The Week Ahead: JJB problems to gather pace with FY loss
Monday 21 September 2009
Today: Oil & gas assurance and quality control company Velosi is expected to announce an impressive set of first-half results this morning, showing that trading was better than expected. Last year's pre-tax profits increase of 30 per cent will most probably be replicated.
Analysts at Charles Stanley expect the positive trend to continue into 2010, bolstered by increased demand for quality assurance in the oil and gas industry, as environmental and safety concerns become priorities. In the first six months of the year, Velosi has secured its position by negotiating several lucrative new contracts as well as renewing existing ones. The analysts reckon: "We expect demand for the group's services to remain resilient."
Results/updates: Ideal Shopping Direct, Lighthouse Group, Millbrook Scientific Instruments, MP Evans, Velosi.
Tomorrow: Third-quarter results from the cruise operator Carnival are expected to show that the business has remained resilient despite the impact of the credit crunch and other nasties like swine flu. While ticket prices, especially in North America, have been forced down by the tough economic conditions, on-board spending, which accounts for 25 per cent of revenue, has remained broadly flat.
Bookings for Mexican cruises have recovered since the US lifted a travel warning for that country, though ticket prices there have nonetheless been forced down. Carnival has also benefited from a 43 per cent decline in the average price of fuel, as well as reductions in other costs, such as food. The experts at Charles Stanley describe Carnival as "still the number one player in a global duopoly," adding that it "has a strong balance sheet and cruising is a growth industry". They argue that returning consumer confidence in the US will be crucial for the business in the next six months.
Results/updates: Highland Gold Mining, Gulfsands Petroleum, Carnival, JD Sports Fashion, Savile Group, AI Claims, CVS Group.
Wednesday: Game Group is expected to post a profit before tax of £15.8m, which is at the upper end of predictions, even if it is down 57 per cent on last year. Retail analysts at KBC say: "The [video] game release schedule has affected profits though first-half results are largely irrelevant for a business like Game, which has only twice before posted a profit in the first half. " They add: "Game enjoys a strong market share which it can hope to increase still further going into the all-important second half, which includes Christmas."
KBC expects profits to keep falling, however. Competitor HMV has already observed that the UK video games market was down by over 30 per cent on last year, though high-profile releases such as Beatles Rock Band have boosted trade recently.
Another problem facing Game Group is competition from the supermarket giants such as Tesco and Asda, which have increased stocks of reduced price games and consoles, using them as loss leaders to entice customers into their stores.
Results/updates: Ceres Power Holdings, EG Solutions, Game Group, Charlemagne Capital.
Thursday: JJB Sports is expected to post a loss of £40 million for the half year. The chain was dogged by fears that it could go bust at the bottom of the market, and struggled to build up stock levels as suppliers were reluctant to do business with the group.
The results are expected to indicate a double-digit drop in sales compared to last year, while in-store stock levels remain a concern.
While JJB has proved its short-term viability, the company is struggling to acquire new stock quickly enough, as well as facing challenges in enticing customers back into its stores.
Another concern is store presentation, which some analysts have identified as a weakness in the company's model. The opening of a new flagship store at the Trafford centre in Manchester where lines are broken down by brand has gone some way to addressing concerns, though a nationwide roll out is not expected imminently.
JJB Sports and its larger competitor Sports Direct are still under investigation by the Serious Fraud Office for alleged price fixing, which has further hampered JJB's appeal to both customers and investors.
Results/Updates: S&U, JJB Sports, M&C Saatchi, Group NBT.
Friday: Results/Updates:Afren, Dillistone, Alexon, Mission Marketing.
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