Thursday preview: Messy numbers from Capita and Cobham expected

As well as some "messy" post-profit warning results from the likes of Capita and Cobham for investors to pore over, traders also have UK construction PMI and eurozone inflation data to keep them interested through the day.

Company announcements also include results from ConvaTec, Gocompare.com, Hunting, Merlin Entertainments, Spirent and Travis Perkins.

Following its profit warning earlier this month, where Cobham cut 2017 guidance, wrote down goodwill and provided for KC46 contract risks with Boeing, Deutsche Bank analysts said the company had "parked a number of risks" but investors would still be looking for more detail in the preliminary results announcement.

"For the stock to move ahead two final pieces of the jigsaw need to slot into place – the balance sheet needs addressing and a new restructuring plan and associated mid/long-term targets given. Until these residual issues are addressed, valuing the equity is as much of an art as a science."

Capita's are another company's annual numbers that "will look messy", said Numis, following its own profit warning in December.

At that time management guided to underlying profit before tax of "not less than £515m", a around £1.9bn debt and net debt/EBITDA ‘in the region’ of 2.9 times.

With the recent contract assets review announcement indicating the company would write-off circa £40m of accrued income to underlying profits, Numis sees underlying PBT in the order of around £475m.

This is not to mention indications that assets of roughly £50m will be written-off as a non-underlying charge and an exceptional of close to £50m in respect of restructuring plans.

"More important, in our view, will be the cashflow performance, and particularly the working capital management," Numis said, also looking for some replenishment of the pipeline.

Travis Perkins recent share price performance has been robust, but with full year financials expected to be reported in line and 2017 guidance anticipated to still reflect a cautious tone, Deutsche said it did not expect results to provide a further catalyst for the share price.

"Any indication of capex/ store opening strategy, and ability/intention to pass through cost inflation in price is likely to garner most investor interest in the release."

Following a strong recent trading update, GoCompare will be expected to just provide a little more detail about its divisional performance.

Macro action

UK construction output, as measured by the Chartered Institute of Purchasing & Supply and Markit, is expected to build on the previous four-month low of 52.2 with a small rise to 52.4 for February, according to the economist consensus.

Economist Howard Archer said there was little in the January purchasing managers’ survey to inspire confidence that activity would improve markedly in February, in fact fanning concerns about the outlook for construction output and input prices.

"The strong likelihood that the economy will slow appreciably as 2017 progresses -- despite its ongoing resilience in the fourth quarter of 2016 -- and a lacklustre housing market are serious concerns for the construction sector. There are also signs that some clients are reluctant to commit to major projects in an uncertain environment," he said.

Construction companies will be hoping that government measures aimed at boosting infrastructure and housebuilding will have a material beneficial impact, he added.

Following an array of country-specific macroeconomic data on gross domestic product, unemployment and prices from the likes of Germany, Spain, Italy and Switzerland,

Unemployment rate is forecast to slip from the previous 9.6% to 9.5% while Eurozone inflation is seen increasing at the headline level.

The consensus forecast is for headline harmonised CPI to rise to 2.0% from 1.8% last time, while core HICP remains at 0.9% as more volatile prices are stripped out.

This comes after euro-area headline inflation shot up in January, led by the rise in energy and food prices.

Core inflation remained stable and services inflation even fell, from 1.3% in December to 1.2%.

Bank of America Merrill Lynch said there was "ample room" for surprises in any direction because the weights were changed in the last release "and that always creates noise in the data" and as electricity prices have already started to correct strongly in Spain.

Thursday 02 March

UK ECONOMIC ANNOUNCEMENTS
PMI Construction (09:30)

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Import Price Index (GER) (07:00)
Harmonised Consumer Price Index (EU) (10:00)
Unemployment Rate (EU) (10:00)

FINALS
Arrow Global Group, Capita, Cobham, Convatec Group , Dairy Farm International Holdings Ltd. (Singapore), Gocompare.com Group, Hellenic Telecom Industries SA ADS, Hongkong Land Holding Ltd. (Sing.Reg), Jardine Matheson Holdings Ltd (Singapore Reg), Jardine Strategic Holdings Ltd. (Singapore), Jimmy Choo , Mandarin Oriental International (Singapore), Melrose Industries, Merlin Entertainments , Nichols, Schroders, Spirent Communications, Sportech, Vesuvius

Q4
Hellenic Telecom Industries SA ADS

SPECIAL EX-DIVIDEND DATE
Beazley, Plus500 Ltd (DI)

AGMS
Jersey Electricity 'A' Shares, Shoe Zone

FINAL EX-DIVIDEND DATE
32Red, Centamin (DI), Downing Three VCT D Share , Downing Two VCT D Share , LPA Group, Mobeus Income & Growth Vct, MTI Wireless Edge Ltd., Northern Electricity Prf, Plus500 Ltd (DI), RSA Ins 7 3/8%pf, RSA Insurance Group, Sanderson Group, SSP Group

INTERIM EX-DIVIDEND DATE
Berkeley Group Holdings (The), City of London Investment Group, Colefax Group, Genus, Hansard Global, Hays, Park Group, Stewart & Wight

QUARTERLY EX-DIVIDEND DATE
Aberdeen Diversified Income and Growth Trust , Barclays, Blackrock North American Income Trust , HICL Infrastructure Company Ltd, Regional REIT Limited, SQN Asset Finance Income Fund Limited, The SME Loan Fund