The Week Ahead: Updates due from Thomas Cook, Kingfisher, Severn Trent and AO World

Thomas Cook chief executive Harriet Green.

Thomas Cook chief executive Harriet Green. - Credit: PA

The improved fortunes of Thomas Cook and the autumn sales performance of B&Q owner Kingfisher will be in the spotlight for investors this week.

The recovery at Thomas Cook will reach another milestone on Wednesday when it reports an increase in earnings for the year to September 30.

The FTSE 250 firm is due to post a figure of £323million for the period, a rise of 23% on a year earlier despite a backdrop of difficult European markets after bookings in Germany moderated from their previously strong level.

The company’s German operation is also experiencing weaker margins due to reduced demand, excess market capacity and the geopolitical events in Ukraine.

Its UK summer capacity was 92% sold, with average selling prices down 4% mainly caused by a change in product mix and greater level of market capacity.

Overall, the company should have achieved a ninth consecutive quarter of increased profitability in the final three months of its financial year.

Thomas Cook, led by chief executive Harriet Green, is half way through a long-term plan to drive savings and return the group to bottom-line profit after its near collapse in 2011 as a result of overcapacity in the holiday market.

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It has significantly reduced net debt from £788m at the end of 2012 to between £300m and £350m by the end of this financial year. The travel firm has already cut costs by more than the £360m it targeted this year and will use the full-year results to outline new savings plans.

Brokers at Morgan Stanley forecast it will have saved £380m this year, and that Thomas Cook will unveil a £480m target for 2015.

The impact of favourable weather conditions on Kingfisher’s B&Q business will be offset by poor trading in France and a strong pound, when it issues a trading update on Tuesday.

Analysts at Numis believe the Screwfix owner will unveil a 3.9% fall in trading profit to £245m as the group is impacted by the softer trading at French unit Castorama and at outlets in Poland.

Europe’s leading home improvement group has been affected by the slowing economy and housing market in France, although in the UK and Ireland conditions have been more helpful as like-for-like sales rose 4.4% in half-year results in September.

Britain’s Indian summer will have benefited B&Q while Screwfix is expected to continue its run of double-digit growth in underlying sales.

A stronger pound against the euro and Polish zloty, which together account for two-thirds of the groups trading profit, have continued to weigh on trading.

The results come as Kingfisher boss Sir Ian Cheshire prepares to stand down in January from the firm he has led for seven years.

He will be replaced by the group’s Castorama boss Veronique Laury, who will run the firm’s 1,157 stores across 10 countries in Europe and Asia and become one of the few women to lead a FTSE 100 firm.

Investors will also want to know what plans Kingfisher has for its large estate in light of last month’s decision by rival Home Retail to close a quarter of its 323-store Homebase DIY chain over four years due to falling sales.

Severn Trent’s upcoming five-year settlement over bills will concentrate minds in the City when the water company presents half-year results on Tuesday.

Brokers expect the firm, which supplies 4.3m households and firms across the Midlands and parts of Wales, will be handed an agreement by Ofwat next month that will cut bills but still allow healthy dividends.

Analysts at Deutsche Bank believe that Seven Trent should achieve average investor returns of around 6.6% between 2015-2020, compared to a peer group performance of 6%.

This comes despite Ofwat in August stating that it wants Severn Trent’s average bills to fall 2.2% a year over the five-year period, compared to the firm’s original proposal of a 1.5% yearly fall.

At the time Severn Trent’s new chief executive Liv Garfield, the youngest in the FTSE 100, said she was happy with Ofwat’s draft proposals. The former BT director said: “We are pleased that on first reading, in many areas the draft determination is in line with our revised business plan.”

Ofwat’s final plan will be published on December 12 and Ms Garfield has said that the company’s future pay-out policy cannot be determined until then.

The City expects tightly-run Severn Trent to post pre-tax profits up 8.4% to £277.3m, as it continues with this year’s investment programme worth up to £530m.

Appliances retailer AO World will be pressed for an early update on its new operation in Germany when it posts half-year results on Tuesday.

The online business, which sells washing machines and cookers, recently launched its German operation six months ahead of schedule.

AO World, which floated on the London stock market in February, is expected to post half-year earnings of £8m, according to brokers at Numis, without comparable figures for the same period a year ago.