The Week Ahead: Hope of seasonal Homebase sales boost

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HomeRetail Groupis forecast to follow in the footsteps of peers and deliver a positive first quarter update this Thursday, with analysts looking forward to news of stronger sales at the company’s Homebase chain.

KBC Peel Hunt said recent news from Kingfisher, the rival group that reported a spike in seasonal product sales at its B&Q chain last week, was particularly relevant. “For Homebase, seasonal product in the first quarter has historically been described as representing 40 per cent-plus of the sales mix, offering scope for a material improvement in like-for-like sales performance this year, against weak comparatives,” the broker said.

UBS is also optimistic, saying: “A 20-30 per cent recovery in seasonal would give a 6-10 per cent pro-forma like-for-like gain.’”

The company’s Argos stores may also benefit from the demand for seasonal stock, although UBS warns that the chain “could be affected by a very strong period for games console sales last year, and other areas may not be able to make up the shortfall”.

TODAY: Full year results from Hyder Consulting, theFTSESmallCap-listed engineering consultant, should be in line with market expectations, according to Panmure Gordon, but the news on trading is likely to be less than inspiring, with the environment in the Middle East forecast to be “tough”, and further delays in government spending expected to affect the company’s UK and Australian businesses. “The only bright spot appears to be Asia, where Hyder appears to be well positioned to benefit from planned government [spending],” the broker said, adding that the risk to consensus remained “on the downside”.

Panmure also weighed in on Workspace, the property group which is also due to post full year numbers this morning, forecasting an underlying occupancy rate of 79.8 per cent at the end of March, compared to 81.3 per cent in the January update. “Importantly, the stock is de-risked following the rights issue that took place in early March,” the broker said, “Whilst calendar 2009 will probably represent a year when KPIs [key performance indicators] deteriorate, we maintain the view that the overall rent roll will remain relatively resilient, the company will not breach its banking covenants, and it will pay a divided. Our pro-forma dividend forecast gives rise to a 4.3 per cent dividend yield at the current share price, and our trough NAV [net asset value] forecast is 25 per cent above the current share price.”

Results/Updates: E2V Technologies, Latchways, Workspace and Hyder Consulting.

TOMORROW: IG Group is due to post a pre-close trading statement tomorrow, and UBS is looking forward to news of improved trading conditions in the company’s mature markets. “In its third quarter update, [IG] reported challenging conditions in its two more mature markets, UK and Australia,” the broker said.

“We hope to receive an update on trading in these markets, with an expectation that conditions may have improved slightly in the March/April equity market rally.”

Results/Updates: Carclo, Oxford Instruments and IG Group.

WEDNESDAY: Halfords is expected to deliver a strong set of full year results mid-week, with Charles Stanley forecasting £94.5m in pre-tax profits, compared to £90.2m last year.

Investors are expected to focus on gross margins, the outlook and strategy updates, as profits guidance and sales data were released with the pre-close trading update in mid-April.

“Management is expected to give guidance on expansion plans for the UK store network and shed light on the decision to terminate trials of standalone cycle stores,” the broker said. “Further detail is likely on international expansionplans, currently focused on Ireland, theCzech Republic and Poland.”

Charles Stanley is also looking forward to a progress report on the company’s restructuring programme, saying

that the reconfiguration of the distribution infrastructure is expected to lead to a one-off cost of £8m, delivering annual cost savings of £4m from 2011/12.

Also on Wednesday, investment management group Rensburg Sheppards is due to post final results, and Numis expects pre-tax profits to slide 20 per cent to £33.3m, thanks to the market turmoil. Funds under management should also slip, with Numis predicting a 25 per cent drop to £9.7bn in the year to the end of March.

Results/Updates: Focus Solutions, Liontrust Asset Management, Rensburg Sheppards and Halfords.

THURSDAY: Results/Updates: Park Group, Premier Farnell, AEA Technology and Home Retail Group.

FRIDAY: Results/Updates: John Lewis weekly sales data.

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