The Week Ahead: Northern Rock ready to unveil solid profits

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The Independent Online

The highlight of a relatively quiet reporting week comes on Wednesday as Northern Rock, the UK's fifth largest mortgage lender, reports full-year numbers.

Last week's rise in interest rates knocked mortgage banking shares back, and many analysts are more bearish on mortgage banking than on the retail side. That said, Northern Rock has been a strong performer over the last five years, rewarding patient investors with a 71 per cent return not including dividends.

Consensus forecasts are for the Newcastle-based company to announce post-tax profits for the full year of £360m, based on total gross mortgage lending of £330bn. The company is aiming to deliver 20 per cent growth in assets and underlying profitability and, given the company's good track record, investors would be shocked if those targets were not met.

TODAY: Investors are expecting strong interim results from the financial and sports spread-betting company IG Holdings following a period of internal expansion and investment. Originally listed in 2000, IG was taken private in 2003 following an internal management buy-out, only to be relisted in 2005. Since then the share price has remained consistently strong, fuelled by the massive increase in the popularity of online betting. The company does not accept bets from US residents, so unlike most other online betting groups, it has emerged from the backlash against the industry unscathed. The shares closed at 283.5p on Friday, and forecast pre-tax profits of £30m could be beaten.

The building and plumbing supplier Wolseley, the subject of speculation concerning a possible bid by rival St Gobin, gives the market its half-year pre-close trading update. It has been another busy six months for Wolseley, having continued its acquisition spree, spending £1.25bn in the process. With more than half of group profits coming from the US, Wolseley has benefited from the real-estate boom across the pond. However, that shows signs of deceleration, and even depreciation, and it remains to be seen what the long-term effect on the company's North American operations will be. The US broker Citigroup raised its price target for Wolseley shares to 1,680p on Friday, indicating that bad news will come as a genuine shock.

Another strong performer in 2006 was Zetar, a confectionery and snack foods manufacturer listed on AIM. The shares have returned over 430 per cent since listing in January 2005, thanks to strong growth in consumer demand for healthier snacks. Having made a series of acquisitions in 2006, more can be expected in 2007 as Zetar looks to move further into the market for healthier eating, although no first-half forecasts were available.

Results: Full year - Aukett Fitzroy Robinson Group; Beale. First half - IG Group Holdings; Monsoon; Zetar.

TOMORROW: There are bound to be plenty of nerves among WH Smith shareholders ahead of the Christmas update. Coming at the tail end of the high-street retailers' post-Christmas trading statements, it seems unlikely that the best will have been saved for last. The company is in the throes of an identity crisis. Smith's, looking to concentrate more on books, stationery, and cards than CDs and DVDs, has seen sales suffer in the face of competition from supermarkets and online book retailers. Uninspiring Christmas trading from Woolworths, HMV and Clinton's Cards may not have filled Smith's chief executive, Kate Swann, with glee, given the market's view on her own company's festive season. However, Smith's declined to issue a profit warning in December, unlike several of its retail counterparts, so things may not be as bad as the bears believe.

Results: Full year - Domino Printing; Humberts Group. First half - NCC Group.

WEDNESDAY: Phil Cox, outgoing chairman of Punch Taverns, takes the helm for his final annual general meeting before handing over to Peter Cawdron. Investors have little else to look out for - according to analysts the company is unlikely to convert its pubs into a Real Estate Investment Trust, and the consolidation talk that buoyed the sector at the end of 2006 has died a swift death.

Results: Full year - Northern Rock.

THURSDAY: Results: No results due.

FRIDAY: Results: No results due.

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