The Week Ahead: The billion-dollar question of M&S's profits

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The Independent Online

Will Marks & Spencer post pre-tax profits of £1bn? Analysts, wary of the impact of tougher trading conditions on the high street, have been laying their bets in the run-up to the retailer's final results tomorrow.

Kaupthing Singer & Friedlander used to think the company would hit the magic number, but after assessing "clear evidence of a dreadful spring trading period" the broker cut its forecast to £990m from £1.015bn. JP Morgan, whose analysts predict pre-tax profits of £989m, and Dresdner Kleinwort, whose analysts expect £977m, also think the company will miss the milestone.

Lehman Brothers, on the other hand, notes that "sales weakness may have been exacerbated by tight stock control and as a result mitigated by lower markdowns". While acknowledging the recent "flurry of negative data" about the retail sector, the broker forecasts £1.02bn in pre-tax profits.

The market will findout the real number, aswell as whether Sir Stuart Rose will get his bonus,tomorrow.

today: Results/updates: ITE, Care UK, Big Yellow, Homeserve, Derwent London, International Ferro Metals, Manganese Bronze, Wood, Mitie.

tomorrow: The Utterly Butterly spread-maker Dairy Crest is due to publish full-year results. Citigroup thinks the numbers should reassure sceptics in the market, many of whom remain concerned about rising input costs. "With [year-to-date] share price declines in mind, one could be forgiven for concluding that trading has deteriorated dramatically," the broker said. "We do not believe this is the case... We estimate that Dairy Crest has suffered annualised cost inflation of over £200m in [2008]. Recovering this on-cost is no mean feat, but we believe that [the results] will illustrate pricing power."

The pub group Mitchells & Butlers is due to publish interim results tomorrow. The company is also expected to publish the findings of its strategic review, which Evolution Securities thinks will turn out to be a "damp squib" and confirm (or not) whether a lieutenant of major shareholder Robert Tchenguiz has been appointed to the board.

"Punch Taverns made and withdrew a paper offer and conversations about Spirit, Punch's managed house business, have floundered," the broker said, adding: "M&B has said that it is in talks for private equity to take a stake of up to 29.9 per cent at a material premium to the share price, but we can see little rationale for this unless there is an identified back-to-back deal. M&B would love to buy the rest of Whitbread's pub business, but Whitbread is not a seller,"

Also tomorrow, Imperial Tobacco is due to publish first-half results and JP Morgan is predicting some "robust" numbers, with £913m in earnings before interest & tax. "Imperial could provide details on the upcoming rights issuance to finance the Altadis acquisition," the broker said.

Results/updates: Fountains, Innovation, Victrex, Renew Holdings, British Land, Expro International, Icap, Yell, SSL International, Imperial Tobacco, Dairy Crest, Mitchells & Butlers, Marks & Spencer.

Wednesday: The soft-drink maker Britivic is due to publish interim results for the 28-week period to 13 April.

Citigroup is forecasting a small pick-up in sales growth to 1.5 per cent, compared with 1.1 per cent in the first quarter of 2007. "During [the first half of 2007] Britvic's innovation was strong, the weather was good and the group rolled out to discounters," the broker said, adding: "The stills market has sluggishly returned to growth, the on-trade is wrestling with the effects of the smoking ban and weakening consumer spending and, despite the early Easter, the weather has been poor."

Results/updates: Business Post, Experian, Great Portland Estates, Thus, French Connection, Wolseley, Britvic.

Thursday: De La Rue, the commercial currency printer and cash-handling specialist, is due to publish full-year results. Beside the numbers the focus will fall on the company's strategic review update, which, according to Citigroup, should bear details about disposals and "a chunky capital return". "We expect it to confirm that Cash Systems may be sold and see scope for a possible sale of its Camelot stake, given that it could be considered non-core and the recent signing of a long-term contract makes it more secure/saleable," the broker said.

Results/updates: Chrysalis, Daily Mail & General Trust, Western & Oriental, Telecom Plus, Booker, Cable & Wireless, London Stock Exchange, Tate & Lyle, De La Rue.

Friday: Marston's is due to publish interim results for the 26 weeks to 29 March 2008. Evolution Securities, whose analysts chose the company as their top mid-cap defensive pick, is predicting £35.9m in adjusted pre-tax profits and 17.9p in adjusted earnings per share. "Marston's April trading statement was remarkably sanguine, with few signs of any material cyclical pressure," the broker said. "While we continue to be cautious on the economic outlook, our forecasts account for a slowdown and so does the share price."

Results/updates: Future, Marston's.

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