The Week Ahead: British Gas fuels gains for energy giant Centrica
Monday 26 July 2010
Continued strength at British Gas is expected to drive gains for Centrica, the energy group which is due to issue half-yearly results this week.
The British Gas owner's business and residential divisions are expected to underpin the results, as both are likely to have benefited from what was a very cold winter in the UK. British Gas residential is also likely to have drawn steam from a "benign pricing environment", according to Citigroup.
"The effects of the coldest UK winter in over 30 years are likely to be the key drivers of a very strong first half for Centrica," the broker said. "This is especially the case for British Gas residential and British Gas business."
UBS also anticipates a boost from British Gas, expecting Centrica "to build on the customer gains" announced in its interim management statement. "Overall, we expect a strong set of results that should bode well for the share price," the Swiss group's analysts said in a preview issued last week.
Results/updates: Pace, Pearson, Hogg Robinson, Reckitt Benckiser, and WSP.
The oil giant BP is to publish its second-quarter figures tomorrow and the focus, unsurprisingly, is likely to be on news of the impact from the spill in Gulf of Mexico as well as changes at the top. "We expect the company to pull out the impacts as separate disclosure[s]," UBS said. "The effects will separate into three different groups: the cash costs to date; the accruals for future costs; and the un-accrued future contingencies."
The broker went on to say that it expected BP to recognise a special charge of $10bn (£6.5bn) for the quarter. "In addition, balance sheet gearing and access to funding will be an area of focus in terms of disclosure, although market concerns should be eased with the recent announcement of the disposal of upstream assets to apace," UBS added. Chief executive Tony Hayward may not be there to present them, as reports emerged during the weekend that he was preparing to quit the group.
The household-products manufacturer PZ Cussons is due to issue its full-year figures, and ahead of the results, Panmure Gordon is forecasting a 17.6 per cent hike in earnings per share.
"Given the first-half liquidity issues in Nigeria, the weakness in the Naira, tough economic conditions in [Europe] and continuing high promotional activity, we view this as a very creditable performance," the broker said, adding that , despite higher capital expenditure over 2010, it also expected cash generation to have been strong.
Also tomorrow, the retailer Halfords is due to issue a first-quarter interim management statement. Numis anticipates news of a tough performance, saying that, while like-for-like sales are expected to climb by 2 per cent over the full-year period, the first-quarter figure could be down 2 per cent.
Gross margins should be higher, however, and the broker also sees ongoing potential for upgrades from the newly acquired Nationwide Autocentre business.
Results/updates: Games Workshop, PZ Cussons, ARM Holdings, BP, Croda International, Informa, Halfords, Provident Financial, Daily Mail & General Trust, and Xstrata.
Results/updates: Bodycote, BG, Brit Insurance, British American Tobacco, CSR, Rexam, St. James's Place, Carphone Warehouse, Compass, Easyjet, Invensys, Sage, and Centrica.
Results/updates: AstraZeneca, BAE Systems, Collins Stewart, Laird, National Express, Rank, Reed Elsevier, Rolls-Royce, Travis Perkins, British Sky Broadcasting, BT, and Halma.
Analysts see little scope for negative surprises when the insurance broker Jardine Lloyd Thompson issues its half-yearly figures at the end of this week. Numis is looking forward to news of continued gains in broking revenues, which in turn should underpin earning growth.
Revenues in the broking business are forecast to be 9 per cent higher on a reported basis, and up 6 per cent at constant exchange rates. The increase is expected to be down to a combination of organic initiatives and market-share gains.
Happily for investors, Numis and Panmure are also expecting an increase in the interim payout. The latter is eying a 5 per cent increase, while the former is looking for a full 6 per cent hike to 9p.
Also on Friday, Rentokil Initial is due to post its interim results. UBS is looking forward to news of a good year-on-year performance as the support-services group's cost-saving initiatives pay off. Beyond the results, Panmure Gordon expects the company to post a strategic update alongside its statement this week.
Results/updates: Charter, Dignity, British Airways, Rentokil Initial and Jardine Lloyd Thompson.
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