The Week Ahead: DSG and Kesa may signal a retail recovery

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The Independent Online

Comet-owner Kesa Electricals and Currys-owner DSG International promise to draw the market's attention this week as investors scrutinise their updates for any signs of a retail sector recovery. Thanks to the recession, and the concomitant drop in discretionary spending, both are expected to show a sharp drop in annual profits compared to the year before. But the focus is likely to be on the recovery road ahead, as investors attempt to look through the slump.

With Kesa, outlook and strategy comments by chief executive Thierry Falque-Pierrotin, who was appointed in January, are likely to hog the limelight, according to Nomura: "We are expecting a broad update on the business from the new CEO, however, we would not expect this to be [about] radical changes or restructuring at this point, but more of an update on the medium-term position of the business," the broker said, adding that the Italian and Turkish arms promise to "remain key to the longer term plans for the business".

For DSG, which will report on Thursday, UBS expects investors to focus on trends in UK gross margins, loss reduction in the weaker businesses and trading news from store refits. The company may also post an improved outlook statement, as it is beginning to lap against easier comparatives, and recent updates from both Argos and John Lewis have been encouraging, according to Numis.

Today: Results/updates: Kewill, Immunodiagnostic Systems.



Tomorrow: Interim results from Chemring, the military consumables manufacturer, are likely to be "pleasing," according to Numis.

"Strong underlying performance in the now dominant Energetics division (60 per cent of sales) will be boosted by a full period from Simmel and contributions from several other acquisitions, realising further revenue and operational synergies," the broker said, adding that, as far as the performance ahead was concerned, "the outlook statement should read positively", again thanks to growth opportunities in the Energetics division.

Results/updates: D1 Oils, Domino Printing Sciences, Chemring.

Wednesday: Full-year numbers from transport group Stagecoach are likely to be line with market hopes, according to UBS, which expects the outlook for the rail franchises and news on the US business to be the key issues.

Results/updates: Avocet Mining, Celsis International, Consort Medical, Imagination Technologies, McBridge, Stagecoach, Kesa Electricals.



Thursday: Numis expects a strong update from Cohort, the small cap technology and defence group, which is due to post full-year results later this week. "We think there is potential for the result to exceed our £7.2m pre-tax profit forecast given our conservative second half assumptions for the SCS (consultancy) and MASS (defence systems) segments," the broker said, anticipating £2m in year-end net cash, as this is the first year since flotation without a significant acquisition.

"Compared to many small cap Aim-listed stocks, Cohort's overall market prospects and acquisition-led strategy leave it well positioned to outperform the index," the broker added. "The key driver will be progress on acquisitions on which management should give a further update."

Results/updates: DS Smith, Goldshield, Keller, Micro Focus International, Cohort, DSG International.



Friday: Berkeley, the FTSE 250-listed housebuilder, is forecast to post a "solid" set of full-year results at the end of this week, with Numis anticipating a year-end net cash position of £287m. "We continue to regard Berkeley as a safe and well-managed business but its high valuation and the fact that it has high exposure to high-value City of London flats suggests that sales will have not shown the same degree of uplift as the more traditional housebuilders," the broker said, adding that it prefers Bellway and Persimmon.

UBS, which, like Numis, doesn't expect to hear of any writedowns in this week's update, is more positive, viewing recent share price weakness precipitated by the sell-down of the Saad stake as a "very good buying opportunity. The focus will be on the extent of land buying so far and at what discount to prices prevailing a year ago, on the size of the forward order book, on whether prices are stabilising and on the margin in the forward order book."

Results/updates: Berkeley, Filtrona.

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