Week ahead: Frasers Group and Berkeley results in focus
Mike Ashley’s Frasers Group and housebuilder Berkeley are among the FTSE 100 firms due to report earnings this week, while investors will also be paying close attention to US jobs data.
Frasers, which owns brands including Sports Direct and Flannels, will post its half-year earnings on Thursday as a recent share slide puts it at risk of falling out of Britain’s blue-chip index.
Shareholders will be judging Frasers’ progress in expanding its premium operations against a challenging market backdrop as higher-end shoppers have been hit by higher mortgage and rental costs.
“There should also be early insight into how trading’s fared in the run-up to the important Christmas period,” said Aarin Chiekrie, an analyst at Hargreaves Lansdown.
“Frasers, with its high brick-and-mortar exposure, relies heavily on shoppers heading to the high street, so it’s more vulnerable than most if there’s any pullback in footfall.”
The group has spent recent months trying to grow its influence over some of the retailers it holds investments in and publicly criticising the management of these businesses.
Ashley has tried to be appointed as Boohoo’s chief executive to turn around the online retailer’s fortunes, while Frasers’ final offer to take over Mulberry for £111m was rejected by the handbag maker’s board in October.
Frasers’ shares have dropped 18 per cent over the last six months amid wider concerns over the health of Britain’s retail sector and demand from shoppers. The group is projected to be demoted to the mid-cap FTSE 250 later this week.
Berkeley will report its half-year earnings on Friday. Any disclosure of expected costs tied to new government’s first Budget will be in focus after a slew of companies warned the hike in employer national insurance contributions will hurt their profits.
Chiekrie said “it will be interesting to see if Berkeley tweaks its full-year outlook” as a result of fears that the Budget will push up inflation and keep interest rates higher for longer, which could dent confidence among prospective homebuyers. The firm’s current guidance is for underlying pretax profits of £525m.
Still, analysts expect Berkeley to report a solid first half of the year and for the group’s operating margins to esclipse its long-term 17.5 per cent to 19.5 per cent range.
“Given their cyclical earnings, housebuilders are often valued on the basis of price to net asset value,” said analysts at AJ Bell.
“These multiples have come down sharply in the past few months across the sector, as enthusiasm has faded for the new government’s deregulation drive and goal to get 300,000 homes a year built, and attention has switched to interest rates and taxes, plus the possibility of additional cladding and remediation costs.”
Elsewhere, economists are looking ahead to US hiring data that could provide clues on whether the Federal Reserve will lower interest rates in December.
Non-farm payrolls data due on Friday is expected to show the number of people in employment grew by 200,000 in November. The unemployment rate is expected to hold steady at 4.1 per cent.
October’s payrolls came in at just 12,000 thanks to hurricanes and strikes by Boeing workers. Traders will look for any revision of this preliminary estimate as they gauge the likelihood of a slowdown or recession in the world’s largest economy.
Back on home soil, Nationwide will release its latest UK house price report on Monday, followed by market data from Halifax on Friday.