The Week Ahead: Next fashions results to lift the retail gloom

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The Independent Online

The continuing economic slowdown and the slide in consumer confidence has caused great concern about the health of retailers such as Next. But, despite the grim backdrop, analysts have been highlighting reasons for optimism before the fashion retail chain's second-quarter trading update, which is due on Wednesday.

Credit Suisse visited three stores in London's Oxford Street and the Canary Wharf store last week and said: "[The Next summer clearance sale] is well under control and one of the better ones we have seen in recent years."

Deutsche Bank also chimed in before the update, noting that while Next may have seen "soft June trading", it should still meet its guidance.

As for the shares, Deut-sche noted that they have fallen so dramatically that "they still look excellent value". The broker added: "Due to the strength of Next Directory and tight cost control, we estimate profits will only come down 10 per cent from peak."

TODAY: The design, engineering and management consultancy WSP is due to publish interim results today. Panmure Gordon is forecasting £22m in pre-tax profits, up from £15.9m last year. If achieved, the broker notes, this would generate in excess of 30 per cent year-on-year earnings per share growth. "We will be monitoring its order book closely, and expect this to be running at £1.2bn when it reports results," said Panmure.

Results/Updates: Compass, Informa, Northern Foods, Pearson, Reckitt Benckiser, WSP.

TOMORROW: BP is due to publish second-quarter results tomorrow and Caze-nove is anticipating a strong set of numbers. The broker, whose analysts advised clients to go long on the stock before the results in a note last week, forecasts net income of $8.25bn, at the top end of the market range of $7.1bn to $8.25bn.

"We note that BP's first-quarter results beat the market consensus by 25 per cent (29 April 2008) – the shares were [at] 578p before that earnings surprise (close on 28 April) and are now 9 per cent below that level," said the broker, reiterating it's "outperform" rating on the stock.

Bodycote, the testing and thermal processing services group, is due to publish interim results. Citigroup is looking forward to an update on the potential disposal of the testing operations, which it thinks "could be well sought after". Elsewhere, the broker expects the focus to fall on the outlook for the heat treatment business.

"The [heat treatment] business has significant operating leverage and is highly exposed to swings in the broader economic cycle," said the broker, adding: "Our forecasts assume a notable slowdown in organic growth in the second half of 2008."

Results/Updates: Croda, United Business Media, Bodycote and BP.

WEDNESDAY: Cadbury is due to publish first-half results. Deutsche Bank, whose analysts anticipate news of 7.2 per cent organic sales growth in the first half, note that in the UK, Cadbury is gaining share in the overall confectionery market and "the domestic business should be strong, driving the BIMA [Britain, Ireland, Middle East and Africa] region". The broker added: "Europe will be hit by Spain and distribution issues in Turkey/Russia. But Americas is looking excellent with Halls [the cough drop brand] good and gum still gaining share, notably in the USA and Mexico. Asia appears strong, both in Australia and the emerging markets."

Also on Wednesday, Rexam, the consumer pack-ing company, is due to publish interim results. Analysts anticipate pre-tax profits on underlying continuing operations of £139m, compared with £98m in 2007, with 15.1p in earnings per share, against 11.7p last year.

Results/Updates: Aviva, Lloyds TSB, Provident Financial, Telecity, Kazakhmys, Rexam and Cadbury.

THURSDAY: The British Gas-owner Centrica is due to publish interim results and Deutsche Bank is forecasting £785m in adjusted operating profits, compared with £1.248bn last year, and 11p in adjusted earnings per share, compared with 21.5p last year. "We expect lower first-half numbers mainly due to a challenging comparative, with [profits in the first half of 2007] boosted by low short-term gas prices," said the broker, adding: "We have seen significantly higher gas prices in 2008, which should lead to lower short-term profits at British Gas residential and higher profits from upstream gas."

Prudential is due to publish first-half results and Panmure Gordon is anticipating pre-tax operating profits, on the European enterprise value (EEV) basis, of £1.356bn, with £1.421bn in new business sales on an annual premium equivalent (APE) basis.

Also on Thursday, RPS, the consultancy group, is due to publish interim results. Panmure Gordon anticipates a solid set of figures, forecasting £25m in adjusted pre-tax profits, compared with £23.1m in 2007.

"We have factored in all of the recent acquisitions the company has completed to date and assumed that margins continue to improve in 2008 against a backdrop of strong revenue growth," said the broker.

Results/Updates: Astra-Zeneca, BT, Carphone Ware-house, HBOS, Rank, Royal Dutch Shell, SABMiller, Trinity Mirror, Shire, Will-iam Hill, Tomkins, RPS, Prudential and Centrica.

FRIDAY: Results/Updates: Alliance & Leicester, BAE Systems, British Airways.

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