Week ahead: Brexit fears set to hang over FTSE earning reports

Billy Bambrough
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Uncertainty over the future of the UK and the EU is set to hold back company earning forecasts (Source: Getty)

The market is bracing itself for a slew of Brexit induced profit warnings this week as we enter the early stages of reporting season.

After the UK’s shock vote to leave the European Union triggered a sharp sell off, the FTSE 100 has rebounded strongly – pushed on by international earners. The blue-chip index ended 1.1 per cent higher at 6,577.83 points on Friday, rising for a fourth straight session and up 7.2 per cent over the week.

Chip maker Imagination Technologies will post its full year results tomorrow. Analysts are predicting a loss of £20m due to slowing smartphone sales.

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Housebuilder Persimmon will meanwhile issue a trading update and is expected to say the first half of the year went well, though could caution on the remainder of the year. Rival Bovis Homes is set to post a similar update on Thursday.

Other corporate numbers to look out for include full year results from Sports Direct, alongside trading updates from AB Foods and Marks & Spencer on Thursday.

Panmure Gordon's market commentator, and resident Brexiteer, David Buik was quick to point out things other than the UK voting to quit the EU were also dragging.

This week we are likely to see dispiriting trading statements or results from M&S, Sports Direct and AB Foods. This has little to do with Brexit and more to do with narrowing margins, very bad weather and the consumer having less disposable income.

We know that house builders are under the cosh due to uncertainty. However we must not underestimate the fact that a 12 per cent drop in the value of the Pound since November will be positive for 65 per cent of FTSE 100 companies whose earnings emanate from dollar related business.

Industrial maintenance products distributor Brammer's shares last week dived 56.2 per cent after it warned a sharp sales slowdown, particularly in the days following the Brexit vote, had put it close to breaching bank covenants.

Read more: Global investors back London to retain financial centre crown after Brexit

Half-year profits would be nearer £5m, it said, not £10m as analysts expected, and its interim dividend was fast evaporating.

Russ Mould, investment director at AJ Bell, said:

Brammer could just be the canary in the coal mine so far as UK industrials are concerned, or at least for those with substantial exposure to the UK and Europe, and this is one area where there could be more trouble ahead, especially if companies begin to reassess their near-term investment plans.

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