The Week Ahead: City eager to weigh up strength of Mitie
Monday 12 August 2013
It's Monday and it's time for the City to welcome the mighty Mitie to the stage. Facilities management and outsourcing is certainly not an exciting sector but last month the group was quite a mover after analysts at Merrill Lynch upgraded it to buy from underperform. Today the midcap company will update the City on trading and, if Merrill is to be believed, it will have been benefiting from steady growth and a gradually improving economic outlook in the UK.
The group, run by Ruby McGregor-Smith, gets about two fifths of its business – around £800m in revenues – from government contracts such as supplying guards for the English and Welsh law courts. Analysts at Peel Hunt are concerned about the costs of its purchase of care home business Enara but expect the first-quarter trading update to be better even though they are still "cautious" about the business. Peel predicts the group is on track for 2014 pre-tax profit of £113.4m, up from £105.5m for the year to March 2013.
Results/Updates: BATM Advanced Communications, Delcam, Mitie, Prudential, SVG Capital.
Who is hiring and who is firing? Recruitment specialist Michael Page needs to know, and tomorrow its investors expect to hear how the group has managed declining fees. It has been making cuts from it own staff to keep costs down. Analysts at Numis think the group may have turned a corner and expect it to report that the UK market may have shown signs of improvement in the face of continued difficulties in Europe and Australia. Numis, which predicts earnings to have dropped to £32.6m, thinks the group is worth a buy because it is the "most geographically diverse portfolio of all of the UK staffers, and we remain positive on the outlook".
Results/Updates: Caledonia Mining, EnQuest; Mears, Michael Page, Resolution, Synthomer, 1Spatial,Tribal.
Balfour Beatty gets a chance to defend itself after a pretty bad year – the construction and infrastructure group has been hit by government cutbacks, and is likely to continue to sell off various projects and businesses. On Friday, it sold facilities management business WorkPlace for £190m to pay down debt. It said it will eventually use some cash to invest in new businesses, but analysts at Investec think the half-year results on Wednesday will produce a £50m profit shortfall in UK construction and a weaker professional services outturn. They predict the second half will "have to be an extremely buoyant trading period" to keep the group on track. Numis analysts reduced their forecasts and now expect Balfour to report a pre-tax profit for the full year 2013 of around £193m.
Results/Updates: Amara Mining, Balfour Beatty, Capital & Regional, Centamin Egypt, CLS, Eurasian Natural Resources, Interserve, Lookers, Rentokil Initial, Subsea 7.
Will investors take a drag on Imperial Tobacco? Investec thinks they should pile in to Imps, over rival British American Tobacco. It doesn't expect third-quarter results to be good but predicts that "potential catalysts" in the form of a new finance boss, non-core disposals and an eventual potential take-out will make it more attractive. Panmure Gordon analysts expect a modest improvement in volumes and stable price mix performance in the quarter – and expect it to reveal a 1 per cent decline in net tobacco revenue, compared with the 2 per cent decline in the first half.
The hot summer may have put people off trips to the pictures and Cineworld's half-year results may show a deterioration in sales. But Oriel Securities analysts think "it is wrong to pay much attention to trading over short periods of time", and says profit growth will be strong. Analysts expect adjusted pre-tax profit of £46m – up from £39m.
Results/Updates: AZ Electronic Materials, Cineworld, Derwent London, Gem Diamonds, Imperial Tobacco, Rank, Ophir Energy, PV Crystalox Solar, SIG.
Analysts say India is focusing on improving its energy market to encourage investment and reduce shortages that have plagued parts of the country. Scribblers at Citi reckons Essar Energy will be a key beneficiary of this. They point out that it has a "high-potential growth portfolio", and upgrade to buy with an 180p price target ahead of a trading update.
Results/Updates: Essar Energy.
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