Mindful Money’s shares watch: Compass Group, Kingfisher & Marston’s

23rd November 2015


Compass Group delivers its full-year results on Tuesday and pre-tax profit is forecast to have edged higher with the firm’s North American business likely to be the main contributor.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers highlights that profits at the FTSE 100 listed contract catering giant are expected to have climbed by 1.6% to £1.77bn.

Looking ahead to this week’s update, he anticipates that management outlook comments, particularly in relation to its ‘Fast Growing & Emerging’ business, are likely to head the agenda.

In July the firm said third quarter trading had been in line with expectations with good growth in North America, Europe and Japan offset by weakness in some emerging markets.

Graham Spooner, investment research analyst at The Share Centre, who has Compass on his ‘buy’ list says: “The market will be interested to hear if those trends have continued in the final quarter.

“A reshuffle amongst some of the executive team in September has resulted in a new finance director coming in so investors will be interested to see if there is any change in approach as a result. Future prospects for the order book and dividends will also be high up on the list of priorities for many following the company.”

Compass’s share price has gone sideways over the past year, moving up by 1% over the period and falling by 7% over six months. As such, Bowman notes: “Ahead of the results, analyst consensus opinion currently signifies a ‘hold’.”

B&Q and Screwfix owner Kingfisher, up 16% over the past 12 months, reports its third quarter results on Tuesday.

Investors will be expecting to hear that trading at the two chains in the UK has remained strong but Spooner says shareholders will perhaps be focusing more on the performance of the continental European operations, especially those in France, which he notes have been struggling of late.

Spooner, who has the stock down as a ‘hold’, says: “Any news on progress with the new CEO’s strategy will also be of interest to the market as will any comments on how the company sees trading into the new year.

“Given the strength of the house-building sector there is an assumption that Kingfisher should benefit but competition and a strong pound may provide headwinds.”

Bowman points out that French same store sales are expected to prove broadly flat, “having gained by 1.3% in the second quarter”.

He adds: “UK same store sales could prove similar to Q2, up 5.5%, again led by its Screwfix business and continued consumer demand for using tradesman and not DIY. Adverse currency movements may have dragged further on profits, whilst an additional update on the DIY retailer’s ‘One Kingfisher’ strategic plan could be forthcoming.”

Ahead of the market report and with exposure to the still challenged French economy pitted against current management initiatives, Bowman says the analyst consensus opinion currently indicates that the firm’s shares are a ‘hold’.

Thursday sees FTSE 250 pub group Marston’s post its full-year results. The firm, which owns among others the Pitcher & Piano bar chain, has enjoyed a 13% share price rise over the past 12 months.

“Investors will be looking to hear how trading has been since the last update in October when the company said its destination and premium pubs were performing in line with expectations,” says Spooner.

With an above-average dividend yield of 4.6% shareholders will also be interested in where the final dividend is set and any comments about expected future dividend growth.

Spooner is upbeat on its prospects and has Marston’s stock down as  a ‘buy’, broadly echoing the consensus.

He says: “Marston’s has announced plans to continue expanding its pub estate but investors will also note any plans to exploit the growth in sales of craft and premium beer in recent times.”

Leave a Reply

Your email address will not be published. Required fields are marked *