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Business Analysis & Features

The Week Ahead: BP profits pumped up by Russian joint venture

BP WILL tomorrow post record annual results, with most in the City expecting the oil giant to boast a profit of up to £9bn for the year just gone.

Of course the high price of crude over the past 12 months is the main reason for this success, but BP's TNK joint venture in Russia has also played its part. In the last three months of BP's year, the venture accounted for a quarter of the group's production, although this is expected to decline as profit centres in the Gulf of Mexico, Algeria and Azerbaijan come on tap.

In terms of shareholder returns, 2004 has been a great year for BP. Its investors will have received £3.2bn in pay-outs, and also benefited from £4bn-worth of share buybacks.

Looking ahead, 2005 promises to be another strong year for the oil group. Not only can investors expect yet more bumper dividends and share buybacks from the giant, but a special dividend is also a possibility as BP moves to IPO, its petrochemicals business.

Today: Results: Full year - Pursuit Dynamics; Randgold Resources. Interims - Invox; Cambridge Antibody.

Tomorrow: Although Dicom's second-quarter numbers will have been impacted by the weakness of the dollar, analysts predict the results will show that underlying growth remains very much intact at the software group. Bridgewell Securities believes that a series of major contract wins are likely to be secured by Dicom during the second half of its year, including one with the US Social Security Administration. It forecasts the software group to generate earnings before interest, tax, depreciation and amortisation of £6.8m, and tips this figure to hit £15m by the full-year stage.

Results: Full year - Alphameric; BP; Brandon Hire; Dobbies Garden Centres. Interims - PZ Cussons; Marconi Corp; Dicom.

Wednesday: Back in October, Reckitt Benckiser posted forecast-busting third-quarter numbers and raised its estimates for the full year. It is now expected to achieve net sales growth of 9 per cent for 2004, and brokers reckon the company will have no problems meeting this target. Last year was certainly a good year for the world's biggest maker of household cleaning products, but 2005 is likely to be an altogether tougher proposition given the proposed merger of Procter & Gamble and Gillette. This American mega-merger will without doubt turn up the heat on rivals such as Reckitt.

Results: Full year - Arc International; Liberty International; Reckitt Benckiser. Interims - Regent Inns.

Thursday: Bid rumours have followed Barclays for some weeks now, although nothing concrete has emerged. This aside, brokers expect the bank's full-year results to be a bullish affair, with Barclays Capital, Barclays Global Investors and the company's international operations all performing strongly. The performance of Barclays' domestic business is likely to be less sparkling as the bank restructures itself in order to adapt to major changes in both the regulatory environment and market conditions. Investors can expect profits for the year just gone to rise to £4.8m from £4.1m.

GlaxoSmithKline's promise for 2004 was to achieve earnings at least in line with those seen in 2003. At the nine-month stage the pharmaceuticals giant looked to be on its way to topping this; however, since then the combination of the weak dollar and higher litigation provisions will have weighed on the company's earnings.

For some timeBT has been frantically cutting costs in an attempt to keep its margins intact amid fierce competition. The group's third-quarter results should show that BT remains good at reducing overheads, and so profits are expected to jump to £532m from £526m. The analyst meeting to be held by the fixed line carrier in the wake of the numbers will concentrate on the company's new product developments, along with the practicalities of dealing with Ofcom's Strategic Telecom Review.

The bulk of analysts in the City forecast ICI to deliver a full-year pre-tax profit of £391m, up from £341m a year earlier. Williams de Broe believes that the figures could well prove to be conservative, given the positive comments coming from some of ICI's rivals recently. The broker also expects a confident outlook statement from the chemicals group, particularly with regard to its US operations.

Along with Unilever's full-year results will be the company's strategy for the next five years. The strategy for the last five was certainly not a success, and shareholders will be keen to see some serious reforms at the consumer goods giant. Few brokers expect a swift turnaround. In fact, some predict the group will have to yet again lower its sales and earnings targets.

Results: Full year - Barclays; Rensbury; GlaxoSmithKline; ICI; Rolls-Royce; Unilever. Interims - Scottish Power; McBride; Macro 4; BT Group; Enodis.

Friday: Results: None expected.