The Week Ahead: Updates due from Kingfisher, TUI, Bellway, Wolseley and Lloyd’s of London
B&Q is due to report back from a rain-hit DIY market this week, while figures from TUI Travel and Bellway will throw the spotlight on the holiday and housebuilding sectors.
B&Q owner Kingfisher will reveal the impact of last year’s record rainfall on the DIY market as annual figures on Tuesday are expected to show a hefty fall in profits.
Having seen profits surge by a fifth in the previous year, the group’s turnaround efforts were hit hard in 2012 after relentless wet weather affected demand for gardening and outdoor maintenance products .
Sliding profits at B&Q contributed to a 17% drop in half-year profits across the wider group to £364million.
Snow and freezing weather in the final quarter meant sales failed to recover, down 6.4% at B&Q in the three months to February 2.
Analysts are expecting underlying full-year pre-tax profits to slip by 11% to £715m across the group, which also owns tools supplier Screwfix as well as Castorama and Brico Depot in France.
The fall is predicted to have been driven by a 19% slump in profits at B&Q in the UK and Ireland to £192m.
- 1 Snow possible overnight as 50mph gusts set to arrive in Suffolk
- 2 Man caught massaging woman's leg by husband viewing home CCTV
- 3 Evicted Suffolk family of dying child given early Christmas presents
- 4 Suffolk beauty spots ranked among best in UK
- 5 Is this the cheapest house for sale in Suffolk?
- 6 Automatics out-of-reach and making the play-offs a real battle? The size of the task now facing Ipswich
- 7 'You can't kid supporters... we have to give them a lift' - Cook previews Crewe clash
- 8 Willow Tree Farm Shop & Cafe: 'A lovely blend of upmarket and informal'
- 9 No timescale for when Suffolk road closed due to flooding can reopen
- 10 Action taken to target second home owners exploiting tax loophole
Rival Homebase recently confirmed how tough trading has been in the sector, with sales down by 1.5% on a like-for-like basis in the final eight weeks of its year to March 2 and 5.2% lower over the year as a whole.
But analysts at Deutsche Bank believe the first quarter of the new financial year will bring some cheer at beleaguered B&Q and are forecasting a marked revival in like-for-like sales, up 6.5% against “the softest ever comparables”.
Freddie George, analyst at Cantor Fitzgerald, remains unconvinced over the outlook. He said: “We continue to be concerned that the decline in Kingfisher’s full-year earnings is not just down to the one-offs of the extreme summer wet weather last year and the decline in the euro, but is also structural.
“The company has too much space for a multi-channel society, while its stores are too large, difficult to shop and not aligned to the new trend for convenience.”
Half-year figures from housebuilder Bellway on Tuesday follow a Budget day boost for the sector after Chancellor George Osborne unveiled a package of measures designed to breathe life into the ailing housing market.
Shares in housebuilders jumped after details of a new help-to-buy scheme for those struggling to find mortgage deposits was announced, including a government interest-free loan worth 20% of the value of a new-build house, up to £600,000.
The scheme will be available to everyone who wants to buy a home from next year, including first time buyers and those looking to move up the housing ladder.
Measures will also include a new mortgage guarantee, sufficient to support £130billion of loans, to help people who cannot afford a big deposit.
The plans will act as a further lift for housebuilders such as Bellway, which have already enjoyed improved fortunes in recent months, thanks largely to existing government-backed schemes.
Newcastle-based Bellway delivered a 57% increase in profits to £105.3m in the year to July 31 last year as consumer demand for new homes was helped by the availability of the government’s new buy scheme, which provides up to 95% loan-to-value mortgage products in England.
The UK’s fourth biggest housebuilder has also benefited from a shift towards family homes and away from flats, as they are more exposed to first time buyers who are struggling to get on the property ladder.
Its move to snap up cheaper land in the wake of the recession has proved a further profit driver.
Bellway has already set the scene for a decent set of half-year results after revealing that sales rose 5.8%, with the average selling price 2.3% higher at £187,000 in the first half.
Thomson and First Choice holiday operator TUI Travel will confirm whether the recent package holiday comeback has continued when it delivers a trading update on Wednesday.
It had already sold more than a third of its UK summer holidays by the end of its last quarter, with bookings 9% ahead of last year as more customers choose the certainty of all-inclusive deals and look to avoid a repeat of last year’s wash-out summer.
A 4% increase in average selling prices failed to impact bookings, helping the group narrow operating losses by 15% to £93m in the three months to December 31.
The performance saw TUI raise expectations, saying underlying earnings growth was forecast to be towards the top end of its guidance of 7% to 10%.
Despite the group’s optimism, analysts at Panmure Gordon remain concerned over the outlook for consumer spending as wages are increasingly outstripped by inflation.
They said: “Research indicates 40% of UK customers intend spending less on holidays abroad this year compared to 2012.
“Weakening sterling could also impact accommodation costs for the UK market leading to pressure on margins.”
There was also a blow for the sector as Chancellor George Osborne rejected its calls for air passenger duty (APD) to be reformed and in fact confirmed it would rise in line with Retail Prices Index inflation this April and next.
TUI joined others in the industry in attacking the move, saying “our customers already pay the highest rates of APD in the world”.
“We would urge Government to undertake an impact review of the effects of APD,” it added.
UK and European markets have remained tough for plumbing and heating merchant Wolseley during its first half, but results on Tuesday will benefit from a more robust US performance.
The Leamington Spa-based group, which achieves 13% of its revenues from UK businesses such as Plumb and Parts Center, revealed UK like-for-like revenues slipped 0.3% in the first quarter in a marked reversal of the 3.5% recovery seen at the end of its last financial year.
Its French business, which is being reviewed by Wolseley, suffered worsening sales declines, plunging 8.2% in the three months to October 31.
However, profit was driven higher once more by its resilient US business as sales in the region jumped 7.1%.
The US arm, which trades as Blended Branches, Waterworks and Ferguson, was behind a 10% rise in trading profits to £658m in the year to July 31.
It now accounts for two thirds of group earnings after Wolseley offloaded businesses such as Bathstore in the UK, sold for £15m to turnaround investor Endless last May, to focus on core operations.
Andy Brown, analyst at Panmure Gordon, forecasts a 13% leap in underlying earnings to £340m in the half year, thanks to the US division.
But he said: “While recent results have been solid, the group still faces a number of trading challenges as European markets remain tough.”
Wednesday’s full-year figures from specialist insurance market Lloyd’s of London come after a difficult end to 2012 after Superstorm Sandy wrought havoc across North America and the Caribbean.
The group - a collection of around 80 competing insurance syndicates that sell protection against natural catastrophes and other events - said in December that the storm would cost it between 2bn and 2.5bn US dollars (£1.3bn and £1.6bn) after an estimated 71bn dollars of damage in total.
But despite the devastating hurricane, full-year figures are expected to show a marked improvement after fewer natural disasters than in 2011, when its members were hit by near-record claims from Japan’s earthquake and tsunami, heavy floods in Thailand and the New Zealand earthquake.
Lloyd’s returned to profit in the first six months of 2012, with a surplus of £1.5bn, having slumped into the red by £516m in 2011.
The 325-year-old institution will reveal how badly the Superstorm Sandy claims impacted its second half, but the group has already said the bill from the hurricane “is well within the worst case scenarios we model and prepare for”.