Thursday preview: Can Kingfisher and Hikma Pharma turn around fortunes?

Thursday will see results from two businesses trying to turn around fortunes after some difficult few months, in the case of Hikma Pharmaceuticals, or years, in the case of Kingfisher.

On a wider macroeconomic level, official retail sales data will give further insights into the economic and confidence of the UK households, though monetary policy minutes out overnight from the US and in early afternoon from the European Central Bank might grab attention.

Growth in retail sales excluding fuel is expected to slow to 0.2% in July from a 0.9% rate a month ago, with the year-on-year figure forecast to slow to 1.3% from 3.0%.

On a more micro level, a second quarter update from Kingfisher follows a mixed first quarter where group sales dropped 0.9% in constant currencies with like-for-like sales down 0.6%.

B&Q LFL sales were up 0.5% and total B&Q revenues down 4.6%, while Screwfix remained strong, with LFL up 12.6% and total sales rising 20.3%. In France, Castorama LFLs were weaker than expected, down 4.3% against a 1% decline in the wider home improvement market, while Brico Depot LFLs softened 6.8%.

The company noted some business disruption from the ONE Kingfisher transformation plan (TP) ‘given the volume of change’ as the group clears old merchandise ranges and rolls out the new IT platform, trimming 2% of LFL sales during the quarter through the poor availability of the new unified product ranges.

Morgan Stanley anticipated "a subdued, but not bad, statement", with growth in the UK and continued declines in France.

The bank's analysts forecast 1% like-for-like sales growth at B&Q and 10% for Screwfix, balanced by a fall of 3% in LFL sales at Castorama and 5% for Bricot Depot.

"As this is a trading statement, we are not expecting much detail on profitability, or any changes to the 'One Kingfisher' strategy," they added, ahead of full interim results due on 20 September.

After the May update Numis downgraded full year PBT forecast 6% to reflect the weakness in France and turnaround issues, noting that Q2 represents 27% of annual sales.

"Numbers this time should benefit from good weather in the UK, while Banque de France data for May/ June was steady. Castorama and Brico Depot also square up against weaker comps, but we would continue to flag risks to forecasts, given the challenges of implementing the new strategy," analysts wrote, noting that the shares have underperformed the sector by 10% during the past 12 months, despite the currency tailwind.

Hikma, which dropped out of the FTSE 100 in June after an unhappy 12 months, is due to publish half year results.

The generic drugmaker, which saw its shares hit an all-time high of above 2,600p last July but tumble to a three-year low below 1,300p this month after a knock-back from US regulators.

In May, after US regulators interjected to delay its application for a generic asthma drug and due to devaluation of the Egyptian pound against the US dollar, Hikma maintained its full year guidance for its injectables with revenue at $800-825m, but in the branded drug division said revenue would to grow “in the low-single digits” in 2017 and core operating margin would be broadly in line with 2016.

As for the first half of the year, after management guided investors to expect performance this year to be weighted towards the second half, the focus is likely to be on the commentary rather than the numbers, said Hargreaves Lansdown's George Salmon.

Barclays expect Hikma to deliver $921m in firsty-half revenues, $181m in core operating profit and 47.5 cents in core diluted EPS.

On a divisional basis analysts see sales for injectables of $391m, Generics of $267m and Branded of sales of $259m.

Key comments, Barclays said, will be on any updates on the generic Advair timing or outcome of regulatory discussions, US generic pricing outlook in light of guidance for high-single-digit erosion in the second half, and finally the outlook for injectables in light of new entrants.

Broker Numis said the interim results are "unlikely to impress and may even be quite messy", with "few expectations for an update on the generic Advair application in these results, with further work (potentially clinical) needed".

Hikma's generic peers, Teva and Mylan, have been hard-hit in recent weeks, but Numis continues to see "strategic value in the Branded and the well-invested Injectables businesses and so are more inclined to see a mixed set of results as a more attractive entry point for a company going through a tough time, but well incentivised to drive improved performance and higher returns for shareholders".

Thursday August 17

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (EU) (11:00)
Capacity Utilisation (US) (14:15)
Consumer Price Index (EU) (10:00)
Continuing Claims (US) (13:30)
Crude Oil Inventories (US) (15:30)
Industrial Production (US) (14:15)
Initial Jobless Claims (US) (13:30)
Philadelphia Fed Index (US) (13:30)
Wholesale Price Index (GER) (07:00)

UK ECONOMIC ANNOUNCEMENTS
Retail Sales (09:30)

FINALS
Rank Group

INTERIMS
Allied Minds, Apax Global Alpha Limited, Capital Drilling, Frutarom Industries Ltd GDR, Gem Diamonds, Hikma Pharmaceuticals, India Capital Growth Fund, Kaz Minerals, Oxford Biomedica

TRADING ANNOUNCEMENTS
Kingfisher

EGMS
Phaunos Timber Fund Ltd.

AGMS
South African Property Opportunities plc, Threadneedle UK Select Trust Limited

FINAL DIVIDEND PAYMENT DATE
U And I Group

FINAL EX-DIVIDEND DATE
Aberdeen Private Equity Fund Ltd. Sterling Part Shares, Ashtead Group, Cohort, Lazard World Trust Fund, Lindsell Train Inv Trust, London & Associated Properties, Severfield

INTERIM EX-DIVIDEND DATE
4Imprint Group, British American Tobacco, Evraz, Hazel Renewable Energy VCT 1, Hazel Renewable Energy VCT 2, Henderson Opportunities Trust, Ibstock , Legal & General Group, Man Group, Merlin Entertainments , Millennium & Copthorne Hotels, Mobeus Income & Growth Vct, Nexus Infrastructre , North Midland Construction, Pearson, Quartix Holdings , Reckitt Benckiser Group, RM Secured Direct Lending, Schroders, SEGRO, Synectics

INTERIM DIVIDEND PAYMENT DATE
Treatt

QUARTERLY PAYMENT DATE
Fair Oaks Income Limited 2017 Shs NPV

QUARTERLY EX-DIVIDEND DATE
Blackrock North American Income Trust , BlackRock World Mining Trust, Brunner Inv Trust, M Winkworth, MedicX Fund Ltd., The Renewables Infrastructure Group Limited

SPECIAL EX-DIVIDEND DATE
Lindsell Train Inv Trust