Many traders and investors have predictably deserted the City in favour of a summer frolic in a more exotic location. However, corporate activity continues regardless, with several key results from energy, media and engineering stocks as well as more takeover activity this week.
The most dazzling set of results is likely to come from British Energy, which is expected to report a tripling in first-quarter pre-tax profits to just over £180m. The biggest profit driver is expected to be a significant rise in wholesale electricity prices. The energy group is also likely to be a beneficiary of the Government's recent proposals for more nuclear power plants.
However, the more immediate focus will be on comments regarding the company's improvements in efficiency, as well as the Government's part sale of its stake in the group, due in the next few months.
In contrast, its larger German peer E.ON is expected to unveil weaker second-quarter earnings, not helped by a spate of recent power plant shutdowns. Another German energy giant, Linde, is finalising its takeover of smaller British gas specialist BOC, which will be holding an extraordinary meeting for its shareholders to vote on the deal this week. BOC recently reported its third-quarter profits up by nearly one-third on increased demand for hydrogen.
From the production of gas to the world of advertising: media giant WPP is expected to unwrap an interim profit before interest and tax of £355m, up from £300m last year. But it will be what boss Sir Martin Sorrell thinks about the state of the advertising market for the coming months that will really grip the market's attention. Advertising is tipped to grow this year by its slowest rate since 2002, due to economic uncertainty. Investors will be keen for some reassurance over the outlook for WPP, particularly after it lost the £400m-plus Reckitt Benckiser account to rival Havas. Its strategy of buying small online advertising companies has continued and there could be more on this strategy this week.
Sir Martin has already indicated slowing growth in the second quarter, reporting revenue growth of 4.5 per cent for the first five months compared to a 4.8 per cent rise for the first quarter. However, increased activity from the World Cup in June and strength in the Asian markets are expected to have helped offset weakness in the UK during May and April.
Back to the topic of M&A, and resources group Xstrata's bid for nickel miner Falconbridge is expected to be given the go-ahead by shareholders at an EGM tomorrow, after Falconbridge recommended its bid last week. It has already trumped a rival bid from miner Inco. In the gambling sector, investors in casino group Stanley Leisure will also be looking for an update on its merger talks with London Clubs at its annual meeting. In addition, bids for infrastructure group Thames Water are due this week.
Balfour Beatty, one of Thames Water's partners in the controversial London Underground consortium Metronet, is also set to provide details on a strong first-half performance. The engineering and construction giant, a dominant contractor in the UK road and rail industry, is tipped to reveal some weakness in the rail market but be upbeat about its performance in the construction market. Balfour, which recently won more than £100m in road-upgrade contracts in Dubai, may provide further details of its purchase of coastal defence contractor Birse. The company may also comment on criticism over its safety procedures in the lead up to the Hatfield rail disaster.
Still in the engineering sector and Weir Group is set to produce its annual results with a £28.8m pre-tax profit, up from £24.4m last year. This has mainly been due to initiatives implemented as part of its three-year restructuring programme and healthy demand from customers in the oil and minerals industry. Performance across its engineering products, defence, nuclear and gas businesses are expected to have shown improvement.
Property stocks, too, are likely to cement expectations of robust results and could provide a good indication of the health of the UK economy. Commercial property monolith British Land will be reporting its first-quarter figures. Continued growth is expected across the group's portfolio, with office values likely to have risen in the quarter. Retail income should remain stable despite tough trading conditions. British Land may also talk about the recent sale of its headquarters and £1bn restructure of its debt. There could also be news of a return of capital to shareholders.
Another property group, Countrywide, should also report strong results with sales in its house agency up 40 per cent in the first four months of the year. This activity has also helped lift the group's sale of financial products.
Another company likely to give some insight into the economy's strength is recruiter Michael Page International. The firm is expected to produce strong results after indicating last month that its second-quarter profit rose 28 per cent. So few surprises are likely. The focus will be on the growth outlook in the UK but management are not expected to be overly upbeat, according to Barclays Stockbrokers.
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