The Week Ahead: Housing slowdown weighs on Carpetright

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The Independent Online

Rumours that Carpetright, the floor-coveringschain, may be considering a management buyout have a ring of truth about them.

Brokers say it is not impossible, as Lord Harris, the chairman and chief executive, runs it like a private company anyway - though the move would be hard to square with the recent change of finance director. Tomorrow's results will give Lord Harris a chance to confirm or deny the rumour.

April's trading update was even worse than expected, with like-for-like sales in the fourth quarter down about 8 per cent after a dire March. The group has been hit by the slowing housing market, as many furnishing sales happen when a family moves house. Brokers at Evolution are looking for pre-tax profits of £61.5m for the year to the end of April, but point out that there is also a useful £9m profits from property disposals.

Carpetright hopes to push profits excluding property disposals back to £63 to 64m this year if like-for-like sales hold up, but that looks optimistic, with a tough first-half coming up. Its shares have been on an upward trend over the past month but could well tumble in the wake of tomorrow's announcement.

TODAY: The Co-operative Financial Services group's new chief executive, David Anderson, launches an ethical engagement policy for the Co-op's insurance arm. It wants to work together with other investor groups to push for better corporate governance and ethical and environmental policies.

TOMORROW: A little more than a week ago, Sanctuary, the music group with artists such as Morrissey and Iron Maiden on its books, issued a profits warning, causing its shares to collapse. It warned that delayed album releases and expansion costs would hit profits, predicting a 40 per cent fall in interim profits from a year ago - suggesting £6m for the first half of this year.

Teather & Greenwood said unless conditions improve vastly in the second half, Sanctuary risks breaching two of its main four banking covenants. T&G also criticises the group for being too diversified, which means potential buyers will be tempted to pick up selected assets rather than the whole group. Sanctuary announced recently that it was in takeover talks.

Investec Securities also warns that investors should not count on a rescue bid for the entire company. But it thinks a big disposal or a cash injection could help Sanctuary reduce long-term debt built up from its acquisition spree.

Exel has been one of the top performers in the FTSE 100 this year. Although the logistic company's trading is likely to stay strong, analysts at Credit Suisse First Boston wondered whether tomorrow's update would have enough good news for the stock to push on in the near-term. In April, Exel reported trading in line with expectations, though it admitted growth in air-freight volumes had slowed to a mere 5 per cent in the first quarter, against 16 per cent last year.

CSFB is also concerned about two other possible niggles: like other logistics players, Exel has struggled with its French operation and has made it clear there is no short-term fix. Secondly, Exel's brewing logistics business, Tradeteam, had a tough last year, with profits down by £8m and 2005 profits are likely to be downagain. It remains to be seen whether the new management can turn around this business.

Results: Full year - Carpetright, Profile Media, Stonemartin. Interims - Porvair, Sanctuary. Trading updates: Exel.

WEDNESDAY: April's trading update showed that the HMV music chain was not immune to the slowdown which has affected the UK high street in the past four months. Like-for-like sales fell at the group's UK business and at the Waterstone's bookshop chain.

Only an optimist could predict a significant upturn at the start of the current year, but Charles Stanley, the stockbroker, take comfort from the strength of the new release schedule that includes albums from Coldplay and Oasis and the next Harry Potter installment, due in July.

Results: Full year - HMV. Interims - Wynnstay Group. Fourth Quarter: EasyScreen Group.

THURSDAY: DS Smith, the paper and packaging group, said in April that trading remained tough in the industry. It warned that rising fuel and raw material prices were eating into its results, forcing it to cut costs and raise prices to recoup the damage.

With the outsourcing and technology group Xansa, investors will be looking for evidence of progress with the Department of Health contract. Analysts have pencilled in annual pre-tax profits in the range of £17.4m to £18.6m, and forecast revenues of £374m to £394m.

Results: Full year - DS Smith, Xansa, Reliance Securities. Interims: Montpellier Group.

FRIDAY: Results: Full year - Total Systems; Interims - Travis Perkins.

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