Results from Sainsbury on Wednesday may give some pointers whether sector leader Tesco is finally rousing from its slumbers in the UK.
Results from Morrisons in the first week of May showed that supermarket chain suffering its first year-on-year fall in like-for-like (LFL) sales since the time it bit off more than it could chew buying Safeway, and the company suggested that this was because rivals (no names, but they probably meant Tesco as well as Sainsbury) had stepped up their money-off coupon promotions in the first quarter.
Tesco's muscle-flexing will not have gone unnoticed by Sainsbury, and it will be interesting to see how well it responded to it.
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Broker Jefferies thinks Sainsbury's full year results should show "solid" 6% growth in earnings before interest and tax, "but with close to £1.4bn of gross capex [capital expenditure] leading to net debt increasing to over £2bn."
The broker expressed the hope that "with returns still amply trailing those of peers, the group may follow Tesco's lead in reducing expansionary capex (and reinforce yield credentials)."
The market is expecting profit before tax of £711.9m on sales of £22,545m.
Operating margin is forecast to be broadly flat at 3.5%, held back by an increased sales mix of low margin petrol, reckons broker Charles Stanley.
"Future dividend policy is expected to be clarified. Current policy is to maintain dividend cover [earnings per share/dividend per share] in the 1.5-1.75x range," notes Charles Stanley.
"Accelerated investment in new space means the current dividend payout is not being covered by free cash flow, leading to rising net debt. In our opinion, however, all balance sheet ratios remain sound and we believe the group has the ability to support a moderately higher level of net debt," the broker suggests.
The market is expecting a full year dividend of 15.7p, but Charles Stanley is going for a smaller divi of 15.1p.
"The level of capex is also expected to moderate over the coming years, meaning the dividend should once again be covered by free cash flow. Our base case assumption is that dividend policy will remain broadly unchanged, although we would not rule out the possibility that the dividend cover target is raised to 2.0x, leading to dividend growth lagging EPS growth over the near / medium term," Charles Stanley speculates.
Terrestrial broadcaster ITV has indicated that first quarter advertising revenue will be down 2% year-on-year (y/y), but Credit Suisse thinks the firm will flag a sharp pick-up in second quarter (Q2) activity.
"The latest feedback we have from our network of media buyers in the UK is positive. Based on this feedback, we believe that ITV Family revenues could be up 10% y/y in Q2, which, after -2% in Q1, would make H1 [first half] +6%. The H2 comp is much easier (-1% vs H1 comp +3%) so, if our buyers' network is right, we would feel more confident about our full year forecast of +2%," Credit Suisse said.
"With ITV Studios revenue growth also likely to continue its strong momentum, we see the stock responding positively to the release," the Swiss bank added.
Credit Suisse recently upgraded hotels group InterContinental Hotels to "outperform", so it is presumably expecting an upbeat first quarter trading update from the firm.
Jefferies is a bit more circumspect, sticking with its "hold" rating for the hotels group.
Jefferies is expecting a 4% rise in sales, a 6% rise in operating profit and an 8% increase in earnings per share (EPS). It is forecasting earnings before interest and tax (EBIT) will climb to $118m from $112m last year and noted in passing that last year's number included a $10m one-off liquidated damages fee, "so underlying growth is closer to 15%."
As for the key revenue per available room (revPAR) metrics, Jefferies predicts a 6% increase in the Americas and Greater China, a 2% increase in Europe and a 3% improvement in Asia, Middle East and Africa.
"Recent numbers from Starwood and Marriott would indicate that this should be at least achievable, and could be slightly better. We estimate that every 1% on group RevPAR adds about 3% to EBIT," Jefferies said.
No frills airline easyJet recently modified its guidance for its half-year results to a loss ranging from £110m to £120m, compared to previous guidance of a loss of somewhere between £140m to £160m.
"Strong total revenue per seat performance is the key driver - we forecast a 10% rise in stated total revenue per seat," says Nomura Securities. It thinks the loss before tax will be at the gloomier end of the spectrum, and is forecasting a loss of £120m, with performance not helped by a fuel bill of around £105m.
INTERIMS
easyJet, Sage Group, United Drug
INTERIM DIVIDEND PAYMENT DATE
St Ives
INTERIM EX-DIVIDEND DATE
Aberdeen Asset Management, Henderson Fledgling Trust , Matrix Income & Growth 4 VCT, Numis Corporation, Redefine International, Smart (J) & Co., Smiths News, Spirit Pub Company
QUARTERLY PAYMENT DATE
British Land Co
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BP, GlaxoSmithKline, Royal Dutch Shell 'A', Royal Dutch Shell 'B', Unilever
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Crude Oil Inventories (US) (15:30)
Current Account (GER) (07:00)
Factory Orders (GER) (11:00)
MBA Mortgage Applications (US) (12:00)
Retail Price Index (GER) (07:00)
Wholesales Inventories (US) (15:00)
FINALS
Sainsbury (J)
IMSS
CRH, Glencore International, ITV, Resolution Ltd.
SPECIAL EX-DIVIDEND PAYMENT DATE
Antofagasta
EGMS
Matra Petroleum
AGMS
Brady Exploration, Brady Exploration, Chime Communications, Costain Group, CRH, Dairy Farm International Holdings Ltd. (Singapore), Downing Planned Exit VCT 2011 (General A Shares), Downing Planned Exit VCT 2011 (General Shares), Downing Planned Exit VCT 2011 (Low Carbon Shares), Downing Planned Exit VCT 2011 (Structured A Shares), Downing Planned Exit VCT 2011 (Structured Shares), European Assets Trust NV (Regd), First Quantum Minerals Ltd., Futura Medical, Glanbia, Glencore International, Go Plc GDR (Reg S), Hygea VCT, Imagelinx, ITV, KBC Advanced Technologies, Melrose, Merchants Trust, Mithras Inv Trust, MyCelx Technologies Corporation (Reg S), Orogen Gold, Rightmove, Savills, Standard Chartered, Unilever
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BRC Sales Monitor (00:00)
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4Imprint Group, Acencia Debt Strategies Ltd., Dialight, Novae Group, Quadnetics Group, Smith & Nephew
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Antofagasta, Avocet Mining, Bilfinger Berger Global Infrastructure Sicav S.A.(DI), Bunzl, Bwin.party Digital Entertainment, Cape, CSR, G4S, GVC Holdings, H&T Group, Hiscox Ltd., IS Solutions, Lighthouse Group, Macfarlane Group, Matrix Income & Growth VCT, Maven Income & Growth 3 VCT, Maven Income & Growth 4 VCT, Maven Income & Growth 4 VCT 'S' Shares, Neptune-Calculus Income & Growth VCT, Octopus Second AIM VCT, Persimmon, Randgold Resources Ltd., Rexam, Rightmove, Ted Baker
Q1
Inmarsat
JH
Annual house price growth halves to 3.5% – ONS
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