Thursday preview: SABMiller, UBM, retail sales ...
Also included in this preview: Mothercare, European Union summit
There is the usual Thursday glut of trading announcements and this week a large proportion of them are heavy hitters.
Lager brewer SABMiller's second quarter should see a slight slowing down in the growth of volumes from the first quarter (Q1).
Credit Suisse thinks the main reasons for any slow-down are likely to be: Latin America, in particular Colombia, where consumer confidence is weakening; Africa, where there has been a 25% increase in excise duties in Tanzania; and Europe, where first quarter volumes were inflated by the Euro 2012 football championship.
"We expect a sequential acceleration in South Africa, as Q1 lager volumes were held back due to the timing of Easter. However, we expect price/mix to be solid at c3%, broadly in line with Q1, driving organic revenue growth of 7% for Q2," the Swiss bank said.
Taking the two quarters together, Credit Suisse thinks organic revenue growth of 7.5% will be achieved, of which 2.9 percentage points will be due to changes in the price mix.
"However, we forecast organic EBITA [earnings before interest, tax and amortisation] growth of 6.7% (leading to an organic margin decline of c10bps [one-tenth of a percentage point]), driven by a negative margin hit in Europe from the price rebasing taken at the start of FY13 [fiscal 2013]; input cost inflation (particularly in South Africa and to a lesser degree in Africa)," the broker said.
Business publisher and events organiser UBM's third quarter trading update should continue the good momentum seen at the half year stage, Investec reckons.
The broker thinks nine-month sales will be in the region of £746m, up 6% year-on-year. Like-for-like sales are seen growing 5.5%.
The EBIT number is tipped to rise to £143m from £127.5m at the same stage last year, while the margin should improve to around 19% from 18.1%, Investec predicts.
"We do not expect much new re the Data review/exit though hope for some update," the broker added.
Mothercare, the retailer of products for mothers, babies and toddlers, is going up against soft UK comparatives in its second quarter, so we should not see a rpeat of the first quarter's eye-watering 6.7% year-on-year decline in like-for-like (LFL) sales.
Panmure Gordon, which is bearish on the stock, forecasts what it calls a "sentiment-driving" UK LFL sales decline of 5.3%.
"Squeezed by specialists on one side and the supermarkets on the other, we continue to be concerned about Mothercare's ability to fight back in the UK. We note increasing interest from US maternity and childrenswear companies in the lucrative Far East markets in which Mothercare international trades," Panmure Gordon said.
Seymour Pierce is also a seller of the stock, and expects another disappointing trading update, as it is too soon for the new management to have made much impact.
"Jools Oliver's new range, for example, was only launched in 70 stores as part of the autumn/winter range. We will be interested in any early feedback on how these new ranges are doing as well as the repositioning of its entry price points value offer," kate Calvert at Seymour Pierce writes.
Seymour Pierce is a bit more optimistic than Panmure Gordon, predicting LFL sales will be down 4% to 5%.
"There was some disruption from the re-platforming of its Direct business last quarter so we will be looking for more positive news in this area. International sales are expected to remain strong and we are looking for a similar run-rate to Q1 when 11% growth was reported as we expect Europe to remain a drag," Calvert added.
On the economic side. the EU summit is sure to attract attention on Thursday and Friday, although Credit Suisse reckons leaked draft conclusions of the summit should have shaped, to some extent, market expectations. "The main topic of discussion is the interim report prepared by the European authorities to further strengthen the functioning of the euro area," the Swiss bank notes.
"The final report and precise road map towards a more integrated euro area is only due in December. Markets should not expect too much out of this summit given the political bargaining that will likely slow down the process towards a consensual agreement. Market sensitive issues such as the possibility for the ESM [European Stability Mechanism] to recapitalise banks directly will not be clarified. Instead, we expect a similar statement to the one in June. There will also be no decision on mechanisms to control national budgets better and provide support to countries in need but such mechanisms will be explored in the future," Credit Suisse opined.
UK Retail Sales figures for September are due out at 09:30, and the expectation in the market is that the index will be up 0.4%, after falling 0.2% in August. On a yearly comparison, sales are expected to be up 2.1%, after showing an annual rise of 2.7% in August.
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