Share Talk Expected Market Updates For The Week Ahead – 20th September 2021

The market mood will be determined by a series of central bank meetings in the US, UK, and Japan over the next week. However, there will be more upgrades from corporations to keep things moving.

Compass Group (LSE :CPG) is an expert on plates. Investors will be excited to hear that more plates are being prepared for trading when the FTSE 100 contract caterer updates traders on Tuesday.

Although there was some progress, the last update did not include cost control measures such as managing costs, negotiating contracts and resizing.

Profits and revenues fell by 32% and 83% respectively in the six-months to 31 March. We will closely monitor the statement for any signs of improvement in sales.

Compass is a strong presence at work canteens. With the ongoing debate about whether to return to the office or work from home, it would be nice to have some assurance about the medium-term prospects.

Harry Barnick, senior analyst at Third Bridge, stated that Compass Group relies too heavily on corporate food service demand. This has been eroded by a renewed appetite for homeworking in the UK, and the US.

This could explain why shares have been in decline for nearly a year, while other sectors have rebounded.

Can Kingfisher fly second-half headwinds better than Kingfisher?

Kingfisher PLC, the owner of Screwfix and B&Q, was on the other side one of the beneficiaries. In January, people were forced to concentrate on their homes and gardens, and Kingfisher PLC (LSE :KGF) was another beneficiary.

The company doubled its sales and profit guidance this year. Its first half of 2021 saw like-for-like sales rise 22%. Adjusted pretax profit will be between £645mln to £600mln, compared to £415mln last year.

Investors and analysts will be comparing last year’s numbers with the outlook for the second half of the year, taking into account the large numbers for the first-half.

Analysts at RBC Capital Markets suggest that you also keep an eye out for potential £1bn in dividends.

Credit Suisse (NYSE.CS.) might be able to provide some insight into inflation. Kingfisher is a company that has the ‘pricing power to ease the pressure of rising input costs, and pass through any price increases they face instead of materially sacrificing margins.

Fuller pubs?

Fuller Smith & Turner PLC (LON :FSTA), covers all aspects of hospitality, from hotels and pubs to restaurants. This should give a good indication of how the UK sector is recovering after Covid.

The FTSE 250 group announced that it was benefiting form the staycation boom in its last update. This tailwind should still be strong as travelling abroad is still a nightmare.

As debt has fallen, expansion plans are something to be on the lookout for. Also, there might be opportunities among competitors trying to recover from Covid slump.

Pre-tax losses for the entire year at the London Pride Brewer were less than the £53mln consensus forecast. This latest update also showed an improving trend.

Saga continues

The recent news about Saga PLC’s censure of nuisance marketing (LSE:SAGA), will be a distraction. However, a £225,000 penalty for sending emails, won’t have any impact on the financials. A pretax loss of £10.7mln is expected.

The ongoing disruption of Saga’s tourism and travel operations will have a greater impact.

Although Saga’s insurance business has been relatively stable, Saga’s cruise operations were only resumed in June. With a large portion of its over-50s customers in a higher risk category, some reticence could be expected, even though sailings are back.

Saga’s outlook is bullish, however. Management expects to retain 73% of customers who had their bookings cancelled due to the pandemic.

The end of the UK’s traffic light system for travel last week bodes well, at most for narrative’s sake.

The market will be paying close attention to what Saga has to offer about the changing landscape of international travel, and the potential risk of further disruption caused by Covid-variants.

Indebtedness will also be a major concern, although £250mln bond sales helped to alleviate that concern.

Play on Playtech

Playtech’s July trading update showed that the group was in line with its overall performance. A strong online performance is offset by an indifferent performance in the bookmaking business in Italy.

Broker Peel Hunt pointed out the possibility of upgrades if retail opens strongly and online continues to outperform.

A Final offer was rejected last month, and a Gopher offer is being looked at.

“We believe that the best way to drive value is through evidence of US progress. Playtech US may surprise with its upside potential as it transitions from the R&D stage to executing on its plans. The Peel Hunt analysts believe that a slowdown in online gambling revenue growth after Covid-19 is the greatest immediate threat.

CVS – a cute investment?

Few Covid-adjacent investor stories include cute photos, but CVS Group Plc (AIM:CVSG), Plc is clearly riding the wave of British pet ownership.

According to statistics from the Pet Food Manufacturers Association, the UK now has 17mln pet-owning homes.

This is a good sign for CVS, a veterinary services company with over 1,900 vets and 480 practices.

In July, a trading update stated that sales had increased 17.4% and informed investors that its profits would exceed previously set targets.

Investors might be able to expect expansion news in Thursday’s trading report, as the group grows typically by acquiring additional practices and closely watching guidance for the future.

Macro matters

The US Federal Reserve policy decision of Wednesday is the most important macro news of the week, if not of the month. It includes the conclusion of the Bank of England’s Monetary Policy Committee’s meeting on Thursday, and the equivalent for Japan, Switzerland Brazil, Turkey, South Africa. This adds more potential for volatile market action.

On Thursday, more market-moving events will occur around the publication of flash purchasing managers’ index reports so far for September in manufacturing and services. Both reports are due out on Thursday.

There are also political events taking place with Canada’s election happening Monday and Germany’s next weekend.

“The market calendar picks up this week, as we arrive at an array central bank meetings that set the stage for investors when we move into Q4,” stated analysts at Deutsche Bank (NYSE.DB), mostly the US Federal Open Markets Committee.

This meeting is significant because we will receive the latest economic projections from the FOMC and the “dot plot” of future rate increases.

Jerome Powell, Fed chair, has stated recently that a decrease in QE (or asset purchases) pace is appropriate for “this year”, as long as the economy continues to be on track.

The Deutsche economists believe Powell will keep an “optionality” regarding the timing of the announcement. However, they think the message will be that, “in the absence, any material downside surprises the bar to pushing that announcement beyond November is relatively high.” According to the dot plot, there will be an upward trend in the dots which will raise the rate hikes in 2023 from 3 to 3, followed by 3 more increases in 2024.

Fawad Razaqzada is a market analyst at ThinkMarkets. He said: “Looking ahead to the week ahead and heading into the weekend, sentiment can be quite cagey. Supply bottlenecks, rapidly rising oil, gas, and electricity prices have all contributed to inflationary pressures that have been very high.

He said, “What’s not clear is when and how much energy prices will fall again.” Inflation and high energy prices directly affect consumers’ disposable incomes. Some factories have had to stop production due to the rapid rise in energy prices in Europe. Rising input costs will squeeze the margins of manufacturers and reduce their profits.

“The decline in the buying power of consumers will only make matters worse.” The stock market outlook is uncertain against this background, to put it mildly.

The following announcements are expected for the week ending 24 September:

Monday 20 September:
Finals: Finsbury Food Group (AIM:FIF) plc, Wilmington plc

Interims: Frenkel Topping, Open Orphan

Tuesday 21 September:
Finals: Litigation Capital Management (AIM:LIT) Ltd, Time Finance plc (AIM:TIME)

Interims: Alliance Pharma PLC (AIM:APH, FRA:DVL), Alphawave IP Group PLC (LSE:AWE), Cambridge Cognition Holdings PLC (AIM:COG), Dignity (LSE:DTY) plc, Fintel plc, JTC PLC (LSE:JTC), Kingfisher plc, Learning Technologies Group plc, M&C Saatchi PLC (AIM:SAA), Pensionbee plc, Personal Group plc, SIG PLC (LSE:SHI)

Trading announcements: Compass Group plc

Economic data: UK public sector net borrowing, CBI industrial trends orders

Wednesday 22 September:
Finals: PZ Cussons (LSE:PZC) plc

Interims: Deepmatter plc, Ecsc Group PLC, IGAS Energy PLC, Oxford BioMedica PLC (AIM:OXB), Pennant International (AIM:PEN) Group plc, Quixant PLC (LSE:QXT), Saga plc, Ten Entertainment Group PLC (LSE:TEG), The Mission Group plc, Trellus Health PLC (AIM:TRLS), Wandisco PLC (AIM:WAND)

Economic data: US Fed interest rate decision, FOMC economic projections

Thursday 23 September:
Finals: DFS Furniture (LSE:DFS) plc, Fonix Mobile PLC (AIM:FNX, FRA:FOS), Hansard plc, Supermarket Income REIT PLC (LSE:SUPR)

Interims: Arecor Therapeutics PLC (AIM:AREC), City Pub Group PLC, Distribution Finance Capital Holdings PLC, Ebiquity PLC (AIM:EBQ), eve Sleep plc, Everyman Media plc, Playtech PLC (AIM:PTEC), Safestyle UK PLC (AIM:SFE), Xeros Technology Group PLC (AIM:XSG), XLMedia PLC (AIM:XLM, FRA:7X3)

Trading announcements: CVS Group plc, Fuller Smith & Turner plc, Investec PLC (LSE:INVP)

FTSE 100 ex-dividends to knock 0.59 points off the index: Smurfit Kappa Group plc (LSE:SKG), Hargreaves Lansdown PLC (LSE:HL.)

Economic data: UK flash manufacturing/services PMIs, BoE Interest Rate Decision, US initial jobless claims, US flash manufacturing/services PMIs

Friday 24 September:
Interims: Judges Scientific PLC (AIM:JDG)

Economic data: UK GFK consumer confidence

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