The Week Ahead: M&S expected to suffer from downturn
Monday 30 March 2009
J Sainsbury put out some surprisingly resilient numbers last week, but the market is not so bullish when it comes to Marks & Spencer, which is updating on sales tomorrow. As customers have traded down in the current environment, M&S is expected to suffer.
A Reuters analysts' poll expects sales from those stores open for at least a year to have fallen by up to 7.5 per cent during the fourth quarter. The consensus for profits in 2008/2009 is £592m.
The predictions have raised fears among analysts that M&S will be unable to maintain the 22.5p dividend of last year, and is also expected to heap pressure on boss Sir Stuart Rose.
Today: On Friday, 888 Holdings' stock looked buoyant in the build-up today's results announcement. The problem, according to Ivor Jones at Evolution Securities, is underlying trading is "clearly" being hit by the economic slowdown, which is made worse by the exchange rates. He is more bullish on the gambling group's cost-cutting drive, which should see earnings before interest, taxation and amortisation exceed Evo's previous predictions of $52m (£36.4m) for 2008. Full-year revenues announced in February showed a 20 per cent jump over 2007.
"Given the pressure from currency, 2009 underlying revenue is likely to fall," Mr Jones said. He has the stock on a 192p target on a price-to-earnings multiple of 17 times. "This reflects our view of the value of growth prospects and the potential for consolidation once a settlement with the [US] Department of Justice is reached."
The AIM-listed construction group James Halstead will also announce its interim results today. Before moving into the close period, management was bullish on trading, with earnings before interest and taxation expected to be ahead year-on-year. The business, which has a market capitalisation of about £200m, expects sterling's weakness to help sales. David O'Brien of Altium Securities said: "Management has stated the dividend payout will be a record, highlighting management's confidence. We therefore retain our positive stance."
Asterand, which deals in human tissue, has performed strongly on the markets while most of its small-caps peers have been rearranging the deck-chairs over the past year. The biotech firm has been the best-performing share on AIM in the last 12 months, rising 156 per cent and bringing with it an award at the PLC awards earlier this month. Those brave enough to invest in a tiddler will be confident in the run-up to today's results.
Oil exploration stocks were in focus last week as Premier Oil agreed what looked a cracking deal to buy Oilexco's North sea oil assets for $505m. Dana Petroleum, which also has North Sea interests, is releasing its results as well. Dana hit the headlines last week as it agreed to buy Bow Valley Energy. The move is likely to strengthen its research and development pipeline, and it received another fillip when Citi named the stock its "top pick" of the sector.
Results: 888 Holdings; Corin; Barr; Oxford Catalysts; Asterand; Velti; Headlam; Charles Taylor Consulting; Individual Restaurant Company; Dana Petroleum; Litho Supplies; Mecom. First half: James Halstead; J Smart & Co.
Tomorrow: The interdealer broker Icap is expected to maintain its profit guidance of between £336m and £356m for 2009. Hugo Mills of Evolution said Icap's voice-broking business would be resilient, despite average daily values in the electronic trading business falling 38 per cent year on year in January and February. "A strong management team and diversified business model means Icap is likely to be a long-term winner in the interdealer broker marketplace," Mr Mills said.
Afren, an independent oil and gas producer, is reporting full-year results. Following its announcement last week of a successful outcome from its Ebok field appraisal, Richard Griffiths of Evolution Securities said its share valuation should increase by about 30p on a long-term oil price view of $50 per barrel.
The publisher Bloomsbury is reporting its prelims, and is expected to do well from titles by Khaled Hosseini, JK Rowling and Warren Buffett. Numis Securities forecasts pre-tax profits of £10.5m. The group's trading update in January said 2008 will be in line with management expectations. "Although we think the company's shares have been supported by the strength of the group's balance sheet, we are cautious on consumer-facing media and the UK retail environment and therefore rate the shares a hold," the group said.
Results: Afren; African Consolidated Resources; Bloomsbury; Blue Oar; SandU; Cairn Energy; UK Coal; MWB; Bond International Software; Lonrho; Robotic Technology System; Hilton Food Group; Development Securities; Pendragon; Cattles; Morson; Surgical Innovation Group; First half: Bellway; Silence Therapeutics; Eatonfield; Mouchel; Norwood Immunology; Spectrum Interactive; St Ives.
Wednesday: Results: Lombard Medical Technologies; Gem Diamonds.
Thursday: Results: Hansteen; Prezzo; Treveria; First quarter: Stolt-Nielsen.
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