Footsie waits for Vodafone to call

The Week Ahead

Big UK results and major US economic data should ensure a hectic four-day week after the markets return from tomorrow's bank holiday. The City remains in the depths of a difficult reporting season where no results, so far, have had enough impact to give the market any clear direction.

Big UK results and major US economic data should ensure a hectic four-day week after the markets return from tomorrow's bank holiday. The City remains in the depths of a difficult reporting season where no results, so far, have had enough impact to give the market any clear direction.

All that could change on Tuesday with the full-year results of Britain's biggest company, Vodafone. The mobile telecoms group has had a crazy year of acquisitions and disposals but, for all its corporate activity, it has still not convinced the market. This time last year, the stock stood at 330p; since then it has relentlessly fallen to below 200p.

Fortunately for Vodafone, the City will not be concentrating its attention on historical information. Investors have tired of mouth-watering stories about third-generation technology and are now more interested in nitty-gritty issues of costs and margins.

News here should be encouraging. As mobile penetration rates in the UK near their peak, it costs Vodafone less to gain new subscribers. Subsidies on new mobile phones are gradually being withdrawn, and further cost savings should arise from the group's sheer size and global reach.

The big question will be whether Vodafone sees itself raising average revenue per unit (ARPU). If it convinces the City that it can, the shares should rebound from the sub-200p level. Given that the Footsie moves three points if Vodafone stock moves by a penny, this could offer wider market cheer.

Similar issues will be raised at Carphone Warehouse's final results, which are expected to reflect a year of rampant sales growth across Europe. Consensus estimates are for pre-tax profits to rise by 38 per cent, although the group is also expected to say sales this year have not lived up to the bumper pre-Christmas boom.

But the move in the industry to steer customers from low-margin pre-pay phones towards higher-margin contract phones should benefit the company. Carphone Warehouse adds value by offering impartial advice, which is more important when customers are comparing contracts.

Any rally prompted by those two groups will probably be stopped in its tracks by results from the utilities sector. Regulation has been the name of the game in the electricity and water industries, and the ill-effects will be plain to see.

Water group Awg should have made progress with its small, non-regulated businesses, but none of this will be enough to offset the damage from April's regulatory cuts to water and sewerage charges.

But the results could have an upbeat conclusion. Awg has committed itself to making a statement on restructuring, and analysts believe it might be on the brink of splitting its operations. It may leave the announcement until after the election, but any hint could fuel speculation that others in the sector, particularly Kelda and Pennon, might follow suit.

The latter company, reporting at the end of the week, will also have seen its profits dented by regulation. Unlike Awg, its numbers will not have been supported by solid performance from subsidiaries, with waste business Viridor expected to have struggled.

Scottish & Southern Energy, also reporting on Friday, will likely come up with only modest profit growth for the year as regulatory price controls take their toll. The focus will be on any update on the management's targeted cost savings of £120m per annum.

It's a big week for the retail sector, as Boots reports amid continued vicious competition from the supermarkets and as Sainsbury's reviews another troubled year. The latter's results will show major exceptional losses on restructuring, and a large exceptional gain on the sale of Homebase.

Safeway and Morrison have, over the past few weeks, given Sainsbury's a lot to live up to, but the group's fourth-quarter trading statement did offer a glimmer of hope. The results will be overshadowed by the crippling embarrassment of the group's Egyptian venture.

As David McCarthy of Schroder Salomon Smith Barney explains: "In the 18 months or so since Sainsbury's entered Egypt it looks to have sustained a total trading loss of over £40m and a loss on disposal of £100m. The same amount could have bought 10 superstores in the UK."

Tomorrow: UK: Bank Holiday.

Tuesday: UK: Results: (final) Carphone Warehouse, Emap, Vodafone. British Bankers' Association: April mortgage lending and consumer credit figures. US: May consumer confidence index.

Wednesday: UK: Results: (F) AWG, Bristol Water Holdings, British Land Company, City of London Group, Chloride Group, Electrocomponents, Garban-Intercapital, Merchant Retail Group, Northern Foods, Peacock Group, Pil-kington, J Sainsbury, Scottish & Southern Energy; (interim) ITE Group, Game- play, SHL Group; (first quarter) International Power. EU: French law makers present Swiss money laundering report.

Thursday: UK: Results: (F) 365 Corporation, BPB, Boots, FKI, Invensys, MAN Group, Pennon Group, Plasmon, South African Breweries; (I) Lonmin, Securicor. Bank of England: April consumer credit figures.

Friday: UK: Results: (F) Fuller Smith & Turner, John David Sports; (I) Aukett Group. Chartered Institute of Purchasing and Supply: May manufacturing survey.