Weekly outlook: Speculation abounds ahead of Rishi Sunak's second budget; Fresnillo and Persimmon results

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26 February 2021

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Monday 1 March

-Bunzl full-year results

Bunzl supplies disposable coffee cups to cafes, food wrap to supermarkets, hard hats to builders, cleaning materials and bandages and rubber gloves to hospitals. The company’s skill sets, customer mix and supply chain meant it has been well placed to help its customers thrive during the pandemic, according to AJ Bell investment director Russ Mould.

Despite Bunzl revealing in December that full-year sales in 2020 would rise by around 8% year-on-year, chief executive Frank van Zanten noted that large Covid related orders had begun to slow and that 2021 would be unlikely to see a repeat of 2020’s growth.

Analysts are looking for a headline pre-tax profit figure of £537m for 2020, up from last year’s figure of £453m. This is expected to fall to £506m in 2021, before surging to £525m in 2022. But Mould notes there are questions over the impact of Bunzl’s bolt-on acquisition strategy, as the firm spent a near-record £410m on purchases by the time of the December 2020 trading update.

Bunzl had increased its annual dividend every year since 1994, before the pandemic forced it to scrap the second-half payment of 35.8p a share last year. The company restarted paying out dividend at the first half stage in 2021, with an increased interim payment of 35.8p to make up for the missed final payment in 2019. Analysts are predicting a full-year distribution of 62p for 2020, before falling back to 54.8p next year.

-Full-year results from Aggreko and Reach

-UK Nationwide house price index

-UK M4 money supply, consumer borrowing and mortgage approvals data

-Manufacturing PMIs in Asia, Europe, UK and US

-In the US, quarterly results from Zoom Video Communications, Novavax and Lemonade

Tuesday 2 March

-Fresnillo full-year results

Fresnillo’s shares are trading at near eight-month lows, despite silver standing at near eight-year highs of $28 an ounce.

“Silver miners and the silver price shot to fresh prominence in the wake of the GameStop farrago, as the r/WallStreetBets community on Reddit turned its attention to the precious metal and its producers,” Mould said.

Fresnillo has missed a number of production and output targets as its mines were severely affected by the pandemic. It operates seven mines, three development projects and four advanced exploration sites in Mexico which is particularly badly hit by Covid.

Analysts will look for production guidance for 2021 as January’s trading update revealed output of 53.1 million ounces of silver in 2020, a 3% fall since 2019 and a 12% slide in gold output to 767,000 ounces. So far, Fresnillo has targeted silver output between 53.5 and 59.5 million ounces of silver and 675,000 and 725,000 of gold.

The miners’ Ebitda rose 53% year-on-year in the first half thanks to higher silver prices, lower costs and the devaluation of the Mexican peso against the US dollar, although the devaluation dragged net income down 20% year-on-year at the interim stage. For the full year, the analysts’ consensus estimate is for Ebitda of $1.2bn, up 77% year-on-year and earnings per share up 71% to $0.48 a share.

Dividends are expected to rise to $0.21 a share, up from $14.5 a year ago, with a further increase of $0.38 expected in 2021.

-Full-year results from Flutter Entertainment, Intertek, Taylor Wimpey, Travis Perkins, Weir, Rotork, Senior and Robert Walters

-Trading statement from Ashtead

-Interest rate decision from the Reserve Bank of Australia

-EU inflation figures

-US car sales data

-In Asia, quarterly results from Sea Limited

-In Europe, quarterly results from HelloFresh

-In the US, quarterly results from HP Enterprises and Nordstrom

Wednesday 3 March

-Quarterly reshuffle of FTSE 100 and other leading indices

-UK Budget

Chancellor Rishi Sunak finds himself in an unenviable position ahead of his second budget. Having already reportedly reached a deal with Number 10 and the Treasury not to increase income tax, National Insurance or VAT rates, he must now “navigate a £400 billion high-wire act with one arm firmly tied behind his back,” said AJ Bell senior analyst Tom Selby.

“To one side he can see the fiery pit of economic disaster if the UK doesn’t get its financial house in order, while on the other is the molten lava of electoral disaster if he cuts too hard, too fast or in the wrong places. With such dangers below, the last thing Sunak wants to do is have a wobble.”

Implementing a wealth tax, radical pension tax relief reform and abolishing the state pension triple lock are just a few of the potential tools at his disposal to deal with the UK’s ballooning fiscal deficit.

Jon Greer, retirement policy expert at Quilter, said as Sunak “scrambles around for every spare penny” the rumours of pension tax relief becoming a potential casualty will grow stronger.

“The last thing we need from the government is yet more tinkering to the system,” Greer said. “Recent tinkering has got us into the mess that is the Money Purchase Annual Allowance (MPAA) and the tapered annual allowance. These policies have left many hard working, front line employees with huge tax bills, and while some changes have numbed the problem, they have not been solved.”

Though changes to the state pension triple lock seem unlikely given the Conservatives’ reliance on the “grey vote,” Greer said this would be an ideal time to reform the annual uplift in state pension to ensure the cost of the pandemic is more evenly spread across generations.

Greer said: “A quirk in the system means that once the furlough scheme ends, we are likely to see a large boost in earnings growth, and this will lead to a significant uplift to the state pension from 2022. The triple lock was not designed with this situation in mind.

“Already costing an substantial sum, it would make sense to place the state pension increases on a more sustainable long-term footing. Moving to a double lock or ‘smoother earnings link’ would ensure more intergenerational fairness and make sure pensioners maintained their real living standards.”

-Persimmon full-year results

Persimmon’s new chief executive Dean Finch gave an upbeat full-year update in January so the focus will be on the company’s assessment of the housing market in 2021. The new Help to Buy scheme will kick in, which boosted completions for 2019 by 43%, and Rishi Sunak is said to consider an extension to the stamp duty land tax exemption.

Analysts will also look for comments from the company on its ongoing efforts to address prior customer concerns over build quality and cladding on high-rise buildings, Mould said.

While completions fell 14% to 13,575, Persimmon also saw a 7% increase in average selling prices to £230,500, meaning that revenues fell by only 10% to £3.3bn.

The house builder’s profits were hit by Covid 19, as well as safety-related costs to replace claddings that may need to be removed from 26 buildings that are over six stories tall. Analysts are therefore looking for a headline pre-tax profit figure of £857m, down from £1bn in 2019.

Analysts expect a 7% increase in sales to £3.6bn and an 11% jump in pre-tax profit to £947m for 2021, with a further profit gain to £990m in 2022.

Persimmon resumed dividend payments after the cancellation of the planned payments for calendar 2019. The company has so far declared two interim payments for 2020 of 40p a share and 70p a share. Analysts predict a return to its pre-pandemic plan of 125p a share interim payment and a 110p final dividend in fiscal 2021.

-Full-year results from Polymetal, Avast, Page Group and Vimto maker Nichols

-Trading statement from packager DS Smith

-Services PMIs in Asia, Europe, UK and US

-US ADP employment change data

-US oil inventories data

-Federal Reserve Beige Book

-In Asia, quarterly results from AIA

-In Germany, quarterly results from Dialog Semiconductor

-In the US, quarterly results from Snowflake, Marvell Technology, Splunk, Dollar-Tree and Viatris