look ahead to FTSE 350, other companies reporting & economic events from 16-20 January 2023
- How long can consumers keep spending? Experian plc (LON:EXPN) may be able to shed some light
- Ocado Group PLC (LON:OCDO) Retail is teed up to report a full year sales decline as customers tighten their belts
- Burberry Group plc (LON:BRBY) expected to show healthier sales after China ‘reopens’
- Currys PLC (LON:CURY) could feel the pinch if consumers curbed spending this Christmas
- Diploma PLC (LON:DPLM) should continue to go from strength to strength
- Dunelm Group plc (LON:DNLM)’s product mix should ensure resilient sales in tough times
- Netflix Inc (NASDAQ:NFLX) still has a fight on their hands in a difficult market
- Sage Group PLC (LON:SGE) will be helped by its large US exposure
Experian, Q3 Trading Statement, Tuesday 17 January
Matt Britzman, Equity Analyst, Hargreaves Lansdown:
“Experian’s half year results, back in November, showcased a lot of what we like about this business. The revamped consumer division has been adding new members and saw organic revenue growths in double digits. On the businesses-to-business side, Experian’s host of products look we placed to help lenders who are starting to look for lower risk borrowers.
The threat of a wider economic downturn remains, though. If lenders start to retreat and consumers reign in spending, then demand for Experian’s products could come under pressure.
For now, we’re still seeing signs that consumers are happy to keep spending, despite the threat of recession. That should be positive news for Experian, but the real thing to watch for is any commentary on the outlook and whether Experian’s treasure trove of data is starting to throw out any warning signs.”
Ocado, Q4 Trading Statement, Tuesday 17 January
Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown:
“Ocado Retail is facing challenges. Customers are swapping usual items for cheaper alternatives. In the third quarter the group’s average selling price rose 5% overall, but within that there was a 2% decline relating to the preference for value goods.
We expect this trend to have continued in the final quarter, and we’ll find out the extent of changing customer attitudes over the important festive season.
Last we heard, the average basket value was down 6% because of people buying fewer items. With inflation still running rampant this is unlikely to have reversed. This is troubling because the group’s grappling with enormous energy costs so lower basket values limit Ocado’s ability to help offset this.
The difficult conditions mean Ocado expects “to see a small sales decline” for the full year, and close to break-even cash profits. That appears to be a sensible prediction in our view, but a worse-than-expected outlook could upend things.”
Burberry Group, Q3 Trading Statement, Wednesday 18 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown:
“Burberry’s shares are climbing back towards pre-pandemic highs, buoyed by China’s reopening. China has powered the market for luxury goods over the past decade, so pandemic restrictions have hit hard. With an easing of the rules, it’s hoped the high spending Chinese tourists will go globe-trotting once more enabling Burberry to meet its potential.
However, much will depend on the speed of the recovery and the effect of rising infection rates given that some travel restrictions have been imposed by other countries. Investors will be keen to see forward guidance from the company indicating that it is confident of a rebound in sales in Chinese boutiques and high-end outlets in travel destinations.
Efforts to elevate the brand have been paying off, given that a luxe image is rewarded by improved loyalty among well-heeled customers, who are far more insulated from inflationary pressures. “
Currys, Trading Statement, Wednesday 18 January
Sophie Lund-Yates, Equity Analyst, Hargreaves Lansdown:
“Currys sells a lot of big-ticket items like TVs, laptops, and white goods like fridges and washing machines. But because these items are expensive, demand could be on the chopping block if consumers decide to curb their spending.
With the group’s underlying operating margins already running thin at 0.6%, there isn’t much breathing room if demand falls further. Next week’s Christmas trading update will give an early insight as to whether consumer spending pulled back during the festive period.
Currys’ business is highly seasonal, with a substantial proportion of its revenues, and any profits or losses, generated in the second half of its financial year. This includes the likes of Black Friday and the Christmas period.
As such, a strong showing from next week’s Christmas trading update will be key if the group are to meet investors’ expectations. Keep in mind, there’s already been a downgrade to the group’s profit before tax target this financial year, so any further setbacks would represent a real challenge.”
Diploma, Q1Trading Statement, Wednesday 18 January
Steve Clayton, Head of Equity Funds, Hargreaves Lansdown:
“Diploma ended their last financial year on something of a high. Organic revenues rose by 15% and reported numbers, including the benefit of acquisitions, rose by 29%, breaching the £1bn level for the first time in the group’s history.
We don’t expect the group to keep that pace up in FY23, but Diploma should still be capable of posting robust growth in 2023. For this quarter we see growth benefiting from a buoyant copper price, which should push sales ahead in their Windy City Wire business in the USA and ongoing growth in the other divisions.
Diploma benefits in times of economic turmoil from being a distributor of essential products, such as industrial seals or healthcare equipment where demand is relatively independent of the state of the economy. We expect this, allied to the group’s proven management strength to make Diploma stand out in 2023 as one of the UK market’s most resilient Industrial stocks.”
Dunelm Group, Q2 Trading Statement, Thursday 19 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown:
“As consumers tighten their belts, discretionary purchases have been coming under pressure, but Dunelm has been showing hardiness amid the headwinds and its product mix should ensure sales continue to be resilient.
Although first quarter sales fell 8%, that was against a tough comparison in 2021 when homeowners spent more on improvements during lockdowns. Although inflation is still painful, the company said it was still on track to meet full year target of a margin of around 50% and investors will be keen to see if that guidance is still intact.
It’s been adeptly controlling costs which has kept prices competitive, and the range of goods sold at its vast stores in retail parks and online cater for differing budgets while still offering value. If people feel they can’t afford big items to freshen or refurbish the home and decide to make do with a cheaper makeover in the meantime that is likely to keep benefiting Dunelm.
With consumer spending overall holding up during the pre-Christmas period, with homewares and sales at department stores stronger than expected, it bodes well for Dunelm but a deeper than expected recession would still be painful.
Netflix, Q4 Trading Statement, Thursday 19 January
Susannah Streeter, Senior Investments & Markets Analyst, Hargreaves Lansdown:
“Although Netflix added more subscribers during the last quarter than expected, it’s a super-tough market and numbers are set to come under intense pressure this year. With the market saturated in the US and Canada, the company is seeking-out growth in emerging economies, particularly in the Asia Pacific region, but these are areas which generate less revenue per membership.
So, hanging onto existing customers is crucial and the company still has a fight on its hands as cost-of-living pressures mount on households in Europe and North America.
Costly monthly subscriptions are among the first to go when times are tight and unless Netflix keeps rolling out the hits, which is an expensive business, cancellations will mount. Netflix has to spend big just to keep hold of the customers it already has, let alone the cost of bringing new customers on board.
Industry analysis estimates that Netflix could shed another 200,000 subscribers this year, as cash strapped consumers cut back. There were high hopes that the new ad supported service could help win new fans, but there is also a risk that this cheaper option will accelerate paid subscriber drop-offs.’’
Sage Group, Q1Trading Statement, Thursday 19 January
Steve Clayton, Head of Equity Funds, Hargreaves Lansdown:
“Sage’s last financial year went well with 12% growth in annualised recurring revenues and signs of improved competitive positioning. Moving forward, there is no doubt that the next few quarters will be tougher given the pressures the group’s customer base will inevitably face.
But whilst businesses keep trading, they have to do the books, and when times are tough few will invest in the time and trouble of switching accounting software providers. So, we expect to see resilient revenues and growing attention placed upon the group’s Intacct cloud-based accounting software.
Intacct has grown well since Sage bought it but is still barely penetrating large sectors of the addressable market. The group will be helped by its large US exposure. Roughly 40% of sales come from the US and whilst the US still has to contend with inflation and rising interest rates, it has not faced an energy crisis given plentiful domestic gas supplies.”
Among those currently scheduled to release results next week:
16-Jan
| Ashmore Group | Q2 Assets Under Management Release |
| Bankers Investment Trust | Full Year Results |
| Rio Tinto | Q4 Operating Review |
17-Jan
| Crest Nicholson Holdings | Full Year Results |
| Experian* | Q3 Trading Statement |
| Hays | Q2 Trading Statement |
| Ninety One | Q3 Assets Under Management Release |
| Ocado Retail* | Q4 Trading Statement |
18-Jan
| Antofagasta | Q4 Operating Review |
| BHP Group | Q2 Production Review |
| Burberry Group* | Q3 Trading Statement |
| Currys* | Trading Statement |
| Diploma | Q1 Trading Statement |
19-Jan
| Centamin | Q4 Production Review |
| Dunelm Group | Q2 Trading Statement |
| Harbour Energy | Trading Statement |
| Netflix* | Q4 Results |
| Network International Holdings | Full Year Trading Statement |
| Sage Group | Q1 Trading Statement |
| Workspace Group | Q3 Trading Statement |
20-Jan
No FTSE 350 Reporters
