The Week Ahead: Updates from builders to clarify housing market
Monday 05 July 2010
Investors will be hoping for further clarity on the housing market when the builders Persimmon and Bovis Homes issue updates this week.
Persistent concern about the strength of the housing recovery has continues to pressure the builders, with Investec, which only turned positive on the sector in May, warning on short-term prospects last week. The broker said anecdotal evidence from unquoted industry sources "paints a markedly more downbeat picture of the market" than stock market announcements from quoted companies, adding: "In our view, management of the quoted companies sounds more nervous in tone in conversation than is immediately apparent in their published statements."
Given these worries, any comments from the bosses at Persimmon, which is due to post its update tomorrow, and Bovis, which will follow with a trading statement on Friday, are likely to be closely scrutinised by investors looking to get a handle both on prevailing conditions and on the near-term outlook for the market.
Results/Updates: NCC and XP Power. Other – British Airways June traffic and capacity statistics.
The impact of public sector spending cuts in the UK will no doubt be in focus when the construction firm Balfour Beatty posts a trading update for the six months to 26 June tomorrow. As Numis points out, Balfour has "consistently seen a rising order book and [a] good level of work, which is at odds with the share price performance as concerns about UK Government spending has weighed on sentiment".
The worries notwithstanding, the broker said investors can take comfort from the fact that Balfour operates across a wide range of markets around the world, adding: "Trading is likely to be mixed – [the] UK is performing well, but likely to face pressures, while [the] US will be down this year as a function of a very strong performance in 2009 – but we believe that the group has a very strong trading platform, which should enable it to offset macro issues."
UBS is also confident, saying: "We expect no material change since the last trading update in May ... The group might elect to comment on the announced fiscal cuts in the UK, although these were broadly known before the previous budget and should not result in any change for the ... outlook."
Results/Updates: Anite, London Capital, Partygaming, Tullow Oil, Punch Taverns, Balfour Beatty and Persimmon. Other – Easyjet passenger statistics for June.
Results/Updates: Photo-Me, Cape, Carillion, Booker and Marks & Spencer.
Investors could be greeted with news of positive net flows when Man, the London-based hedge fund group, issues its first-quarter trading statement later this week. UBS is looking for inflows of $900m, compared to new outflows of $1.5bn over the final quarter of last year. Back in March, Man announced a $1.5bn pipeline for its institutional business, which UBS expects to translate into $400m in new inflows over the first quarter. "Among private investors, we expect sales in open ended products and low redemption to translate into ... $500 [in] net sales versus $500m of net outflows in the fourth quarter," the broker said, estimating a $300m contribution from positive investment performance.
Results/Updates: Hays, Associated British Foods and Man.
Numis is looking forward to news of £103m in net fees when the recruitment group Michael Page International posts an update on the second quarter at the end of this week. If achieved, the figure would be slightly ahead of the consensus estimates of £101. Pointing to the valuation – Michael Page trades on a multiple 22 times forecast earnings for 2011 – Numis said there was "little room for slippage", adding: "The performance of the Eurozone (where Page is skewed to France) will be a key indicator for the ongoing recovery curve."
Also on Friday, UBS expects to hear of improved like-for-like trends when SIG posts its trading statement. The broker has pencilled in an overall 5 per cent decline in first-half like-for-like sales, implying an improvement over the second quarter, with half yearly pre-tax profits of £13m, compared to £22m last year.
"We expect trading in non residential to approach a trough towards the end of 2011 ... [and] pockets of residential (in particular in the UK) seeing recovery, implying [that] we should hit the inflection point of zero growth sometime during the middle of this year," the broker said in a preview issued last week.
Results/Updates: Interserve, SIG, Michael Page International and Bovis Homes.
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