Weekly Outlook: Full-year results for Derwent London and IAG

Key events for UK wealth managers for the week starting 26 February

Photo by dylan nolte on Unsplash
Photo by Dylan Nolte on Unsplash


Monday 26 February

  • Full-year results from Bunzl
  • US new homes sales
  • In Europe, quarterly results from Bank of Ireland
  • In the US, quarterly results from Berkshire Hathaway, Zoom Video Communications and Domino’s Pizza

Tuesday 27 February

  • Full-year results from Smith & Nephew, UNITE, Senior and abdrn
  • Chinese one- and five- year interest rate decisions
  • BRC UK shop price index
  • Japanese inflation
  • US durable goods orders
  • US Conference Board consumer confidence
  • US Case-Shiller house price index
  • In Europe, quarterly results from Munich Re, ASMI, Ferrovial and Puma
  • In the US, quarterly results from Lowe’s, Dell, AutoZone, Agilent, Sea Limited, HP Enterprises, JM Smucker, Jones Lang LaSalle and Macy’s

Wednesday 28 February

  • Full-year results from Reckitt Benckiser, Taylor Wimpey, St James’s Place, Aston Martin Lagonda and Primary Health Properties
  • First-half results from Avingtrans
  • Nationwide UK house price index
  • Interest rate decision from the Reserve Bank of New Zealand
  • German retail sales
  • US oil inventories
  • In Europe, quarterly results from Universal Music, Holcim, Amadeus, Uniper, Endesa and Moncler
  • In the US, quarterly results from Snowflake, Dollar Tree, HP, Splunk, Paramount Global and Icahn Enterprises
  • Derwent London full-year results

Derwent London will release its full-year results on Wednesday, with the Reit trading at a 43% discount to its last stated net asset value per share figure.

The shares are down over a quarter in the past year, with blame placed on an increase of work from home and hybrid work models, online rivals, and the beginnings of a recession.

Russ Mould, AJ Bell investment director, Danni Hewson, AJ Bell head of financial analysis, and Dan Coatsworth, AJ Bell investment analyst, said: “A further handicap for Reits’ share prices are higher interest rates and bond yields.

“They drive up interest costs for indebted property developers and owners, drive down net asset valuations (thanks to how future cash flows from rents are valued using a higher discount rate) and make the dividend yield available from Reits look relatively less attractive when compared to the returns on assets such as cash and bonds, which are also, in theory, lower risk.

Based on the Reit’s dividend, analysts believe the trust will yield 4%, which would deliver below the base rate of the Bank of England and the ten-year gilt.

In the half-year results, Derwent London was valued at £34.44 per share, yet analysts expect this figure to decrease to 920p per share. Analysts will also look at vacancy rate, which had shown improvement at the half-year results at 4.5%, down from 6.4% in December 2022.

“Like many Reits, Derwent London is looking to recycle its portfolio by selling assets and using that cash to upgrade existing properties or develop new ones,” the AJ Bell trio said.

“Derwent London is helped in this respect by how it carries relatively little debt at £1.3 billion. Interest cover is good, and the loan-to-value ratio is also relatively low, although this is creeping up as the valuation of the property assets ebbs.”

Thursday 29 February

  • Full-year results from London Stock Exchange, Haleon, Schroders, Ocado, Weir, Howden Joinery, Shaftesbury Capital, Mobico, Spectris, Serco, Drax and Vesuvius
  • First-half results from CVS
  • UK mortgage approvals
  • Purchasing managers indices (PMIs) for manufacturing and services industries in China
  • US Personal Consumption Expenditure (PCE) index
  • US pending homes sales
  • US weekly initial unemployment claims
  • In Asia, quarterly results from Hong Kong Exchanges and APAC Budweiser Brewing
  • In Europe, quarterly results from AB-InBev, Saint-Gobain, Beiersdorf, Adecco, Clariant, Aixtron and AirFrance-KLM
  • In the US, quarterly results from Broadcom, VMWare, Marvell, CRH, BestBuy, Birkenstock and Polestar
  • Full-year results for International Consolidated Airlines

International Consolidated Airlines (IAG), owners of British Airways, Aer Lingus, and Iberia, will present its full-year results on Thursday after shares dropped near 10% for the year.

While rival airlines have rallied post pandemic, IAG has continued to struggle.

Mould, Hewson, and Coatsworth said: “It is therefore tempting to think that investors are frightened that IAG is losing out in the market share stakes to the low-cost carriers, at least in short haul.

“The company has also been dogged by labour unrest and geopolitical uncertainty, while the UK’s gradual slide into recession may not have helped sentiment either, given how sensitive airline travel (passengers and cargo) can be to the economic cycle.”

The fourth quarter is also typically a weaker period for the business, but analysts expect a 11% increase in year on year sales and an 18% rise in operating profit. Analysts, however, do not expect adjusted operating profit to make significant increases for 2024 or 2025, a possible explanation for the struggling shares.

Areas of interest in the results will include capacity, load factor, revenue per revenue seat kilometre, and total cost per available seat kilometre.

“Meanwhile, IAG has continued to pay down debt, even earning an upgrade back to investment grade from ratings agency Standard & Poor’s. At the end of Q3 2023, net debt was €8.0 billion, and the FTSE 100 firm had paid back 2020’s £2 billion UK Export Finance (UKEF) loan three years early,” the trio said.

“That could, conceivably, clear the way for a return to the dividend list in 2024, after a four-year absence.”

Friday 1 March

  • Full-year results from Pearson, Rightmove, IMI, Nichols, Funding Circle and Capital & Regional
  • Purchasing managers’ indices (PMIs) for manufacturing from Asia, Europe, the UK and the USA
  • EU flash inflation
  • US car sales
  • In Europe, quarterly results from Daimler Truck, Aegon and Vallourec