The Week Ahead: Woolworths investors pin bid hopes on Baugur

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The Independent Online

Woolworths has been in play for corporate activity since January 2005 when Apax Partners, the private equity group, first moved for the sweets, household goods and CD retailer. Since then the news flow from Woolworths has been uninspiring at best, and poor high street sales have weighed on the entire retail sector.

However, the takeover rumours persist. On Friday Baugur, the acquisitive Icelandic company, bought 15 million shares, lifting its total stake in Woolworths from just under 9 per cent to 10.02 per cent. Despite that, Warwick Okines at Deutsche Bank does not think a bid will come at any time soon and is recommending investors to sell the shares ahead of results, due on Wednesday.

In a note to clients last week, he wrote: "On a 2006 PE of 17.4 times earnings, the market is either expecting a bid or for earnings to recover markedly: we believe both are unlikely in 2006. We struggle to envisage private equity paying more than 40p for the shares."

Earnings from its main UK high street business are expected to be flat, with analysts pencilling in pre-tax profits of about £48m. If no bid news comes and the company fails to meet expectations, expect to see the shares lose some of that takeover premium.

TODAY: Alexon Group, the clothing and footwear retailer, has rarely been mentioned in the glut of takeover chat in the sector, but the company has a strong balance sheet and good cash flow. Some analysts believe this not reflected in its current share price and would make the company attractive to a private equity buyer. It also has strong brands, including Dolcis, Bay Trading and Envy, operated through 360 shops and 1,200 in-store concessions. Expect to see pre-tax profits of about £21m.

Positive results from Canadian Ragweed trials on Friday, for hay fever sufferers, gave a timely boost to Allergy Therapeutics ahead of interim results. House broker Bridgewell Securities has a fair value for the stock of 158p, and with the Ragweed vaccination due to hit the Canadian market in 2007 analysts will be hoping for more good news.

Results: Full year - Alexon Group; Business Directories; Delcam; Designer Vision; DRS Data & Research; Healthcare Locums; Imagesound; Metal Bulletin; MTL Instruments; Omega Underwriting. First half - Allergy Therapeutics; Minerva; NeuTec Pharmaceuticals.

TOMORROW: Shareholders of Brixton got boost last week as Gordon Brown revealed an easing of the requirements to convert property companies into Real Estate Investment Trusts. Too much of a boost perhaps; consensus forecasts are for Brixton to report net assets of 457p, meaning that at a current price of 528p the stock trades at a 15.5 per cent premium. The sector still has work to do to justify the premiums it now trades at and if results come in below expectations, that job will become even harder.

Results: Full year - A G Barr; Brixton; Dana Petroleum; Development securities; Genemedix; Leisure & Gaming; MWB Business Exchange; NETeller; Ottakar's; Pinewood Shepperton; Smallbone; UKBetting. First half - Accuma Group; Finsbury Food Group; Liberty; Marylebone Warwick Balfour.

WEDNESDAY: The small company entrepreneur Bob Morton reports on two of the companies he chairs.

Vislink, the suppliers of microwave radio and satellite transmissions to the broadcast and security market, is expected to reveal a substantial increase in profits. Fuelled by its US broadcast business and last year's acquisition of Link Research, profits at the operating level are forecast to soar from £2.4m to £7m.

Times have been tougher for Armour Group, the one-time car accessories group now involved in consumer electronics for car and home entertainment. The half-year figures are expected to show the effect of the slowdown in the retail sector. Market expectations are for operating profits marginally lower than last year's £1.4m.

Results: Full year - Adventis; Corac Group; Hikma Pharmaceuticals; Inditherm; Proximagen Neurological Sciences; Vislink; Woolworths Group. First half - Barratt Developments.

THURSDAY: Kazakmhys is the only FTSE100 company to report this week, and not surprisingly for a mining company analysts are expecting bumper results. The copper miner has cashed in on demand for its products from the booming Chinese and Indian markets. Analysts expect pre-tax profits of £621m.

Results: Full year - Alpha Airports; Burren Energy; Cornwell Management; Getech Group; Kazakmhys; Orca Interactive; Pilat Media Global; Pixology; RC Group Holdings; Sportech; Stem Cell Sciences. First half - Armour Group; Gladstone; James Halstead.

FRIDAY: Results: Full year - Advent Capital Holdings; Chesnara; Independent Media; Melrose Resources; Watermark Group. First half - Polaron.