FTSE 350 Look Ahead: InterContinental Hotel, Ted Baker, Barclays And More

By Anna Peel. Originally published at ValueWalk.

Look ahead to FTSE 350, other companies reporting & economic events from 21 to 25 February

Q4 2021 hedge fund letters, conferences and more

• Staycations should continue to help InterContinental Hotel Group (LON:IHG) show resilience
• Ted Baker plc (LON:TED) will show if it’s making more progress with online sales
• Barclays PLC (LON:BARC) is expected to announce a round of bumper staff bonuses
• We’ll see if Rolls-Royce Holding PLC (LON:RR) managed to make good on its promise to trim free cash outflow
• Lloyds Banking Group PLC (LON:LLOY) set to see benefits from rising interest rates
• Anglo American plc (LON:AAL) look to post record profits after a bumper first half
• Will WPP PLC (LON:WPP)’s focus on digital marketing capabilities should keep reaping rewards
• Another round of increased revenue per agent expected at Rightmove Plc (LON:RMV)

InterContinental Hotels Group, Full Year Results, Tuesday 22 February

Susannah Streeter, Senior Investment and Markets Analyst

“InterContinental Hotels Group has still been in recovery mode with bookings still lower than pre-pandemic levels given that international travel is yet to fully rebound. Omicron is likely to have delayed IHG’s path back to health but domestic bookings in the US had already been looking strong and staycations should continue to provide a boost to sales until the lucrative overseas tourists return. Its operating model, where it mainly licences the brand to the hoteliers rather than owning the properties outright, has proved a stellar strategy particularly during the pandemic, as even though occupancy levels nosedived, the group remained profitable. We could expect an update on the reshuffle of the portfolio which it’s been concentrating on during the crisis to refresh choice for customers. With travel restrictions easing in Europe in particular investors will be watching out for forward guidance to gauge how soon bookings will rebound.”

Ted Baker, Q4 Trading Statement, Wednesday 23 February

Sophie Lund-Yates, Equity Analyst

“Last we heard, second quarter trading was in line with expectations – sales rose 50% compared to last year. That came as shoppers returned following the pandemic in the UK and US. What was most pleasing was a reduction in discounted stock, which boosted margins. We’d very much like to see a continuation of that trend next week. Stock management has been an area of disappointment in the past.

The group has been grappling with declining overall footfall for a while, and it was therefore disappointing to hear the new online platform is taking longer than planned to launch. The new start date has been pegged as “early 2022”, so we’ll find out if that’s still the case. Online sales are an important area for growth, and we wonder how badly Omicron fears dented demand for Ted’s more formal-wear over the important festive season.”

Rio Tinto, Full Year Results, Wednesday 23 February

Steve Clayton, HL Select Fund Manager

“Rio Tinto, one of the world’s leading iron ore producers reports full year results on 23 February. With the key iron ore price having rallied strongly in the final months of the year, the figures should reveal net income approaching $21.8bn, according to the Bloomberg consensus data. That should allow the company to pay a full year dividend of as much as $10.4 per share. With China currently trying to rein back demand for iron ore and dampen steel pricing, 2021 could prove to be the peak year for the iron and stell markets in this cycle. But Rio are sitting on net cash and have some of the lowest operating costs in the industry. Rio Tinto should still be able to paint a picture of robust expected profitability, even into a weakening cycle.”

Barclays, Full Year Results, Wednesday 23 February

Susannah Streeter, Senior Investment and Markets Analyst

‘’A round of bumper staff bonuses is expected to be announced, after Barclays put in a particularly strong performance in 2021 as worries about bad debts evaporated and its powerhouse of an investment arm helped revenues pour in. There are signs that consumers and businesses are starting to loosen the purse strings and borrow more and investors will be watching for guidance that more lucrative conditions are on the horizon, compared to earlier in the pandemic, when customers repaid billions in credit card and other higher interest borrowing. Omicron may have upset the positive trend but it should only be a temporary set-back and as interest rates rise, loans should become more profitable. However, Barclays like other banks won’t be immune from inflation either, with labour costs and even rising paper prices among the growing costs it will have to navigate.  Although its mortgage book is going from strength to strength with a rise of new applications and customer retention, if there’s a cooling off in the housing market, that may not prove to be a solid crutch to lean on.’’

Rolls Royce, Full Year Results, Thursday 24 February

Laura Hoy, Equity Analyst

“Rolls Royce has been inching its way back toward normalcy over the past year and the group’s full year results will tell us what’s left to climb. At last check, large engine flying hours had made their way back to 50% of 2019 levels. This was below management’s 55% estimate, but we wonder if a strong showing in the fourth quarter may have nudged it a bit closer.

We’re also keen to hear where management sees Civil Aerospace, the largest arm of the business, heading in the year ahead. The group’s fortunes are closely tied to a recovery in long-haul travel, and we’re concerned that rising inflation could deter many people from booking expensive holidays abroad. This could slow Rolls’ recovery considerably. The small but growing defence business is also a key signpost for the future, with the orderbook giving some indication of how much growth we can expect to come.

Free cash will be the metric to watch, the group was positive in the third quarter. If this continued in the fourth quarter, the full year outflow could be considerably lower than the £2bn initially expected.  A big part of this will be linked to disposals and cost savings, with the latter expected to bring in around £2bn and the former seen saving a total of £1bn for the year.”

Lloyds Bank, Full Year Results, Thursday 24 February

Sophie Lund-Yates, Equity Analyst

“It’s not a bad time to be a bank. Rising interest rates make a bank’s loans more profitable. That’s especially good news for Lloyds, which relies more heavily on traditional banking than those with larger investment banking or trading arms. That means we should find out what this helpful tailwind means for Lloyds’ outlook statement.

We have reason to think these buoyant conditions could lead the group to announce new shareholder returns. Latest consensus showed a 43% increase in what’s known as “Excess Capital Distribution”, which may well translate into share buybacks. Remember no shareholder return is ever guaranteed.

A very active housing market has also helped Lloyds more recently, helping mortgage lending remain strong. The housing market looks like it’s remained healthy in recent months, but there are early signs of weakening. We do wonder if rising rates, which affects the affordability of mortgages, plus high inflation is having any negative effect on forward indicators for mortgage lending demand.”

Anglo American, Full Year Results, Thursday 24 February

Matt Britzman, Equity Analyst

“Miners across the board enjoyed a bumper first half to the year, reaping the benefits as prices of many key commodities. Anglo was along for the ride and with a policy of paying out 40% of profits, that meant dividends and share buybacks for investors.

The second half of the year hasn’t been quite as fruitful for iron ore or platinum group metals which make up over 60% of sales. Iron ore prices were 50% lower in the second half of the year which will likely take some wind out of the sales. On the bright side, the group’s diamond business, DeBeers, looks set to post improving numbers as prices and production are both up.

We’ll be watching out for margins and any commentary from management on costs. Last we heard, costs were on track to rise 4% this year, down from a 10% rise last year. Markets are expecting cash profits (EBITDA) to come in just north of $20bn.”

WPP, Full Year Results, Thursday 24 February

Susannah Streeter, Senior Investment and Markets Analyst

“WPP had been on a growth spurt earlier in 2021 and pushed up full year guidance with net revenue forecast to come in between 11.5 and 12%. There is a chance that the initial shock of Omicron may have turned the screws a bit tighter on advertising budgets in December, but that is likely to have been short lived given that the impact of the variant isn’t as severe as first thought. As economies have bounced back from the worst of the pandemic, corporate wallets have loosened significantly. That spend happy sentiment coupled with WPP’s focus on streamlining its digital marketing offerings is likely to continue to reap rewards. Labour costs will be watched closely however, as the fight for talent intensifies, in many markets. Acquisitions have also been driving growth, so investors will be keeping an eye out to see if momentum can be maintained here.”

Rightmove, Full Year Results, Friday 25 February

Sophie Lund-Yates, Equity Analyst

“Rightmove’s huge scale means it enjoys a great deal of pricing power with the estate agents that advertise properties on the site. To that end, we expect another round of increased revenue per agent next week.

The bigger question is the group’s outlook. Rising interest rates and soaring inflation could take the heat out the very buoyant property market. That may have a knock-on effect for the total number of estate agents, which is already falling. This isn’t the end of the world while Rightmove can pump up prices for remaining agents, but severe pressure would limit its ability to do this.”

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Updated on Feb 16, 2022, 2:18 pm

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