The week ahead, 14-18 December: Shaftesbury, SSP, Petrofac, and interest rates
All eyes will be fixed firmly on Brussels this week, as businesses across the country hold their breath to see if the UK can finally reach a deal with the EU.
With markets on edge as they await the outcome of the talks, there’s little to distract traders, with only a handful of firms reporting as the holiday season approaches.
Here’s a lookahead to the biggest events of what could be a definitive week for the UK.
Shaftesbury full year results – 15 December
It’s been a rough year for the landlord, whose glittering portfolio of London assets – including properties across the West End – have been hammered by the collapse in footfall as a result of the pandemic.
Shares in the FTSE 250 firm are down 40 per cent over the last year, with fears that retail, hospitality and tourism could take far longer to recover than hoped dragging the firm’s stock down.
AJ Bell investment director Russ Mould says that analysts will have their eyes on two figures in particular when the results drop on Tuesday morning.
First, net asset value (NAV). Currently, shares in Shaftesbury are trading about a third below the firm’s stated NAV of 878p. This means that investors expect the value of Shaftesbury’s buildings and assets is going to fall in future and that rents might do the same, Mould says.
Second, rental income. This hit a record high of £119m in 2019, and although it was only down three per cent at the half-year, that was back in March – before the virus took hold in the UK.
According to Mould, September’s trading update revealed for the second half that only 41 per cent of rents due for the six months to 30 September 2020 had been collected.
Of the rest, 10 per cent were expected to be subject to deferred collection arrangements, 23 per cent were being waived and 26 per cent remained outstanding at 11 September 2020.
SSP full year results – 15 December
As the owner of brands such as Upper Crust, catering group SSP really has had the worst of both worlds this year, with the collapse in travel demand stopping the firm in its tracks.
Shares have been cut in half over the last 12 months, while two-thirds of the firm’s outlets in train stations and retail destinations remain shut due to further lockdown restrictions.
Again, for its first half results, SSP dodged the worst of the crisis, making a loss of just £34m. But with sales down around 90 per cent over the summer, the second half could make for ugly reading.
Mould said that analysts were forecasting a loss of £238m for the full year – a big swing from last year’s £197m in profit.
UK unemployment data – 15 December
After remaining relatively unscathed in the early months of the pandemic – largely due to the furlough scheme – the outlook for UK unemployment has started to look a lot worse in recent month, says Michael Hewson of CMC Markets.
“Since July we’ve seen a big jump from 4.1 per cent to 4.8 per cent in September, and this is likely to continue to rise for several months to come”, he said.
“In the latest spending review Chancellor of the Exchequer Rishi Sunak forecast that unemployment could well peak in the second quarter of 2021 at 7.5 per cent, and to that end the Chancellor said that he would put aside £3bn to deliver a new 3-year restart program for those longer term unemployed, in order to try and get them back into work.”
Given that a lot of firms started to reduce headcount before it was announced that the furlough scheme would continue until March, the latest figures could see a nasty jump in the rate of unemployment.
Hewson added: “The monthly jobless claims total is already running at 7.3 per cent, a level which is likely to more accurately reflect where the UK jobs market currently is at the moment, with the risk this could well start to edge back up again, with the numbers for November likely to tick higher, as a result of the tighter restrictions during the month.”
Petrofac trading update – 16 December
Another firm that found itself heavily exposed to the pandemic was oil service firm Petrofac, with the spring’s oil price collapse leaving a mark on the firm.
In addition, says Hargreaves Lansdown analyst William Ryder, the pandemic paused a number of engineering projects – and Petrofac has still not been able to get these back on track.
Despite that, Ryder said that the sale of its Mexican assets should provide a bit of bolster for the balance sheet – with the prospect even more money to come still a possibility.
“Next week’s results will tell us how Petrofac is recovering after a pretty torrid second quarter”, Ryder said. “We certainly expect improvement, but the question is really one of degree.”
Federal Reserve/Bank of England interest rates decision – 16/17 December
The Fed and the Old Lady of Threadneedle Street are just two of four central banks meeting this week to set out interest rates at the end of a long year for policymakers.
The Fed will go first on Wednesday, with markets waiting to see whether anything has changed since its last meeting – in the immediate aftermath of the most tumultuous election in recent history.
At that meeting, Powell pledged to do more to help prop up the economy – but he also called for Congress to expedite a new stimulus package after months of deadlocked negotiations between parties.
Then on Thursday BoE governor Andrew Bailey will take center stage after a year of drastic actions – and with the strong possibility that massive uncertainty over the UK’s departure from the EU will not have been resolved.
The BoE has already cut interest rates from 0.75 per cent to 0.1 per cent as well as increasing its bond buying program from £435bn to £875bn, and has not yet ruled out turning to negative interest rates in a bid to alleviate the economic damage of the pandemic.
Michael Hewson, head of markets at CMC Markets, thinks that such a step is unlikely at this point.
“For now, the UK economy hasn’t seen the same level of slowdown in economic activity in Q4 that we saw in Q2, despite the various restrictions that are limiting output in the services sector.
“The central bank is likely to have a much better idea of the economic environment early next year, when we have a clear route map for vaccinations and also know the extent of the new EU/UK trade relationship”, he added.
- UK retail sales for November (18/12)
- Swiss National Bank/Bank of Japan interest rates (17/18 December)
- Results from Chenrimg, Inditex, Dixons Carphone, Serco, Watches of Switzerland et al