WELCOME to the Business Week Ahead - a weekly briefing and analysis on events to watch out for across the next few days.
Stock Market Announcements
February 18 - No events.
February 19 - Finals: Drax, InterContinental Hotels, Morgan Sindall.
February 20 - Finals: RSA Insurance, STV, Travis Perkins. Interims: BHP Billiton, Galliford Try. Council of Mortgage Lenders lending estimate for January. Unemployment figures from the Office for National Statistics. Minutes of the February interest rates meeting published by the Bank of England.
February 21- Finals: BAE Systems, Ladbrokes, Premier Foods, Walmart (Asda), Yorkshire Building Society. Interims: Go-Ahead. Trading updates: Kingfisher (B&Q), Sports Direct International. AGM: Easyjet, Public sector borrowing figures for January from the Office for National Statistics.
February 22 - Finals: Millennium & Copthorne.
IT WILL be another big week for corporate results with the likes of defence giant BAE Systems and Hovis owner Premier Foods reporting to the City.
Hovis owner Premier Foods will serve up its full year results on Thursday as it grapples with a major restructure of its bread business.
In November the group said it would close two bakeries and cut 900 jobs as part of plans to overhaul the struggling division, and it is set to lose a £75 million-a-year contract with a major grocery chain from the middle of this year.
The 2012 results will come after the group slumped to a £259.1 million pre-tax loss in 2011 following a price war that sliced its bread division’s profits to just £3.4 million and it was forced to write down the value of the Hovis business on its balance sheet.
But analysts at Credit Suisse said they expected trading to have "stabilised" and on an underlying basis, the City is predicting profits to rise to between £118 million and £125 million, compared with £117 million last year.
Premier has been struggling under a debt mountain following a spending spree which included Mr Kipling owner RHM, but it now looks to be on the mend after agreeing a "landmark" £1.4 billion refinancing deal last year.
The turnaround plan for the group includes the sale of a number of businesses to focus on eight "power brands", including Ambrosia and Bisto.
Charlie Mills, analyst at Credit Suisse, said: "Eking growth out of mature categories is a tough task but these are iconic British brands with strong shelf presence. Premier Foods had made a point of significantly increasing marketing this year - it is where most of the cost savings have gone - so they are better invested now than at probably any time in their recent history."
But he warned growth was still a long way off.
Analysts have also been unsettled in recent weeks by the surprise departure of its chief executive Michael Clarke.
Martin Deboo, analyst at Investec Securities, said while the board was "appropriately decisive" in appointing former Cable & Wireless Worldwide boss Gavin Darby, a fresh leadership drama risked unsettling the group further.
Full-year figures on Thursday will show that a flurry of favourable football results helped Ladbrokes end 2012 on a strong note.
Rival William Hill recently revealed it was boosted in November when Manchester City drew with Real Madrid in the Champions League, followed by the same outcome for all the English teams in the Europa League the following day. It was also helped by a number of draws in that weekend’s line-up of Premier League fixtures.
The City expects pre-tax profits for the full year at Ladbrokes to come in 10% higher than 2011 at £174 million, despite reporting a 5% fall in customer numbers over the summer as bad weather and the Olympic Games dented trade.
But the bookie still grew UK retail revenues by 5.4% over the three months to September 30 as it benefited from a favourable run of sporting results and continued strong growth in income from gaming machines.
Last month Ladbrokes agreed to acquire the operating business of Betdaq in a 30 million euros (£25 million) deal. It is the first takeover by chief executive Richard Glynn, who walked out on talks to buy 888 and Sportingbet and pulled out of the race for Australia’s Centrebet.
Investors will also look for an update on the group’s digital division, which covers betting and gaming online and via mobile phones, which has been beset by delays in bringing in new IT systems, trading platforms and new products.
Ladbrokes is the UK’s second biggest bookmaker, with around 2,150 shops.
BAE Systems will report how it fared in 2012 on Thursday after a dramatic year in which it failed in its attempt to merge with EADS.
The defence giant was forced to scrap a tie-up with its rival after political wrangling scuppered the two companies’ plans to create the world’s biggest defence and aerospace group, which would have had combined sales of around £60 billion.
Spending cuts in the UK and US will continue to dent profits and JP Morgan analyst David Perry expects underlying earnings to fall from £2 billion in 2011 to £1.8 billion last year.
But Mr Perry said BAE had secured some "useful" export contracts at the end of last year, which he said were usually accompanied by sizeable cash deposits.
In December, Oman ordered 12 Typhoons and eight Hawk trainer jets, worth around £2.5 billion including support packages. But delivery of both aircraft is not expected to start until 2017.
The contract win came on the back of a £1.6 billion contract in May last year, which includes 22 Hawk jets with Saudi Arabia and is set to start in 2014, although the Hawks will only be delivered from 2016.
The City will also be keen to hear more on BAE’s plans for the future of its major shipyards after the group’s UK chief executive Nigel Whitehead said he is considering closing one of its major sites - a move that could threaten more than 1,000 jobs.
The future of its three major bases - one at Portsmouth and two in Glasgow, at Govan and Scotstoun - has been under threat after BAE launched a review of its maritime operations at the start of last year.
Transport giant Go-Ahead will report half-year results on Thursday after it was hit with a £7 million bill to compensate passengers for delays and cancellations on its London Midland franchise at the end of last year.
The group, which is behind almost a third of UK train journeys and also operates Southern and Southeastern train services, is expected by JP Morgan to report £15 million of underlying earnings at its rail division in half year results.
In an update in December, the group said passenger journeys at Southern, which includes the Gatwick Express, are expected to dip 1% in the six months to December 29, while journeys at Southeastern will rise 4% and lift 3% at London Midland.
Investors will be particularly interested in how Go-Ahead’s bus division is performing at its half year after the group said it wanted to make profits of £100 million a year by 2016 from running bus services in the UK.
The group currently generates an annual return of £70 million from a fleet of around 4,600 buses carrying some 1.7 million passengers a day.
It comes as Go-Ahead faces up to uncertainty in its rail operation following the Department for Transport’s decision to postpone current rail franchise competitions in the wake of the west coast mainline debacle.
Jamie Rowbotham, analyst at Morgan Stanley, said he expected like-for-like revenues to be up 4% in Go-Ahead’s regional bus division in the first half of the year, driven by decent growth in fare paying passengers. But he warned margins would be down after a cut in a Government grant for bus operators.
Mike Ashley’s sportswear empire will continue to reap the benefit of the collapse of rival JJB when it updates the City on Thursday.
Trading at Sports Direct International, owned by Newcastle United backer Mr Ashley, is expected to be strong as sales are boosted by stock bought by the group when it snapped up 20 of JJB’s shops from administrators.
Richard Chamberlain, analyst at Bank of America, said trading in shops and online would also be strong.
The City expects the group to be on-track for full year pre-tax profits of £207 million, up from £154 million the previous year.
At its half year, Sports Direct jumped to a record profit after enjoying a "significant" sales boost from the London Olympics and Paralympics and half year revenues were up 22.5% to just over £1 billion amid strong growth in its 398 UK shops and branded sportswear division.
But Mr Chamberlain warned the collapse of JJB in the UK had left open the possibility of a new chain emerging to fill the void in mass market performance sportswear.
He said: "However, we think any such chain would most likely be at a disadvantage to Sports Direct in terms of range of merchandise and brand scale."
The City will also be looking for news on the group’s bonus scheme. In an update in December, Sports Direct said it was looking to resurrect a bonus scheme that could trigger a multi-million pound bonus for Mr Ashley.
A previous scheme which would have delivered a £26 million windfall was rejected in a shareholder vote in the summer, but Sports Direct said it was reviewing feedback and would suggest another scheme to incentivise Mr Ashley.
In doing so, it said it will increase the earnings target for the next two financial years by £20 million to £360 million in 2015.
Mr Ashley - who netted £929 million in a single day in February 2007 after selling 43% of the business he founded - had been due to receive eight million shares in 2018 if the chain met a series of "super-stretch" targets up to 2015. He does not receive a salary.