The Week Ahead: When the Chancellor's on his feet, the City turns to drink

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The Independent Online

While the Chancellor's much anticipated pre-Budget statement will dominate the airwaves this week, the reporting season continues with a host of results and pre-close trading updates.

There is a sense of the inevitable about Gordon Brown's savage downgrade of 2005 economic assumptions. The Chancellor has admitted his 3 per cent to 3.5 per cent 2005 GDP growth forecast is no longer viable. Economists are predicting a revised growth rate of around 2 per cent.

A slump in GDP growth may see windfall taxes brought forward in areas such as oil, property sales and banking. In one bright bit of news, Real Estate Investment Trusts (REITs) are likely to be introduced. The launch of these tax-effective structures is set to revolutionise the UK property sector and bring it in line with the US, Australia and continental markets.

While the Bank of England's Monetary Policy Committee deliberates on interest rates, only the most belligerent hawk believes there will be any upward move. In contrast, central bankers are likely to surrender to rising temptation in Canada and New Zealand.

Pubs are proving to be immune to the consumer slowdown. Greene King is expected to produce a strong interim pre-tax profit of £52m - an 18 per cent increase on last year. Like its peers, Greene King has hit the acquisition trail in recent months, acquiring Ridleys in July and the Scottish brewery and pub icon Belhaven in October for £187m.

Three key areas of analyst interest include rising cost pressures due to soaring energy and labour costs; how the blanket Scottish smoking ban from March 2006 will effect business; and the progress of acquisition integration. While Greene King has "a bit to chew on right now" according to one analyst, he believes the acquisitive group "will continue to look around for smaller regional pub owners and breweries to acquire".

Transport company Stagecoach has been shedding its offshore operations. The latest divestment under the "shrinking to greatness" strategy was November's sale of the New Zealand business, from which shareholders are clamouring for some sort of cash return. With a share price which has risen by 11 per cent in the past six weeks, cynics believe that management is tarting the group up for sale.

Stagecoach is expected to post a first-half, pre-tax profit of around £65m. News on Stagecoach's tender for the Greater Western rail franchise is expected before Christmas. Tony Shepard, an analyst at Charles Stanley Securities, thinks it has a "good chance" of prising the franchise from First Group.

Banking heavyweights Royal Bank of Scotland and HBOS also strut their stuff this week, with solid pre-close trading updates expected. Strong commentary from commercial and wholesale banking, capital markets and asset management divisions should more than offset the likelihood of flat UK retail results.

Retail banking margins are under pressure from an unholy mix of increasing competition, solid growth in lower margin mortgages and a marked slowdown in higher-margin unsecured personal lending growth. In addition, analysts will be watching for any signs of asset quality deterioration. HSBC management surprised the market last week with its admission the UK economy was "quite soft" and that the bank was experiencing a tick-up in small to medium-sized enterprise (SMEs) problems. While virtually a rounding error to HSBC, SME business is extremely lucrative for such banks as RBS and HBOS.

With Willie Walsh slashing his way through the top three layers of British Airways management, such trifles as monthly traffic figures may seem a little "ho-hum". But business does carry on, with Gerald Khoo of Oriel Securities looking for an increase in premium passenger volumes. "It's likely to be more of the same," he said, referring to October's 6.4 per cent rise in passenger traffic.

The wintery weather is a boon to at least one firm. Helphire, the provider of aid to motorists in accidents, posts its interim profit this week with analysts expecting a pre-tax result of around £7m. But, in a macabre twist, the bulk of revenue is generated in the second half as accident levels rise in icy weather.


Tomorrow 5

UK RESULTS: (final) Aberdeen Asset Management; (interim) Acal, Carclo, Creston, Helphire, Ten Alps

Tuesday 6

UK RESULTS: (F) Alternative Networks, API, Dewhurst, Grainger Trust, ITE, Victrex; (I) Christian Salvesen, Greene King, Halma, Heath (Samuel) & Sons, International Greetings, Northgate Information Solutions, Quintain Estates & Development, Severn Trent, Stonemartin

Wednesday 7

UK RESULTS: (F) Gooch & Housego, Hardys & Hansons, Intec Telecom Systems, Shaftesbury, Ultraframe; (I) Accident Exchange, DS Smith, Centre Parcs, Chapelthorpe, Northumbrian Water, Stagecoach

Thursday 8

UK RESULTS: (F) Bristol Water, First Choice Holidays; (I) Anite, Computerland, iSoft, Pennon, Universal Salvage; (3Q) Premier Farnell

Friday 9

UK RESULTS: (I) Berkeley