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Earnings Releases Lose Steam

By Thabiso MamathubaStock MarketsSep 25, 2018 08:45
Earnings Releases Lose Steam
By Thabiso Mamathuba   |  Sep 25, 2018 08:45
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Retailers Nike (NYSE:NKE) and Next PLC set to publish results

  • Capitec Bank (JO:CPIJ) (Interim Results): In a recent trading statement, management said that headline earnings per share will be between 18% and 21% higher y/y. This was ahead of market expectations (Bloomberg +17.75%). The company made an announcement in June that it had been shortlisted to pay up to R5 billion for Mercantile Bank, along with Nedbank and the Public Investment Corporation. This would serve as a potential entry point into business banking, particularly in the SME space
  • Ascendis Health (JO:ASCJ) (Full Year Results): Management is targeting to improve the EBITDA margin from 17% to 18% over the medium term, mainly in the South African pharma and Medical Devices businesses. Operationally the key focus will be on the Scitec turnaround strategy and implementation, extracting synergies from the recent acquisitions, effectively driving higher organic growth, while also ensuring an efficient leadership transition following the appointment of the new CEO.
  • Group Five (Full Year Results): Recent guidance suggested that the headline loss per share is expected to deteriorate by between 52.4% and 70% y/y. Consensus was expecting losses to narrow by 18.1% for FY18. Despite benefits being realised following the restructuring and the rationalisation programmes implemented in FY18, further losses were incurred in 2H18 due to contract losses, and difficulty in the construction sector as some contract awards did not materialise whilst some secured contracts materialised later than anticipated.
  • Aveng (Full Year Results): Management guided for the headline loss per share to be between 297 and 329 cents per share, an improvement compared to a loss of 1 625.3 cents per share in the prior period and in line with market expectations (Bloomberg: loss of 313 cents per share). Although the loss narrowed and the company is making strides in deleveraging and improving liquidity, the business is still in a difficult position considering that this is being facilitated through asset sales and raising further equity.
  • From a local corporate actions perspective, Tuesday marks the last day to trade in Imperial (JO:IPLJ) Holdings, Hyprop Investments, Adcock Ingram (JO:ADEOJ), Assore, Spur (JO:SURJ) Corporation and African Rainbow Minerals (JO:ARIJ) to receive their recently declared distributions. These counters will trade ex-dividend on Wednesday. Sygnia will host a special GM next week regarding the election of three new company directors.

Global footwear and apparel retailer Nike is likely to generate interest in the US next week as the group prepares to release quarterly numbers on Tuesday. Beside a broad-based, short-term negative publicity impact, according to Bloomberg Intelligence, the backlash from featuring Colin Kaepernick in its marketing campaign likely won’t have a material impact on Nike’s top-line performance. If anything, the controversy would only affect U.S. revenue, which is up to 40% of annual sales. Accelerating footwear and apparel sales internationally, and improving market trends in North America, should help Nike reach high-single-digit revenue growth in FY19.

In Europe, investors are likely to keep a watchful eye on specialty apparel retailer Next PLC, scheduled to release first half results towards next week. According to Bloomberg, Next’s inability to expand store sales in an exceptionally favourable period was a signal that it may have to begin to take the more dramatic action it signalled in March, closing a significant proportion of its 528 stores. Bloomberg Intelligence believes that Next’s unchanged full-year sales and profit guidance will slightly disappoint, given the bar was set high, following rival Asos reporting particularly robust online UK sales, the unexpected good weather boost and challenges facing some peers.

In the Asia-pacific region, investors will shift their focus towards Australia as Nufarm (worldwide manufacturer and supplier of agricultural chemicals used by farmers to protect crops from damage caused by weeds, pests and disease) prepares to release full year earnings. Bloomberg Intelligence expects Nufarm’s revenue and EBIT to remain under pressure if current dry weather in Australia persists, weakening demand for crop-protection products. The global crop-protection chemicals market remains highly competitive due to low soft-commodity prices.

Earnings Releases Lose Steam
Earnings Releases Lose Steam

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