Look ahead to FTSE 350, other companies reporting & economic events from 21 – 25 November 2022

• Can Compass Group make good on early momentum and finish the year with a flurry?
• Diploma has had a strong trading performance during its first three quarters
• Polar Capital – despite a poor share price performance the valuation still looks demanding compared to earnings expectations
• Are Halfords still on track to hit profit targets?
• Margins will be in the spotlight at Pets at Home
• Cost-of-living pressures are expected to show up in B&Q owner Kingfisher’s update
  

Compass Group, Full Year Results, Monday 21 November
Matt Britzman, Equity Analyst:

“Contract caterer, Compass group, has been enjoying the fruits that come with economies reopening. Third quarter trading details given back in July pointed to a booming recovery from the troubles seen over the pandemic. Sales across the business were well ahead of pre-pandemic levels, whilst new business and retention rates were both looking promising.

A lot has changed since then, so it’ll be interesting to see if managements target of 35% organic revenue growth comes to light. On the profit side, higher costs are already starting to nibble away at into profits. Compass is very exposed to inflation on both the labour and food side and has already hiked prices by around 5% to try and ease the pressure. Management hinted that more rises would be needed, next week will show whether they’ve been implemented yet and if that’s had any impact on demand.

The key focus for now is getting margins back to pre-pandemic levels, the group was targeting an operating margin run-rate at year end of around 7% – but management gave a soft warning that the reality could be a little lower.”

Diploma, Full Year Results, Monday 21 November
Steve Clayton, Fund Manager, HL Select:

“Diploma PLC, the international distribution group has had a strong trading performance during its first three quarters. Most analysts will be expecting a confident statement from their full year results, given their experience to date, but it is worth remembering that their Industrial Seals division has proven volatile in previous economic downturns.

Acting in Diploma’s favour is their strong exposure to North American economies and the Life Sciences sector, which combined are likely enough to keep the numbers on track. But with trading in many major economies weakening toward the year end nothing is certain. Diploma shares have been rallying in recent weeks, leaving profits there to be taken at any signs of a weakening in trading.”

Polar Capital, Half Year Results, Monday 21 November
Derren Nathan, Equity Analyst:

“Since the last year end Polar Capital has seen its Assets Under Management (AUM) fall about 15% to £18.8m. That’s likely to have a direct impact on half year fee income in specialist asset management group’s interim results next week. The biggest impact to AUM has been market movements, but more worryingly investors have also seen customers taking cash out of Polar’s funds. It’s been a tough time for Polar’s focus sectors of healthcare and technology.

Many have seen something of a recovery from recent lows. This could offer investors some hope. For those looking for exposure to these sectors, this could be one way of playing a potential recovery. However, despite a poor share price performance the valuation still looks demanding compared to earnings expectations. And there are still plenty of potential bumps ahead for companies that Polar invests in, and the investors its funds depend on.”

Halfords, Half Year Results, Wednesday 23 November
Derren Nathan, Equity Analyst

“Halfords’ valuation been bruised over the past year, and is now well below the long-term average.  Next week’s half year results will provide some steer as to whether the full year underlying pre-tax profit target of £65m to £75m is still in-tact.

Halford’s Motoring Loyalty Club, which offers discounts on certain services, has proven to be extremely popular since its launch in March 2022. Membership revenue from this loyalty club will provide Halfords with more robust income year-round, helping to dampen some of the seasonality effects that the group faces. Halfords looks on target to have 1m members in its new loyalty club by the end of FY23. Last month’s takeover of Lodge Tyre took service revenues to nearly half of the Group’s total. Many will want an update on whether the expected benefits of combining the businesses are materialising.

As the cost of living goes up, people’s discretionary income decreases. Hence, investor will watch for any significant increases in inventory levels. This can give an early indication of whether future discounting will be needed, which could result in slimmer profit margins.”

Pets at Home, Q3 Trading Statement, Wednesday 23 November
Sophie Lund-Yates, Equity Analyst:

“Pets at Home has undoubtedly been a beneficiary of the UK’s pet boom over the last couple of years. It’s also a rare beast, in that it’s a bricks and mortar retailer that’s still encouraging healthy levels of footfall. That is not expected to change next week.

In the first quarter, higher food prices were offsetting weaker trends in other areas like accessories. In usual times, accessories are more lucrative than food, so it would be good to see how much worse this trend has become. As people rein in their spending, things like pet food are non-negotiable, but a bow tie for your dog can wait.

Analysts think Pets at Home’s on track for full year revenue of £1.4bn, and investors will have a better idea next week if that’s looking likely. Sales growth is expected to slow compared to last year because of the economic challenges, the question is whether that happens faster or more slowly than the market’s braced for.”

Kingfisher, Trading Statement, Thursday 24 November
Susannah Streeter, Senior Investment and Markets Analyst:

‘’Cost-of-living pressures are expected to show up in B&Q owner Kingfisher’s update as consumers make hard choices about how to spend their money. The big boom in DIY home which played out during the pandemic has been fading. Now, with mortgage payments rising, and food and energy bills soaring, there is likely to be less disposable cash around and borrowing may be more difficult for major projects.

An expected correction in the housing market could dent sales further if people put off moving and delay putting their stamp on a new property. However, there could be some benefit could come from people opting to make small changes in current homes instead and demand for energy saving products like loft insulation is likely to stay strong. B&Q like other retailers has already been hit by higher energy costs which have eaten into margins but any sign that supply chain issues are continuing to ease will be well received given the problems snarl ups have caused.”

Among those currently scheduled to release results next week: