The Week Ahead: Travel companies set for burst of spring sunshine
Global events have hit the travel industry hard in 2011, and investors will be hoping to find out the extent of the damage this week with both TUI Travel and Thomas Cook updating the market.
When the companies last released figures, back in February, they talked about the cost of the unrest in Egypt and Tunisia. And turmoil has continued in the region. The resulting oil-price rise has knocked both groups, while share prices have also slipped since the disaster in Japan, even though they have little exposure to the country.
Despite all this, Numis Securities still expects TUI's passenger numbers in the UK to be around 3 per cent higher than the same period last year. Analyst Wyn Ellis says the group, whose trading update is out on Thursday, should also get a boost from the late Easter and the extra bank holiday from the royal wedding.
However, he does point to last week's update from its Swiss peer Kuoni – in which it gave warning that the global events makes 2011 "difficult to estimate" – as highlighting "the uncertain outlook for the sector".
Thomas Cook, meanwhile, releases its trading statement tomorrow and although JP Morgan Cazenove predicts it "should be supportive [for its share price] ... we would not expect earnings upgrades at this stage of the booking cycle".
In terms of outlook, the broker thinks Thomas Cook will benefit from the lowering of Air Passenger Duty in last week's Budget as well as the group's fleet-replacement programme which "should position it favourably ahead of the introduction of airlines into the Emission Trading Scheme from 2012".
Results/Updates: A.G. Barr, DMGT and Lamprell.
Shore Capital is expecting an "upbeat" tone from Babcock International when the defence-services group releases its pre-close trading statement tomorrow. However the broker's analyst, Robin Speakman, does give warning that "a slower organic growth profile is likely to be reported by management for the next few quarters following on from the comments made by many of Babcock's peers through the recent reporting season".
Also updating investors is Man Group, whose share price – thanks to the unrest in the Middle East and North Africa as well as the tragedy in Japan – is nearly 20 per cent lower than in February. Singer Capital Markets believes it will reveal assets under management worth $68.1bn (£42.5bn), "some $2.7bn lower than our previous estimates as a result of market impact".
It also says the sale of its stake in BlueCrest "further reduces management fees ... giving rise to a total management-fee downgrade of 22 per cent for [the financial year] although the valuation impact ... is mitigated by increased surplus capital".
Results/Updates: Afren, Babcock, Hochschild Mining, Kazakhmys, Man Group, Phoenix Group, Thomas Cook and Wolseley.
There was good news for the housebuilders in last week's Budget, with new measures announced to help first-time buyers. Bellway is expected to see another boost in its half-year announcement on Wednesday. Chris Millington, an analyst at Numis Securities, thinks it will have seen a rise in its volumes of around 4 per cent, leading to its profit-before-tax for the first six months growing over 25 per cent.
The catering group Compass dishes out a pre-close trading update on Thursday in the midst of a bad run for its share price which has seen it lose over 7 per cent since December. Part of its weakness has been because of rising food inflation, but Deutsche Bank feels the announcement will not result in the company adjusting its guidance on either that or on labour inflation. Instead, says the broker, "the principal area of concern ... is likely to focus on any impact of recent natural disasters on the group's Australian and Japanese businesses".
However, he believes that its global exposure, plus its "improving net new business growth and modest pricing benefits should offset any disappointment that could come out of these two countries".
Also releasing an update on Thursday is Mothercare, and Peel Hunt's analyst John Stevenson notes that his full-year profit-before-tax prediction of £32.5m remains on the bearish side, saying that he has "taken a dim view of the sales environment over the first quarter of 2011".
Results/Updates: Booker, Compass, Dairy Crest, JKX Oil & Gas, Mothercare, Petropavlovsk, Robert Wiseman Dairies, Tate & Lyle, and TUI Travel.
US pending home sales; US personal spending.
GDP; M4 money supply; mortgage approvals data; US consumer confidence.
CBI ales; US ADP employment report.
GfK consumer confidence; Nationwide house price data; US Chicago PMI; US factory orders; US unemployment claims.
Manufacturing PMI; US non-farm payroll figures.
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