The Week Ahead: Hays sees no end to slow growth in private sector
The recruitment companies are in focus this week, with both Hays and Robert Walters releasing updates as fears continue over the state of the private sector market in the UK.
When Hays – which is set to comment on trading over the final quarter on Thursday – last updated the market back in April, it said private sector growth on these shores in the third quarter had fallen to 18 per cent, 9 per cent lower than in the previous three months. Recent comments from the group show it is not expecting the trend to be reversed soon, and this, combined with the public sector's weakness, means Collins Stewart believes growth in the UK will remain in negative territory.
Numis Securities' Steve Woolf is similarly downbeat, saying he "does not see any signs of improvement in the UK, with further public sector cuts likely in our view over the next 12 months". With Hays' international operations still driving growth, the analyst estimates its net fees will have risen 15 per cent from the same period the previous year, a small dip from the quarter before.
Robert Walters announces its interim management statement for the second quarter on Wednesday, and Collins Stewart notes that last year it "was ideally placed to take advantage of trends" in the sector thanks to its focus on the Asia-Pacific region and the banking and finance industry. However, the broker's analysts say the recent earthquake and tragedy in Japan is likely to have caused problems given that the country provides around 15 per cent of the group's gross profit.
Persimmon continues the run of mid-season updates from the housebuilders on Tuesday, with Peel Hunt's Robin Hardy noting that 2011 has so far been "more positive than expected for [the] new build [market]". Persimmon's share price has certainly been one beneficiary, having risen more than 10 per cent since the start of the year, although there have been fears that the second quarter has not been as strong as the first for the sector.
Results/Updates: Persimmon, St Mowden and Tullow Oil.
Balfour Beatty is issuing a trading statement for the first six months on Wednesday, and Howard Seymour of Numis is expecting a brief update "which is likely to confirm recent trading in line with trends discussed at the time of full year results in March". The analyst says the "UK construction market is holding up", adding that the infrastructure services group believes "revenue declines as public sector cutbacks take place can be offset by cost savings".
Results/Updates: 3i, Balfour Beatty, Booker, easyJet, Ferrexpo and Robert Walters.
2011 has been tough for Man Group, and the world's largest hedge fund manager has found its share price 25 per cent lower than at the turn of the year, but it benefited last month from its chief executive, Peter Clarke, announcing that its net inflows for the second quarter were already ahead of those for the previous three months.
The group releases a trading update on Thursday, and although Credit Suisse notes that the sector as a whole "continued to see strong inflows through April and May" despite volatile markets, it expects June to have been "more challenging". The broker's analysts claim that Man's flagship AHL fund benefits from choppy markets "given the liquidity, long-term track record and the more limited reliance on rising asset values than other hedge funds", but they still believe the group's assets under management will have dropped from $71bn (£44bn) at the end of May to $69.5bn, thanks in part to lower equity markets.
Babcock is expected to issue a trading statement alongside its AGM on Thursday, with JP Morgan Cazenove warning there "could be profit-taking if [it] does not excite the market". The broker is anticipating a possible update on the defence services group's contract pipeline, which in May had risen to £8.5bn from £7bn two months previously – a faster acceleration, according to JP Morgan's analysts, than any of its large peers in the outsourcing sector had achieved.
Thursday also sees WH Smith issue its interim management statement for the third quarter, and Citigroup is expecting the retailer to show "solid trading" in both its high street and its travel divisions. In the latter unit, Citi is predicting that its like-for-like sales will have fallen 3 per cent year-on-year, an improvement from a 5 per cent drop the previous quarter, while on the high streets it is expecting a 6 per cent decline.
Results/Updates: Babcock, Dunelm, Hays, Man Group and WH Smith.
CIPS Construction PMI; eurozone PPI; Eurozone Sentix Investor Confidence.
CIPS Services PMI; eurozone retail sales; eurozone services PMI; US factory orders.
Car registrations; eurozone householdconsumption; Shop Price Index.
Bank of England and ECB interest rate decision; Industrial production figures; NIESR monthly GDP estimates.
Producer prices data; US consumer credit; US non-farm payrolls data; US wholesale inventories.
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