The Week Ahead: Dixons' cash pile raises hope of a buy-back

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The Independent Online

What does the management team at Dixons plan to do with the company's cash pile? This is the question that most analysts in the City will want an answer to when the electricals group posts its full-year results on Wednesday. Speculation is that it will launch a £250m share buy-back.

JP Morgan estimates that Dixons has around £525m of cash on its balance sheet, of which £340m acts as a reserve for the company's extended warranty business, leaving £185m free. The group has two options according to the US broker. It can either make an acquisition or return the money to shareholders. JP Morgan is most comfortable with the idea of a share buy-back by Dixons and calculates that a £200m buy-back would boost earnings per share by 5 per cent. It believes the market will take a dim view of the retailer if it fails to return cash to investors or opts to use the money for a major acquisition.

In terms of the underlying performance of Dixons, analysts expect pre-tax profits to rise to £325m for the year, from £297m the last time. Currys and PC World are tipped to remain the strongest performing areas of the group's UK business. The company recently took action to tackle structural problems at the Dixons chain by closing 106 underperforming stores.

TODAY: The City had expected Vedanta to unveil maiden annual results last Tuesday but the company was forced to delay the figures until this week. The mining group blamed "administrative difficulties" for the delay but this explanation did not stop a sell-off of the group's stock.

Vedanta shares are now down more than 25 per cent since its IPO at the end of last year, compared with a decline of just 5 per cent by the wider sector. Deutsche Bank forecasts earnings before interest, interest, tax, depreciation and amortisation to rise to £326m from $224m.

Results: Full year - Faupel; Quintain Estates; Vedanta Resources; Ten Alps Communications. Interims - GW Pharmaceuticals.

TOMORROW: Public sector outsourcing specialist Tribal needs to prove to the City that it has stabilised its various businesses after February's massive profits warning. Showing that the company is trading in line with revised expectations will not be enough, say analysts. They want to see evidence that a coherent and rational group is now forming from an assembly of businesses acquired in a land grab of services businesses supplying the public sector. However, even after the profit warning, full year profits at Tribal are tipped to rise to £19.5 from £16.3m last time.

Results: Full year - WS Atkins; Glotel; Halma; Itis Holdings Tribal Group; Trifast; Victoria. Interims - OMG; Dobbies Garden Centres.

WEDNESDAY: Comments on the performance of Stagecoach's core UK bus division will be the crucial part of the group's full-year results statement. Williams de Broe hopes to hear positive news on initiatives to improve margins at the business. The results will also be scrutinised for the performance of the remainder of Stagecoach's Coach USA operations. Analysts want to know how much profit and cash flow can be generated from the company's residual interest in the division.

Williams de Broe forecasts overall pre-tax profits at Stagecoach to be little changed on the £113m achieved last year. The results will be accompanied by a share consolidation and a return of cash of perhaps £250m.

Results: Full year - Cybit Holding; Dixons; First Property; Stagecoach; Touchstone Group. Interims - None scheduled.

THURSDAY: The IT services group Xansa has been busy retreating from many of its overseas operations to concentrate on its core UK business over the past 12 months and this will be reflected in the group's full-year results.

Pre-tax profits are hence tipped to fall to £24m from £27m. India is one area of the world from where Xansa is certainly not retreating. In fact, it has been beefing up its operations there in a bid to take advantage of the trend towards the outsourcing services to emerging market countries by multi-national corporations.

Results: Full year - Computerland UK; DS Smith; Dyson Group; Reliance Security; Xansa. Interims - Crest Nicholson.

FRIDAY: Housing market activity had been slowing in London and the South-east over the past 18 months but now seems to be showing signs of a revival. This will be great news for Berkeley, given the importance of that part of the UK to the company.

Meanwhile, forward sales at the group remain robust. They stand at nearly £1bn. For the year just gone, brokers expect a pre-tax profit of £240m from Berkeley, compared with £221m in the previous year.

Results: Full year - Berkeley Group; Content Film. Interims - None scheduled.

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