Tuesday preview: Singapore summit, Brexit debate, updates from BATS, Bellway

Tuesday's UK jobs data is likely to be eclipsed by the Brexit debate in the House of Commons and the US-North Korea summit in Singapore, while investors may be more interested in trading updates from Bellway, Boohoo, British American Tobacco, Crest Nicholson and Halma.

Parliament will begin the two-day debate over 15 amendments to the EU Withdrawal Bill sent back by the House of Lords to the lower house, including on trying to negotiate a customs union with the European Union after Brexit and remaining in the European Economic Area as two of the official goals for the government's negotiations with Brussels. The Lords also called for Parliament to be given a legal guarantee of a vote on the final Brexit deal struck with Brussels.

Overnight, with an expected 0200 BST start time, US President Donald Trump will meet North Korea's Kim Jong-Un in Singapore. The historic talks, which are the first between a sitting US president and a North Korean leader, are aimed at getting the North to agree to abandon its nuclear program.

After handshakes for the photographers, the two leaders are scheduled to go behind closed doors with their translators, before being joined by Secretary of State Mike Pompeo and Chief of Staff John Kelly and their North Korean counterparts in a bilateral meeting and working lunch.

Closer to home, jobs data from the Office for National Statistics, which comes more than a week ahead of the next Bank of England meeting and day ahead of inflation data, is expected tomorrow to show headline three-month unemployment rate remaining at 4.2% and the more closely watched average weekly wage growth remaining at 2.9% year-on-year, excluding bonuses, or 2.6% including.

"Even though there have been a number of large surprises to the upside in the employment data over the last six months, it will be very difficult for gains in employment to match last month’s very strong +197k 3/3m and a slowdown on this occasion shouldn’t come as too much of a surprise," said economists at RBC Capital Markets.

COMPANY NEWS

British American Tobacco said it expects to make £1bn in next-generation product (NGP) sales in 2018, up from under £400m last year, as it increases investment in this area.

The FTSE 100 company said in April profit growth would be skewed to the second half of the financial year because of the phasing of shipments and pricing in markets such as Russia and the Gulf, while forewarning that foreign currency exchange rates were likely to be a headwind of 7% on organic operating profit and 8% on earnings per share.

The company’s chairman Richard Burrows said: "The group has decided to further increase investment plans behind next generation products during 2018, with a significant number of roll-outs and launches planned towards the end of Q3. And although trading conditions remain challenging, the group remains on track for another good year of earnings growth, excluding the impact of currency translation.”

With sales of Philip Morris’ rival heated tobacco product iQOS product slowing, BATS could do with a good result said analysts at Hargeaves Lansdown. "But while progress in NGPs may attract the headlines and shift the share price, conventional tobacco is still the key to BATS’ performance. With industry volumes shrinking steadily, defending market share is vital. Low single digit declines in volume would be a good result.

"Volumes may be down, but a sticky customer base means tobacco companies have historically been able to raise prices without having a big impact on demand. BATS recently bought Reynolds American, which gives it a strong position in the US. Prices in the States are relatively low, so there’s scope for increases."

House-builders Bellway and Crest Nicholson update investors on the all-important spring selling season.

At its interims in March Bellway pointed to robust demand conditions and that its order book was up 8% on last year, with 248 weekly reservations in the six weeks since the start of February.

Numis analysts said: "We think this momentum will have continued and will have benefitted from new site openings and Bellway’s relatively low priced product offering, despite a sizeable London offering."

UBS also predicted sales rates have remained strong, at around one reservation per outlet per week, at roughly the same level as last year, and for Bellway to confirm its outlook for volumes to increase by 600 units year-on-year for the full year and average selling prices to rise in excess of £280k at an operating margin around 22%.

Crest Nicholson will deliver its own interims on Tuesday, having last month reported strong sales growth for the first half of the year but that profit margins were being squeezed by the softer housing market and cost inflation, which sent its shares tumbling to 16-month lows.

Directors warned that operating margins for the full year and next year are expected to be at the bottom end of its 18-20% guided range, reflecting generally flat pricing as build costs rose 3-4%.

With volume growth up 18%, UBS calculated that first-half revenues should come out at £493m, operating profit at £85m, a pre-tax profit of £81m and EPS of 25.8p. "We expect to get more granularity on the direction of operating margins, management's internal initiatives to offset margin pressures as well as more visibility on Crest's growth path and outlook for FY18 to FY20."

Numis said the profit warning "did not come as a huge surprise given the group’s recent history, higher priced product exposure and relatively aggressive growth targets".

Online fast-fashion retailer Boohoo.com is an investor favourite thanks to its rapid rate of growth, with final results in April showing rapid growth and reviving the shares after they had sunk to a year's low on margin concerns. Management have given full year group sales growth guidance of 35-40% with adjusted EBITDA margin guidance of 9-10%.

Deutsche Bank sees group first-quarter, or what it calls 'P1', sales up 44.2%, of which boohoo brand up 22%, PrettyLittleThing 101% and Nasty Gal 101%, while group gross margins are seen at 51.5%. "Investor focus is likely to turn back to sales momentum at the P1 results which cover the period March to May. The boohoo brand's P1 sales growth will be of particular interest after the slowdown in P4 17/18. We forecast a small pick-up in boohoo brand growth to 22% in P1 despite tougher prior year comparatives, and gross margins of 49.4%."

AIM listed cloud computing company Iomart was previewed by broker The Share Centre, which said the market was expecting some strong numbers as more government departments, businesses and individuals become comfortable with their data being held online. "

Group revenues are expected to rise by roughly 10%, and with the business being operationally geared, we should see much better reported profits. The growth is fuelled by new acquisitions and new contracts and investors will lookout for news on anything new in this space."

Tuesday June 12

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Trump-Kim summit in Singapore
Consumer Price Index (US) (13:30)
ZEW Survey (EU) (10:00)
ZEW Survey (GER) (10:00)

UK ECONOMIC ANNOUNCEMENTS

Commons Debate on Withdrawal Bill
Claimant Count Rate (09:30)

FINALS

B.P. Marsh & Partners, Civitas Social Housing , CML Microsystems, Halma, Iomart Group, Motorpoint Group, Oxford Instruments, Park Group, Trifast

INTERIMS

Crest Nicholson Holdings, Iomart Group, Pressure Technologies

TRADING ANNOUNCEMENTS

Bellway, Boohoo.com, Crest Nicholson Holdings, Ted Baker, Trifast

AGMS

Cora Gold Limited (DI), Diamond Bank GDR (Reg S), Ergomed , Globalworth Real Estate Investments Limited, Hansteen Holdings, Interserve, Kingfisher, Martin Currie Global Portfolio Trust, Mobile Tornado Group, Somero Enterprises Inc. (DI), Ted Baker, Tri-Star Resources , Warpaint London , Woodford Patient Capital Trust

FINAL DIVIDEND PAYMENT DATE

AA , Hiscox Limited (DI)