Week ahead: UK Q3 GDP, Rolls-Royce, Vodafone results

UK wages/Unemployment (Sep) – 11/11 – with another budget looming on the horizon the Bank of England finds itself in a bind having left rates unchanged this week and the prospect that unemployment could edge closer to 5% before year end. In the last 12 months we’ve seen unemployment levels rise from 4% to the current level of 4.7% while wage growth has shown little sign of slowing sharply, although it has come down from its 6% peaks of earlier this year. Nonetheless wage growth is still trending at 4.7%, with public sector pay growth contributing the most to that number. With the IMF, in its recent World Economic Outlook last month, wading in by saying that the UK faces the weakest living standards growth in the G7, and warning the Chancellor she needed to come up with a credible plan to reduce debt and grow the economy, the UK is facing huge challenges.       

UK Q3 GDP – 13/11 – Last month the IMF downgraded its 2026 GDP forecast for the UK to 1.3%, while warning that the UK is likely to face the highest inflation in the G7 over the next 2 years.  The most recent monthly GDP number showed that the economy grew by 0.1% in August, however July was revised down to -0.1% with the services sector flat lining over the 2 months. There were also downgrades to the January, February, March and April figures, while May was revised higher. The main contributors to growth were in healthcare, however private sector services continued to feel the squeeze from the recent effects of the last budget and April tax rises. The August GDP numbers were also helped by improvements in manufacturing and industrial production output, which is likely to offer a welcome boost to this week’s Q3 numbers. Does any of this mean that rate cuts are more or less likely? It depends who you speak to – Alan Taylor on the MPC has already suggested that the UK is heading for recession, and needs rate cuts now, a view seemingly shared by 3 others on the MPC, who voted for a cut this week, while Huw Pill, Megan Greene and Catherine Mann appear to be more concerned with elevated price risks.           

Vodafone H1 26 – 11/11 – Having slipped to their lowest levels since the late 1990’s back in April, Vodafone shares have embarked on a modest turnaround, rising to their best levels since May 2023 at the end of October. For years now this mobile telecom giant has been hampered by a bloated business model, as well as poor management as it looks to cut its debt pile while embarking on an ambitious 5G rollout plan in order to secure its future market. Having sold both the Italian and Spanish businesses in order to improve its debt position, Vodafone has turned its attention to its ailing German business which had been haemorrhaging cash at a rate of knots. Earlier this year the company posted an annual loss of €3.7bn after taking a massive €4.4bn impairment on the German operation which has been a significant drain on its resources in recent years. When Vodafone reported in May the management outlook for 2026 was bullish, saying they expected underlying cash profits of between €11bn and €11.3bn and underlying free cash flow of between €2.6bn and €2.8bn. When the company reported Q1 numbers in July trading for 2026 was in line with expectations, with management reiterating its profit and cash flow growth targets with its Three merger now complete and the integration process now underway. Group revenue +3.9% to €9.4bn, helped by 5.3% rise in service revenue. Germany, however, continued to act as a drag -3.2%. Vodafone also announced another €500m share buyback, as it continued to divest the proceeds of the Spanish and Italian businesses, from a year ago. While this is all well and good it doesn’t deal with the underlying problem of how to steer the business onto a more sustainable path where capex spend drives future growth. If Vodafone shares are to push up to 100p then it needs to deliver a decent set of H1 numbers that not only show that the Three merger is paying off, but that the German business has turned a corner. While the first is possible, the second may be tougher to pull off, and while the dividend yield is still decent despite the recent cut, that’s little comfort if the share price continues to struggle. A dividend yield of 5% is well and good, but if the share price halves in value that’s unlikely to be any comfort.           

Rolls-Royce Q3 25 – 13/11 – On course for another spectacular year of share price growth, Rolls-Royce has led the charge for the FTSE100, to more record highs in 2025. There was a brief tariff induced sell-off back in April which saw the shares fall by 25%, to lows of 565p, however these losses disappeared very quickly, with the shares now trading at fresh record highs just shy of 1,200p. The turnaround in this business is even more remarkable given the near-death experience seen in the aftermath of the Covid shutdowns which saw the shares briefly trade south of 40p. Since then, incoming CEO Tufan Erginbilgic has taken a scalpel to the business, having labelled it a “burning platform” in 2023, he’s not only lit a fire under it, he’s also turbo charged the business into a cash machine. In their most recent set of H1 numbers in July the company announced a 50% increase in underlying operating profit to £1.7bn, and free cash flow of £1.6bn. The company went on to raise its full year guidance for underlying operating profit to between £3.1bn and £3.2bn, and free cash flow to £3.1bn. Underlying H1 revenue came in at £9.06bn, compared to £8.18bn a year ago. The company’s net cash position improved from £475m a year ago to just shy of £1.1bn this year. Civil aerospace drove most of the improvement with an almost 7% improvement in operating margin to 24.9%. Power systems also saw a margin improvement, while defence margins remained steady at 15.4%. An interim dividend of 4.5p per share was paid in September. The large engine order book saw an increase of 12%, and now stands at 2,056 as at June 2025, after 349 new engines were ordered during H1. The company said they expect Rolls-Royce SMR to be profitable by 2030, and to start generating revenues by the end of this year. In August/September there were reports of a possible IPO, setting aside the SMR part of the business as a stand-alone operation. Rolls-Royce have denied these rumours saying that there had been talks with investment banks about future funding plans for that part of the business, with an IPO not part of the thinking with respect to this. Given the growth potential of the SMR business it would be a strange decision to make unless Rolls-Royce were able to retain a good chunk of the business, while sharing the costs of the capex.    

B&M European Retail H1 26 – 13/11 – Not having a great time of it recently the shares slid to record lows last month on the back of a surprise profit warning. The surprise revision to their full year profits guidance which saw a £7m downward revision to its previous forecast for H1, from £198m to £191m was not taken well, with the annual numbers down from £274m a year ago. The group’s full year adjusted EBITDA is now projected to be between £470m and £520m, down from £510m to £560m. The error appears to have resulted from the omission of some freight costs. All of the other measures that were highlighted in its earlier October statement were left unchanged; however, its CFO Mike Schmidt has stepped down as a result. H1 revenue saw an increase of 4% to £2.75bn, with the UK seeing a 3.5% increase to £2.2bn. The company remains on course to open 40-45 gross new stores this financial year with 23 already open in H1, (9 net). Given the loss of confidence its likely to be a long haul back for the share price, which has halved from where it was at the start of the year.     

Burberry H1 26 – 13/11 – Is fashion falling out of fashion, or is it coming back into favour? After a tough few years Burberry shares have managed to carve out a base, having slipped close to multi year lows back in April. When the fashion retailer reported in May the company announced a full year operating loss of £3m, however the plan to cut 20% of its staff in response to a sharp decline in sales and revenue of 15% saw the shares shoot higher. Total revenue in 2025 fell to £2.46bn from almost £3bn the previous year. Same store sales across all the regions also saw steep falls with Asia Pacific seeing a 16% decline over the year, while the Americas saw a 9% decline. In November last year, in response to a disappointing H1, new CEO Joshua Schulmann launched Burberry Forward a turnaround plan designed to improve the performance of a brand that has faced its fair share of struggles in the last couple of years and that has seen the share price fall sharply from its 2023 peaks of 2,608p, falling to as low as 557p in September last year, before another attempt lower to 597p in April this year. Since those lows, the shares have recovered their mojo, pushing up to their highest levels in 18 months in July on optimism that the retailer would be able to deliver on its turnaround plan and deliver on its full year guidance. In Q1, revenue fell 6% to £433m with the weak points being comparable sales in its Asia markets with Great China seeing a -5% fall and APAC a -4% decline. The US was strong, seeing a 4% rise. Burberry said it was on course to deliver £80m in cost savings in the current fiscal year, while continuing to improve margins.    

UK Defence – Chemring Q4 25, 10/11 and QinetiQ H1 26, 13/11 – The defence sector has been one of the better performing sectors this year, and while the likes of BAE Systems and Rolls-Royce tend to get the headlines there are smaller players who have also done well year to date. Earlier this year Chemring saw a sharp rise in its share price to 14-year highs on reports that Bain Capital had made an approach for the business of 390p per share. While there was an expectation of a follow-up approach none appears to have transpired, however the shares have managed to hold onto all of the share price gains seen in the aftermath of the bid talk. In June the company reported that in H1 the company oversaw a 5% increase in revenue to £234.3m, and that underlying profit before tax rose to £24.1m, an increase of 6%, however that wasn’t the eye-catching stat. Its order book saw a sharp rise of £488m to a record £1.3bn, an increase of 25% from a year ago. The key growth area was bombs and bullets from Germany and Switzerland, and with both of these countries continuing to build their military preparedness, along with the rest of Europe Chemring is optimistic that it will be able to generate a circa 5-fold increase to a target of £1bn in turnover by 2030, with its biggest challenge likely to be in scaling up its operations to deliver on the sharp increase in its order book. QinetiQ shares have also undergone a solid year, the shares making record highs in June, albeit punctuated with some sharp falls in its share price in March and June. When the company reported its Q1 numbers back in July it reaffirmed its full year outlook of 3% revenue growth and an operating margin of about 11%. In the UK QinetiQ said it has secured a 5-year £1.5bn extension to its Long-Term Partnering Agreement with the MOD, as well as contracts worth £110m in respect of operational support and training.     

Disney Q4 25 – 13/11 – It’s been a pretty uninspiring quarter for the Disney share price with the shares briefly trading at their highest levels since August 2022 in the middle of June. Since those peaks, the shares have drifted back as investors look to what should be a strong quarter for the Mouse House in what ought to be a strong quarter for its parks division. In Q3 Disney raised its full year profit forecast to $5.85 a share, as Q3 revenues increased by 2% to $23.65bn. Profits for the quarter were $1.61 a share. Disney+ managed to see a further 1.8m subscribers added during the quarter which was below market expectations, although profits came in at $346m, compared to a $19m loss last year. As you would expect the parks and cruise division has performed well with revenue of $9.09bn, helped by a rise in guest spending. The entertainment division was the weak spot with a $179m decrease in operating income, which was primarily driven by a $275m decline in content sales and licensing during the quarter. Disney blamed the tough comparatives due to the strong performance of Inside Out 2 a year ago, however this comes across as an excuse for the poor performance of the likes of Snow White and Lilo and Stitch, as well as Thunderbolts, which all performed poorly. The hope is that Fantastic Four will help to contribute an uplift in Q4, however that appears to be doubtful given some of the reviews. The main focus will be on parks, as well as the rest of the holiday business, which saw a 10% increase in operating income in Q3.