The Week Ahead: Revenue erosion feared in Icap's outlook

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The outlook is likely to be key when Icap posts its interim results tomorrow. The inter-dealer broker was sold last week when Morgan Stanley forecast a contraction in earnings next year and investors will no doubt be keen to hear the company's side of the story.

Downgrading the stock to "underweight", analyst Chris Manners and his team said the financial crisis had "fundamentally changed the outlook" for inter-dealer brokers, and forecast a fall in revenues next year as banks and hedge funds move away from over-the-counter transactions towards centrally cleared, more electronic trading.

The analysts also highlighted potential threats from reduced trading activity as deleveraging and risk aversion in the financial system take its toll, and from increased pricing pressures as clients move to cut costs. "We expect counterparty risk and capital efficiency to drive further moves to central clearing (eg CDS, equity derivatives, interest rate swaps)," Morgan Stanley said. "So the shift away from voice-brokered products may mean erosion of revenues over several years."



Today: Panmure Gordon is looking for £18m in pre-tax profits, up 2 per cent, and a resilient outlook for the second half when Cranswick, the food producer, reports its interim results. "The business has generally traded well through previous episodes of economic/consumer volatility, and as such deserves the premium rating of 11 times current-year earnings," the broker said, "The company looks well positioned for the long term and we stay buyers. In essence, good things cost more."

Results/updates: ASOS, Avis Europe, Volex, Workspace, Cranswick.



Tomorrow:United Business Media is due to publish an interim management statement, and Citigroup expects management to reset expectations to reflect the deterioration in the economic outlook since the company's last review of trading. "A big problem for us is that there are risks to earnings throughout each division," Citi said in a recent preview note.

Citi also weighed in on Burberry, the luxury goods retailer, which is due to publish interim results. The broker forecasts a 14 per cent hike in year-on-year earnings before interest and tax, to £94m, split between £61m from retail and wholesale (up 11 per cent year-on-year) and £33m from the licensing business. Pre-tax profits are expected to grow 13 per cent to £91m, with £63m in net income. "There should not be a major surprise to earnings," the broker said, "The focus is likely to remain on the outlook following cautious management comments last month ... Burberry's recent [pattern] of strong trading volatility, higher markdown and rising inventories [is] likely to persist around Christmas."

The storage specialist Big Yellow is due to publish interim results and, following indications of softening consumer interest from rival Safestore last week, Evolution Securities reckons the company might have to temper its growth ambitions. "Safestore believes the consumer 'froze' in September when the media attention on the banking crisis was at its peak, and new lettings dropped sharply," the broker said. "As occupancy softens, it will become harder for self-storage operators to continue pushing up prices."

Results/updates: British Energy, Carphone Warehouse, Enterprise Inns, Lonmin, Oxford Instruments, Premier Foods, Rexam, Wolseley, Wellstream, Big Yellow, Burberry, United Business Media.



wednesday: Results/updates: British Land, Business Post, Care UK, Derwent London, Experian, First Property.

Thursday: Halfords is due to post interim results and analysts at Charles Stanley anticipate news of a "resilient" performance. The broker also anticipates a strategic update from David Wild, the new chief executive, who joined from Wal-Mart in August, with the focus falling on the company's expansion plans for the 450-strong UK store portfolio and the fledgling operations in central and eastern Europe.

"Outlook comments are likely to be cautious given the very tough consumer environment," the broker said.

Results/updates: Daily Mail & General Trust, Halfords, Mothercare, National Grid, New World Resources, Paypoint.



Friday: Results/updates: Business Systems, Fuller Smith & Turner, United Drug.

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