The Week Ahead: DSG investors excitement may be shortlived

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The Independent Online

DSG International, the retailing group that owns Currys and PC World, is due to publish interim results on Thursday. It finished last week strongly with its shares spiking by nearly 21 per cent to 13p after analysts at Credit Suisse issued a positive update. The watchers, in something of a volte face, said that the group is likely to outperform the sector, adding: "In our view the market has overreacted to concerns about the group's sustainability in the medium term. After our long-term negative stance on the stock, we move to outperform with a target of 25p."

Investors were no doubt jumping for joy after what can at best be described as a hairy few months. What is more, the excitement may be short-lived. There have been rumours that the company will be forced to sell off some of its European assets, largely because of a share price that has been in freefall in the last year, coming off by more than 90 per cent.

Despite the positive headline in the Credit Suisse note, there was plenty of bad news, too. The watchers slashed April 2009 profit before tax estimates by 63.4 per cent to £33.7m and April 2010 to £4.7m from £78.6m. Thursday's announcement is not likely to be any easier, with some pretty miserable numbers expected. Even the group's own house brokers, usually the last to go down with a sinking ship, have been furiously downgrading the shares. Citigroup, for example, cut its price target for DSG shares last week from 30p to 18p.

Today: Results/updates: Mitie Group, RM, E2V Technologies, Homeserve, Proventec, Detica, Phoenix IT Group, Vectura Group, Digital Marketing Group.

Tomorrow: Morgan Stanley anticipates a reassuring update from Imperial Tobacco, the Bristol-based cigarette and cigar manufacturer, which is due to publish interim results tomorrow. A presentation on debt refinancing is likely to be the focus, with investors seeking clarity on the reasons behind the recent widening of Imperial's credit default swap spreads.

Morgan Stanley said this did not reflect fundamentals. "In our view, the market is overlooking strong cash generation, earnings growth acceleration and stable underlying trends in key markets ... The most likely explanation is the 'technical' impact of loan hedging (for regulatory capital reasons) by the banks who lent Imperial funds to acquire Altadis (ie, who hedge their credit exposure to Imperial by buying IMT credit default swaps). This may well change post-year end."

Also tomorrow, VP, the specialist equipment rental group, is due to publish interim results. Panmure Gordon will be looking for £13m in adjusted pre-tax profits, which, if achieved, would generate 4.7 per cent growth in earnings per share. The interim dividend is expected to come in at 3p, compared with 2.8p last year.

Results/updates: Imperial Tobacco, Kcom, Superglass Holdings, CML Microsystems, Bango, Topps Tiles, Telford Homes, Intermediate Capital Group, Intelek, SSL International, Paragon Group, Renew Holdings, Chapelthorpe, Hamworthy, Severn Trent, The 600 Group, Gooch & Housego, VP, Carclo, Torotrak, Intec Telecom Systems.

Wednesday: Results/updates: Britvic, United Utilities, De La Rue, Qinetiq, Speedy Hire, Acal, Telecom Plus, Johnson Matthey, Caffyns, Mitchells & Butlers, Atkins, Hyder Consulting, Compass Group, Top Ten Holdings, Focus Solutions Group, GB Group, BSS Group, Assura Group, ITIS Holdings.

Thursday: Evolution Securities is looking for an update on network spending when Sepura, the Cambridge-based communications company, reports interim results. The company supplies more than 30 per cent of the world's Tetra terminals, digital radios used by the emergency services and the military, a market that, until recently, was seen as relatively immune to the slowdown. "[Over the past few weeks] the stock market has begun to fret about government budgets coming under pressure," Evolution said. "At this point we are upbeat about Sepura's prospects in those countries investing in networks. The cost benefit of a terminal is highly attractive and government agencies will be reluctant to let their shiny new Tetra networks turn into embarrassing white elephants for want of investment in terminals. So, if Sepura reports that network spending remains robust, we expect the company will have a good year in 2009."

Results/updates: James Latham, DSG International, Chamberlin, Pennon Group, Quintain Estates & Developments, Holidaybreak, Mountview Estates, Jarvis, Sepura, Grainger, Halma, McKay Securities, Northumbrian Water Group, Avon Rubber, AssetCo, Dyson Group, Hogg Robinson Group, Brewin Dolphin Holdings, Intec Telecom Systems, Byotrol, Findel, FKI, Creston, Helical Bar, Tui Travel, Sportingbet.

Friday: Results/updates: Goldshield Group, RPC Group, Goldstone Resources.