The Week Ahead: Updates due from TUI, Thomas Cook, Compass and Lloyd’s of London
THE appetite of Britons for holidays abroad will be assessed this week as travel giants Thomas Cook and TUI Travel post trading updates.
Thomas Cook and Thomson Holidays parent TUI Travel will reveal if the boost seen from the miserable early summer weather continued when the rain finally eased off and as Britain celebrated the Olympics.
Both groups said they had benefited from the record wet weather between April and July as rain-soaked holidaymakers escaped to European destinations such as Spain.
TUI Travel, which updates the market on Thursday, remarked on a “strong improvement” in overall summer bookings from the UK as of July 29, down 5% against the 6% decline reported in April.
A weakened euro also proved attractive for many Britons, with Majorca, Ibiza and Menorca among the most popular short-haul destinations, as the better exchange rate made holidays to Europe more affordable.
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But the weaker euro is a double-edged sword for TUI, as the exchange rate is also impacting profits.
TUI, Europe’s biggest tour operator, whose brands also include First Choice, posted a 16% fall in underlying profits to �74million in the three months to June 30, as sales fell 2% to �3.7billion, with figures also impacted by the timing of Easter.
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Rising fuel prices are another headache, although TUI is already around 60% hedged for next summer.
Analysts have been cheered by news of the better-than-expected demand for holidays in the early summer, which is expected to counteract some of the exchange rate pressures.
Deutsche Bank analysts said: “Whilst a number of consumer companies remain uncertain about the outlook for 2013, we believe that TUI Travel management is looking forward to next year’s prospects.”
Thomas Cook, which updates on Friday, said in August that its summer programme was 88% sold after a buoyant July for bookings, although cumulative bookings in the UK were still down 1% on last year as at July 29.
The firm’s new chief executive Harriet Green is attempting to lead a turnaround after a torrid time for Thomas Cook. In November, Ms Green will reveal her initial findings of a review launched following her appointment.
The group was recently forced to turn to its banks for an additional �200million of loans and reported an underlying operating loss of �26.5million in the three months to June 30 due to tough trading conditions and the cost of acquisitions.
A mooted �1.4 billion merger of Irn-Bru owner AG Barr and Tango maker Britvic is likely to overshadow the former’s half-year results on Monday.
AG Barr, which dates back to 1875 and also makes Tizer and Rubicon, is forecast by brokers at Numis Securities to report a slight 2% dip in pre-tax profits to �15.8 million in the six months to the end of July.
But the results are likely to come second to interest in discussions the Scottish company unveiled earlier this month about a potential tie-up with rival Britvic.
The pair said a merger deal would create one of the leading soft drinks companies in Europe, with other brands including the Britvic products Robinsons, J2O and Fruit Shoot. It has already been agreed that Britvic shareholders would own 63% of any new company.
In terms of the results, the group previously warned that despite expected sales of �130million, against �123.9million last year, profits would be lower due to margin pressures from changes in the sales mix.
Barr, which is based at Cumbernauld, North Lanarkshire, has produced Irn-Bru from a secret recipe for more than 130 years.
Chairmanship of the company passed outside the family for the first time in 2009 when Robin Barr ended his 31-year tenure as chairman. He remains on the company’s board as a non-executive director and is one of just three people to know the formula of 32 ingredients used in the drink.
The business started in 1875 when Mr Barr’s great-grandfather Robert Barr embarked on a new direction for the family cork-cutting business by producing and selling “aerated waters”, as soft drinks were called at the time.
Compass, the world’s biggest catering company, will reveal further under-pressure trading in Europe in an update on Thursday ahead of full-year results.
The company, which serves an estimated four billion meals a year at 65,000 locations, is forecast by brokers at Numis to report organic revenue growth of 5.2% for the full year, a slight slowdown from the 5.3% growth in the first nine months.
The tough economic climate on the continent, particularly in southern Europe, has weighed on the business with negative like-for-like growth experienced in the region in the third quarter.
Numis analyst Wyn Ellis said: “In Europe and Japan trading volumes are likely to remain under pressure but we believe that there is significant scope for efficiency improvement to drive margins.”
The weaker performances in Europe and Japan are likely to be offset by stronger performances in the US and in “fast growing and emerging markets” such as Brazil, Turkey and India.
With 470,000 employees, Compass is one of the world’s 10 largest private sector employers.
The company is responsible for catering at Wimbledon and the US and French Open tennis championships, as well as the Cheltenham Gold Cup, the official post Oscars ball, the Brit Awards and the O2 Arena in London.
And its Letheby & Christopher sports catering arm provides hospitality staff for events such as Henley Royal Regatta and venues including the Millennium Stadium in Cardiff and West Ham United Football Club.
Pawnbrokers including Albemarle & Bond, which publishes annual results on Tuesday, have signalled a slowdown in the recent high street “gold rush”.
Albemarle, which has 169 stores and 38 gold-buying “pop-up” outlets, said in June that growth in the value of gold bought by the company had fallen from over 50% earlier in the financial year to mid single digits.
Falling gold prices and wet high street conditions earlier in the summer have taken their toll on pawnbrokers, with rival H&T Group reporting a 27% fall in half-year profits due to a �2 million drop at its gold business.
Prices peaked last summer, having soared as investors fled to the precious metal amid increased global recession fears.
They fell back sharply at the beginning of this year, although prices have started to climb higher once more as the eurozone crisis has taken centre stage.
While Albemarle warned in June that profits would grow at a lower than expected rate this year, analysts at Canaccord Genuity are still expecting the group to post a 1.4% rise in underlying pre-tax profits to �21.3 million.
Albemarle, which bought Leeds-based Herbert Brown in 2007, has posted higher profits for 20 years in a row, most recently a 5% rise to �21 million.
The group - founded in Bristol in 1983 - has benefited from increased demand in recent years as banks tighten their lending criteria.
It is also likely that the US Federal Reserve’s latest quantitative easing (QE) programme will spell good news for gold prices and could offer hope of a bounce back for pawnbrokers like Albemarle.
QE has proven a boost for gold as it weakens the dollar, which also makes gold cheaper in other currencies.
There is a further benefit for the precious metal as QE prompts fears of inflation - and gold is seen by many as a natural hedge.
Credit Suisse recently estimated that this round of economy boosting measures announced by the Fed - dubbed QE3 - could propel gold to 2,000 dollars an ounce (�1,233).
Interim results on Friday from five-a-side football operator Goals Soccer Centres come soon after its failure to secure backing for a �73.1 million takeover by Ontario Teachers’ Pension Plan.
Goals saw 71.4% of investors back the deal last month, below the 75% that was needed for it to be passed, which caused shares to plunge 20% in one day.
Ontario Teachers’, which is one of the world’s biggest pension funds and owns lottery operator Camelot, had won the support of the directors of East Kilbride-based Goals.
But investors were not convinced by Ontario Teachers’ claims it was a “win-win” deal for shareholders.
Goals said it was business as usual following the blow, with no talks taking place with other potential buyers.
Ontario Teachers’ is also prevented from bidding again for six months under City takeover rules.
Goals will no doubt try to bring the focus back on to its results - and to celebrate winning an appeal against a tax ruling by HM Revenue and Customs.
It said earlier this month that pre-tax profits were expected to increase by at least �500,000 in the current year and beyond after it was successful in challenging a decision to charge VAT on league block bookings - a move which had hiked Goals’ tax bill.
Goals saw a 1% rise in like-for-like sales in 2011, while underlying profits increased by 11% to �13.8 million.
A typical Goals centre has between nine and 14 floodlit courts with pitches made from artificial grass, which is designed to look and feel like real turf, parking for about 100 cars and a licensed bar. Around three-quarters of its revenues came from football bookings during 2011.
A relatively quiet six months for natural disasters should help lift specialist insurance market Lloyd’s of London results on Wednesday.
The market, which is made up of 87 underwriting syndicates, saw �12.9 billion of claims in 2011, including �4.6 billion related to natural disasters, such as floods in Australia and Thailand, an earthquake in New Zealand and the tsunami in Japan.
The unusually high number of major disasters tipped the market to a �516 million loss for the whole year and a �697 million loss in the first half - but this is not expected to be repeated in the first six months of 2012.
However, Lloyd’s has had to contend with challenging investment conditions in the first half of the year as fears over the eurozone debt crisis and wider global growth rocked markets.
Chief executive Richard Ward previously said Lloyds was prepared for a collapse of the euro and has reduced its exposure to the troubled single-currency region.
He warned that the Lloyd’s market, which is made up of around 80 insurance syndicates, could have to take writedowns on its �58.9 billion investment portfolio if the eurozone collapses.
2011 was the second most expensive on record for insurers.
However, Lloyds met its own claims in 2011 without any call on its central fund - its fund of last resort.
The Lloyd’s market has shown in recent years that it is more than able to cope with major catastrophes, including US hurricanes.
The most expensive event to rock the insurer was Hurricane Katrina in 2005, which caused claims worth 4.3 billion US dollars (�2.4 billion).