The Week Ahead: Tough quarter expected from Mothercare

Nikhil Kumar
Monday 29 March 2010 00:00 BST
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Mothercare is expected to reveal slowing sales growth when it posts a quarterly update this week with the fourth-quarter figures likely to have been hit by tougher comparatives and the cold snap which persisted over January, February and early March.

Both Numis and Singer Capital Markets are forecasting the UK like-for-like sales increase to ease. "We believe the fourth-quarter update will be one of the weakest for some time," Singer said. "Once this... update is out of the way, and given [that] numerous ongoing initiatives should bolster future earnings growth rates, we believe the outlook for the shares should improve."

Despite the weakness, the update is unlikely to impact full-year forecasts, with Numis pointing out that the fourth quarter is usually quiet, particularly when it comes to toys. Like Singer, the broker expects sales at the international business to fare well. "The rate should have re-accelerated... having paused for breath in the third quarter, a timing issue as store opening phasing's fell unfavourably," Numis said, adding that it remained "firmly positive" on Mothercare.

TODAY The oil & gas exploration and production group Afren is due to issue annual results and, beyond the headline figures, UBS reckons that investors could be greeted with two key pieces of newsflow. "First would be an updated competent persons report, which is an independent reserves audit," the broker said. "We expect this to potentially show upgrades to reserves following positive appraisal results on the Ebok discovery. The second would be if Afren had managed to secure a debt facility that it has said it is in discussions to raise – this would help alleviate financing concerns, and risks of a further rights issue."

Also in the oil & gas sector today, Goldman Sachs is upbeat ahead of full-year figures from Dana Petroleum. Moving the stock to its widely followed "conviction buy" list last week, the broker said Dana's core assets "continue to trade at a significant discount, meaning that the company's exploration programme is free". Goldman also weighed in on recent bid rumours, which the company will no doubt be quizzed about. The broker notes that at current levels "speculation on possible mergers and acquisitions activity from acquirers looking to purchase cheap production growth could provide support to the share price".

Results/Updates: Afren, Lamprell, and Dana Petroleum.

TOMORROW There should be few surprises when Babcock, the support services group which recently made an agreed bid for rival VT, issues an update tomorrow morning, with Panmure Gordon pointing out that the company has already indicated that trading both at its own and VT's businesses are in line with hopes. "The company will also be hosting an analyst seminar on Wednesday," Panmure said. "The key focus of this visit will be on the defence side of the operation, particularly the Royal School of Military Engineering public-private partnership. A tour around the Royal Engineers Museum is on the agenda, along with presentations on the wider defence business within the group." Also tomorrow, Numis expects Domino's Pizza's update to show that like-for-like trading has "remained strong". "There are plenty of levers to drive sales higher, including more advertising and extended trading hours in addition to which like-for-like comparatives should be reasonably easy between March and June," the broker said. "We believe there is material scope to upgrade our 2010 forecast, which assumes 4 per cent like-for-like sales versus 11 per cent as at mid-February. However, we do not expect to change our forecasts after [this statement] as it is still very early in the new financial year."

Results/Updates: Asterand, Bloomsbury Publishing, Future, JKX Oil & Gas, Kazakhmys, Robert Wiseman Dairies, Domino's Pizza UK & Ireland, and Babcock International.

WEDNESDAY Cathedral City cheese maker Dairy Crest's full-year trading statement is likely to show strength in branded food sales despite tougher comparatives in the second half and some easing in promotional activity by the company, according to UBS.

"Management have done a good job at managing the challenges thrown at them over the last two years and just beneath the surface at Dairy Crest is a collection of decent brands earning very respectable returns," the broker said. "However, there is also a large liquid milk operation which is much less attractive from a growth and return perspective."

Results/Updates: Compass, Dairy Crest, Northern Foods, Pinewood Shepperton, and Surgical Innovations.

THURSDAY Results/Updates: Booker, Prezzo, and Mothercare.

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