The Week Ahead: Logica to reveal impact of public spending cuts

The potential impact of the Government's cost-cutting drive will be among the talking points when the IT group Logica posts its half-yearly results this week.

Goldman Sachs has warned that with around 13 per cent of revenues exposed to the UK public sector, Logica could be hit as spending is rolled back. The company is likely to be questioned about its views on the probable impact. Happily for investors, Logica is not involved in any of the projects singled out for immediate cuts, according to Panmure Gordon. As the broker notes, the company is "well spread in the UK public sector", with contracts across 55 departments and agencies. "Much of Logica's revenue is either outsourcing or in 'key skills', which are difficult to readily replace," Panmure said, adding that the company also has "good relationships with the key players" in the new administration and "with the civil servants who will advise them".

Goldman, on the other hand, is more bearish and reckons the market may be overlooking the risks posed by the fiscal squeeze. "Consensus does not yet reflect these risks, and we expect estimates to track down as incremental details around the department and nature of public-sector cuts emerge," the broker said in a round-up of the IT services sector published last week.


The ground engineer Keller is due to post its interim results this morning and, following on from the first quarter, when bad weather weighed on the business, Numis expects the company to report an improvement in performance over the second quarter of the year. "The main focus will be [the] US and the trends Keller is seeing in the residential, commercial and infrastructure markets," the broker said. "Additionally, the market will be looking to gain an insight over the competitive pressures currently prevalent in the US, and whether these have the potential to emerge elsewhere or, in fact, are easing."

Results/Updates: Fidessa, Intertek, Keller, Management Consulting Group, Senior, Telecity, Ultra Electronics, Xchanging and XP Power.


Deutsche Bank is anticipating Drax's half-yearly figures to be in line with market hopes, with the power-station operator expected to report a modest year-on-year increase in earnings before interest, tax, depreciation and amortisation.

Beyond the figures, the broker expects the company to issue an update on its plans for biomass-fired generating plants, though actual investment in standalone biomass projects is not expected until later in the year.

Results/Updates: 888 Holdings, Capital & Counties Properties, Drax, Fresnillo, GKN, Meggitt , Rotork, Taylor Wimpey, Weir and Xstrata.


Results/Updates: Arbuthnot, Cookson, Legal & General, Lloyds Banking Group, Premier Foods, Standard Chartered, Wolfson Microelectronics, British Land, WS Atkins, Carpetright, Antofagasta, the Eurasian Natural Resources Corporation and Marston's.


Panmure is looking forward to a dividend increase alongside half-yearly results from RSA Insurance later this week. The broker expects the company to increase the first-half payout by 6 per cent to 3.07p per share, slightly above consensus hopes of a rise to 3.06 per share.

Turning to the lenders, and interim figures from Barclays are likely to show slower second-quarter trading at the group's Barclays Capital investment banking division. The expectations stem from weakness among peers and an update at the end of June, when Barclays confirmed that "investment-banking market conditions in May and June have been softer...reflecting lower levels of capital markets and mergers & acquisitions activity". That said, Barclays Capital may still outperform the broader investment-banking market, according to Citigroup.

"We believe that the top-line revenues of Barclays Capital will hold up much better than the industry average...and that the negative market reaction to the updated trading guidance provided by Barclays on 30 June may therefore have been overdone," the broker said in a preview published last week.

Also on Thursday, the aircraft-services group BBA Aviation is due to post its interim figures. Analysts expect the company to report £42.4m in underlying pre-tax profits, compared with £38.4m last year, while underlying earnings per share are expected to rise to 7.6p.

Results/Updates:Aviva, Barclays, BBA Aviation, Cobham, Ferrexpo, Ladbrokes, Millennium & Copthorne Hotels, Novae, Rio Tinto, RSA Insurance, Randgold Resources, Bellway and Unilever.


Results/Updates: Brammer, Catlin, Inmarsat, Old Mutual, Royal Bank of Scotland and Logica.

Economics Diary


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Insolvency statistics for the second quarter

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