The financial reporting season in the US started two weeks ago and the news from some of the large multinationals on the figures for the second quarter of the year, as well as their guidance for the next six months, are important determinants of the movements across the main equity indices in view of the fears of an imminent economic recession.
While the initial announcements by two of the large banks (JPMorgan Chase and Morgan Stanley) showed somewhat weak signals with lower investment banking revenue and higher provisions for bad debts, the banks that are more dependent on retail customers such as Bank of America and Citigroup delivered better performances and more upbeat guidance.
This is indicative of the strength of consumption patterns which some economists believe are much healthier compared to the situation prior to the COVID-19 pandemic. This was also reflected in the financial statements of American Express published last Friday, showing record spending by cardholders especially across travel and entertainment. In view of the strength of the consumption patterns, the CEO of American Express doubted whether the US economy will enter into a recession in the coming months.
The US reporting season carries on this week in what is to prove to be a crucial time for the immediate direction across financial markets since the Federal Reserve was expected to announce another 75-basis-point rate hike yesterday, various economic reports are due to be released and a large number of companies will be issuing their financial statements, including the Big Tech companies.
In Malta, the H1 reporting season started last week with the publication of the interim financial results by Plaza Centres plc with other announcements by Malta International Airport plc, APS Bank plc, Mapfre Middlesea plc and Bank of Valletta plc due to be published this week.
The H1 reporting season comes at an important time for the Maltese investing public given the various ongoing economic uncertainties and follows the conclusion of the annual reporting season in April for the large majority of companies (those with a December financial year-end), as well as the June deadline for the publication of the Financial Analysis Summary by most of the bond issuers.
Moreover, in view of their different financial reporting periods, the publication of the Financial Analysis Summary by Simonds Farsons Cisk plc, as well as the annual results by PG plc for the 2021/22 financial year, are also important announcements to gauge the strength of the recovery of the Maltese economy.
Last week, Simonds Farsons Cisk plc published its financial forecasts for the 2022/23 financial year. During the current financial year to January 31, 2023, revenues are expected to surge to a record of €115.7 million, representing a growth of 26 per cent from the prior year and, more importantly, a rise of almost 12 per cent compared to the 2019/20 financial year prior to the COVID-19 pandemic. An important observation is the expectation of improved gross profit and EBITDA margins for the Farsons Group showing the effectiveness of all operational and cost efficiency measures that were put in place during the pandemic.
The strength of consumption patterns, following the end of pandemic-related restrictions and also in the light of the surge in inflation and fears of a recession, will be a key determinant of the financial results and guidance by other Maltese companies such as PG plc, M&Z plc, Malta International Airport plc, as well as the owners of retail complexes such as Plaza Centres plc, Main Street Complex plc and Tigné Mall plc.
The strength of consumption patterns, following the end of pandemic-related restrictions and also in the light of the surge in inflation and fears of a recession, will be a key determinant of the financial results
The interim financial statements of Plaza Centres published last Friday indicate a growth in revenue of almost five per cent on a like-for-like basis even when compared to the 2019 figures prior to the pandemic. This could be in part a result of the regular annual rental increments mainly across the office tenants but could also indicate the strong consumption patterns across the retail and catering establishments. The results of PG plc, M&Z plc, Main Street Complex plc and Tigné Mall plc and any additional information that may be provided by these companies on consumer spending patterns could shed some important light on the manner in which the local economy could continue to perform amid the current uncertainties.
In fact, apart from the customary review of the historic financial performance, the companies that will be issuing their results in the weeks ahead should contemplate providing additional information to the market on their current business patterns and guidance for the coming months in view of the spike in inflation and other economic uncertainties.
Following the sharp setback to investor sentiment as a result of the pandemic and Malta’s greylisting by the FATF and now by the war in Ukraine, public companies need to resort to more detailed and informative announcements. Moreover, companies should organise more regular meetings with financial analysts to ensure there is sufficient knowledge among the investing community of the various factors that are likely to impact their financial performance.
Maltese companies should emulate the investor relations efforts of the multinational companies listed on the major capital markets to ensure investors have sufficient information to make well-informed decisions.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, ‘Rizzo Farrugia’, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2022 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.