Thursday’s stock market highlights will likely have one feature in common, they will be revealing just how badly their businesses have been impacted by locked down consumers.
Suspension of sport, travel and at least some corporate spending all spell challenges. Investors will hope to find reassurance, if not confidence.
Has lockdown clipped Flutter’s wings?
Paddy Power owner Flutter Entertainment PLC (LON:FLTR) will report its interim results on Thursday, giving investors a clearer picture of the damage the coronavirus lockdown has inflicted on the bookmaker during a pause in sporting events.
However, recent announcements may provide a more positive outlook, with the group raising £813mln in a placing in May as it reported pro-forma revenue had increased 10% in the second quarter, helped by strong growth from its new Stars Group acquisition.
With organised sport returning, investors will likely hope that this growth has accelerated or at least been maintained, as well as any news on how the company plans to use the proceeds of the cash injection.
The company said the cash will mainly be used to pay down debt and help retain its online clientele, although there may be some left over for other uses.
Investors may also eye on comments on the state of gambling markets around the world, with Flutter saying previously that one anticipated consequence of the pandemic will be that more US states will open up the gambling market to raise tax receipts, and so it is aiming to invest in additional ‘market access deals’ in individual US states and potentially in customer acquisition.
Rolls short on bread
In sync with the battered airline sector, engine maker Rolls-Royce Holdings PLC (LON:RR.) has been laid low by restrictions on travel due to coronavirus and sizeable losses are expected for the first half of the year.
Last month the FTSE 100-listed company, shares in which are down almost two thirds this year, confirmed it was “in the early stages” of looking at ways of strengthening the balance sheet after an eye-watering £3bn free cash outflow in the first half as engine flying hours were down 50% because of global flight restrictions.
The recent half-year trading update showed progress had been made on boss Warren ‘Chopper’ East’s restructuring programme, making the first of the 9,000 job cuts, with £300mln of cost reduction achieved out of a planned £700mn for the current year.
Rolls-Royce’s first-half losses are forecast at £199mln by analysts at UBS, on revenues down 32% to £5.03bn.
The Swiss bank’s analysts said key themes in the results will be updates on the balance sheet review, impairments and financial charges, together with flying hours trends and the impact on legacy programmes such as Airbus’s A330.
WPP investors braced after ad spend bloodbath
During the coronavirus pandemic, marketing spending has often been the first item on the chopping block for firms looking to cut costs, so investors in advertising giant WPP PLC (LON:WPP) are probably not expecting good news in the company’s interim figures on Thursday.
The firm has also been cutting its own costs, implementing hiring freezes, discretionary spending stoppages and salary cuts for senior management. WPP has planned to save around £700mln-£800mln, so the results will likely be eyed for how successful that strategy has been.
Analysts at UBS are predicting an 11.5% decline in organic growth for WPP in the first half alongside £225mln in cost savings. Another area of interest will be whether the group provides any guidance for the rest of the year, as well as any comments on possible recovery in the advertising market.
Thursday August 27:
Interims: Rolls-Royce Holdings PLC (LON:RR.), WPP PLC (LON:WPP), Flutter Entertainment PLC (LON:FLTR), Anglo Pacific Group PLC (LON:APF), Grafton Group PLC (LON:GFTU), Macfarlane Group PLC (LON:MACF), Puretech Health PLC (LON:PRTC), OneSavings Bank PLC (LON:OSB)
Economic data: UK car production, US GDP, US jobless claims