The Week Ahead: GKN set for update on Japanese earthquake
Monday 11 April 2011
The UK markets may have bounced back from the falls prompted by last month's earthquake and tsunami in Japan, but the tragedy is still likely to be a major focus for GKN's interim management statement, which is released today.
The engineer was knocked by both Toyota and Honda pausing car production in the country, although it has now recovered from recent lows. Nonetheless, Citigroup's John Lawson – who thinks "European investors have so far assumed there will be little impact from this issue for European automakers" – still feels the group will "sound a warning note, though couched in careful language reflecting probable continued lack of clarity".
Meanwhile, analysts from Investec predict the group's automotive unit will only be "slightly impacted by customer shut-downs and disruption", saying they "suspect any related volume 'shortfall' will be largely made up through the rest of the year" and that generally "we expect the group to report continued positive trading momentum".
Investec analysts also points to a capital markets day tomorrow, which is expected to provide a boost and demonstrate "GKN's leading capabilities in complex aerostructures".
With sector peers Hays and Robert Walters having updated the market last week, today is Michael Page's turn and the recruiter's first-quarter update is expected by Peel Hunt to be positive. The broker believes recent data "suggests a robust trading environment in key geographies such as Australia and Asia and Brazil", but keeps its "hold" rating because of its current valuation, saying that "the market is up with events".
Results/Updates: GKN and Michael Page.
Last month Punch Taverns announced plans to spin-off its Spirit unit, and the pub group's interim results on Tuesday will offer a chance for investors to hear more detail on the demerger.
In terms of the numbers, Panmure Gordon predicts its first-half pre-tax profits will come in at £62.6m, which would be a small drop of £3.8m from the same period the previous year. "We expect a brief update on current trading," say the broker's analysts, "but due to the change in the timing of Easter do not expect any detailed disclosure to the distorted picture this creates".
Results/Updates: Punch Taverns.
WS Atkins releases a trading statement on Wednesday and Charles Stanley's Andy Smith is not optimistic, expecting profits before tax of nearly £93m, which "represents an organic decline of 9 per cent" at the engineer and design consultants. The analyst believes it will maintain its underperformance, saying it "continues to face challenging conditions in a number of markets and we see limited catalysts for share price appreciation in the coming months".
Results/Updates: Fresnillo, JD Sports, Rio Tinto and WS Atkins.
Thanks to events in North Africa and the Middle East, Ashmore has had a tough time of it recently, last month falling as low as 301.5p. The fund manager has mounted a decent rally since then, and Singer Capital Markets believes its third-quarter interim management statement on Thursday could spark it up further.
Saying "market expectations for both flows and performance are low", the broker believes "that institutional demand for emerging market debt remains intact with positive returns delivered year to date".
Thursday is also a big day for the retailers, with the homewares chain Dunelm one of a number in the sector updating the market. Nomura is expecting it to reveal that conditions have been "challenging" over the third-quarter after enduring a disappointing three months previously. The broker predicts its like-for-like sales will be down 3.5 per cent and it now forecasts its profits before tax will reach £81.4m instead of £86m.
Nomura's analysts also feel WH Smith, which releases its first-half figures as well, will see a fall in its like-for-like sales, although it will be helped by "a strong gross margin performance ... and ongoing cost savings". Numis Securities' Andrew Wade agrees that its margins will provide a boost, and he expects its profit-before-tax for the 12 month to come in at £93m.
Meanwhile Mr Wade forecasts "few surprises" from Debenhams' interim results given the department chain released a first-half trading update last month, but still warns that "heading into the second-half, trading is expected to be difficult as consumer headwinds strengthen".
Results/Updates: Ashmore, Debenhams, Dunelm, Filtrona, PZ Cussons and WH Smith.
BRC retail sales monitor; Consumer price inflation; Retail price inflation; RICS house price survey; Trade balance; US import price index; US trade balance.
Average earnings index; Claimant count change; US business inventories; US Federal Reserve Beige Book; US retail sales.
US PPI; US unemployment claims.
US CPI; US Empire State manufacturing index; US industrial production.
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