Mindful Money’s weekly share watch: Sports Direct, InterContinental Hotels & Centrica

16th February 2015


When InterContinental Hotels Group publishes its full-year results on Tuesday, shareholders will be eager to hear if the better trading backdrop highlighted in its previous update has kept momentum.

Sheridan Admans, investment research manager at The Share Centre asserts that the market will expect to see good growth in the US and UK.

Investors will be hoping that the business, which boasts more than 3,600 hotels and 537,500 rooms across 100 countries can build on its third quarter performance, delivering its best quarterly revenue per available room, performance in more than two years and reporting growth in each of its four regions.

Admans notes however how the uncertainty lies more in the performance of emerging markets, especially Eastern Europe and China given the political tensions and slowdown in underlying economic growth.

Admans who lists the stock as a ‘hold’ says: “There will also be interest in any further comments about the group’s strategy in the wake of its $430m acquisition of boutique hotel operator Kimpton in December.”

Looking ahead to the report, Keith Bowman, equity analyst at Hargreaves Lansdown adds: “The US may again head performance, with the UK in Europe once more a bright spot. Elsewhere, and with the group remaining something of a barometer for the global economy, any comments in relation to China will be closely watched.”

Ahead of the announcement, and with the share price up over 30% over the last year, analyst consensus opinion currently points towards a ‘hold’.

Wednesday sees the Mike Ashley owned Sports Direct International deliver its latest interim management statement. Recent official sales data from the Lillywhites store owner has indicated that clothing has been one of the strongest areas in the retail sector.

Adman says: “Investors will therefore be keen to see if that is reflected in Sports Direct’s third quarter update, which spans the whole of the Christmas and New Year sales period. The market will also be looking closely to see if the gross profit margin improvement, highlighted at the interim stage, has been maintained.”

Investors will also be observing to see whether full-year profit guidance, remains at £360m. “Any comments on recent media reports of a legal case regarding staff on zero hours contracts, as well as Mike Ashley’s recent decision to reduce his holding in the company to 55%, will also be of interest,” adds Admans.

Ahead of the update and with its share up 8% over the past three months, Admans in line with the broker consensus is calling the shares a ‘buy’.

British Gas owner Centrica reports its full year results on Thursday. In the wake of its recently announced 5% cut to household gas prices at British Gas, 2015 financial guidance now firmly heads the agenda notes Bowman.

He says: “As of its third quarter update, adjusted earnings growth was forecast, aided by ongoing cost reduction initiatives and a refocusing of investment in UK gas-fired power generation to flexible smaller plants – releasing capital from larger power stations.

“As for the full year 2014, adjusted earnings per share are currently expected by management to be in the range 19 to 20 pence, compared to a range of 21 to 22 pence as of the interim results back in July 2014.”

While Admans is not expecting the update to get the pulses racing, he however agrees that investors will be looking for some clarification on the impact of lower oil and gas prices.

He says: “The performance of its US operations, along with its core UK business will also be closely followed. Other areas of interest will be costs and cost cutting, the group’s outlook for 2015 and the dividend, for income seekers.”

Prior to the news, and given nerves regarding a potential change of government and possible price caps, Bowman notes that the analyst consensus opinion currently signifies a ‘hold’.

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