Thursday preview: BoE rate decision, Morrisons, Punch ...

9th Mar 2011 17:02

After European Central Bank (ECB) president Jean-Claude Trichet dropped heavy hints last week that the ECB is seriously contemplating a rise in interest rates for the eurozone, attention is keenly focused on Thursday's meeting of the UK rate-setting committee, where the hawks slowly seem to be gaining a foothold.Last month the Monetary Policy Committee (MPC) played what one pundit termed a 1-5-2-1 formation that brought back memories of former England coach Terry Venables and his Christmas tree team lay-out. The MPC's resident dove, Adam Posen, voted for no change in the base rate and for a £50bn top-up to the Bank of England's quantitative easing (QE) programme. Five members went for the status quo of no change to the base rate and no change to QE. Two members, Spencer Dale and Martin Weale, both called for a quarter point increase while the MPC's resident hawk, Andrew Sentance, upped the ante and called for a half point increase instead of the quarter point cut he normally calls for.Given that Bank of England governor Mervyn King, who was among the five who voted for the status quo last month, has recently been saying that people calling for a rate rise are getting a bit ahead of themselves, it is a fairly safe bet he will be using his powers of persuasion to leave rates unchanged, but there is a definite sense that the force is with the hawks.Supermarket chain Morrison (Wm) is expected to announce a good set of results but it will have to go some to steal the thunder of John Lewis-owned Waitrose, which on Wednesday announced a 9.8% increase in sales for the year to 31 January 2011.Morrisons, a much bigger operation than Waitrose, is tipped to announced a very creditable 7.2% increase in sales to £16.51bn in the year to 31 January 2001 from £15.41bn the year before. Profit before tax is seen rising to £863.3m from £767m the year before.Charles Stanley predicts earnings before interest, tax and amortisation will rise to £897m from £812m a year earlier, giving earnings per share of 22.6p, up from 21.7p."Like-for-like sales are forecast to have remained relatively subdued at c.1%, reflecting tough comparatives, low food price inflation and the challenging consumer environment. New space will therefore have been a key driver of total sales growth, with management expected to have achieved its goal of adding 400,000 sq ft in 2010/11 (total space c.12m sq ft)," the broker said. "Operating margin is forecast to have expanded by c.20bps to 5.5%, benefiting from operational gearing and efficiency initiatives," it added.New chief executive Dalton Philips is expected to announce a strategy update, and Charles Stanley is keen for an update on the company's plans to get its convenience store format and its online offering underway. "An update on the capital structure of the business is expected from Finance Director, Richard Pennycook. At the interim stage, net debt stood at £849m, representing a gearing level of 17% and net debt / EBITDA [earnings before interest, tax, depreciation and amortisation] of 0.7x. With ratios at these levels, it could be argued that the balance sheet is underleveraged. The possibility of a capital return to shareholders via a share buyback programme or special dividend should therefore not be ruled out," reckons Charles Stanley. "Management may, however, decide to retain capital within the business and use it to invest in new areas such as non-food, convenience and online," the broker continued.Struggling pubs group Punch Taverns is set to unveil the results of its strategic review on 22 March so Thursday's second quarter interim management statement is likely to be a strictly by-the-numbers affair. "Our sense is that LFL [like for like] progress in managed pubs should have substantially maintained the first quarter's (Q1's) +2.2%, without the -1% impact of weather disruption, but in a softer background trading environment," said Peel Hunt."However, even quite a small flattening will be seized on as evidence of failure of the turnaround project. The core leased estate will probably be in LFL mid-single-digit decline (Q1 -7.3%, first half 2010 -11%), but since few observers attribute any equity value to this part of the estate in any case, the exact figure is of limited importance. Unless there is some additional disclosure - such as the current run-rate of contributions into the A and B securitisations against the £45m p.a. guidance - this announcement can scarcely avoid being disappointing in its reception. That will be a buying opportunity for those that believe that Punch has a unique ticket to exit its major problems," the broker suggested.Life assurance firm Standard Life performed well in the first nine months of 2010, Charles Stanley said, "and its accelerated investment programme seems to be paying off with increased net inflows and continued growth in assets." "Unlike some of its competitors Standard Life is doing well in the UK with its early entry into the SIPP [self-invested personal pension] and Wrap segments clearly paying off," Charles Stanley analyst Nic Clarke added. Funeral homes operator Dignity is set to deliver "a robust set of results," according to Panmure Gordon. "Within the mix, we expect the underlying Funerals business to show steady growth on static margins, with its Crematoria business expected to further expand its margins from here," the broker said.Panmure Gordon thinks revenues will have grown 5.9% in 2010 to £195.7m, and is expecting a similar level of growth in earnings before interest, tax, depreciation and amortisation to £59.7m. "Our adjusted profit before tax forecast of £38.3m compares to £36.4m delivered last year, and is within a fairly tight range [of broker forecasts] of £38.1-£40.1.m," the broker said.Temporary power and temperature control solutions provider Aggreko must love even numbered years, as it usually gets the gig for providing power at the World Cup and the Olympics."In a trading update issued in December, Aggreko indicated that pre-tax profit for 2010 was expected to be up 25% to about £305m on revenues of about £1.2bn. To cap it all, at the end of the year, Aggreko was awarded the London 2012 Olympics contract worth about £37m. Overall, 2010 was an unusual year in that it benefited from three major sporting events (FIFA World Cup, Winter Olympics and the Asian Games) which together accounted for £90m of revenue in that year," noted Charles Stanley. "As a result, in 2011, the group will have tough comparatives though underlying trends are still positive," the broker continued."Overall, about 75% of revenues are dollar based and as a result a 5 cent move could impact profit by some £7m. At the year-end net debt is expected to be about £145m (2009; £175m) in spite of record capital expenditure of £260m (1.8x depreciation)," Charles Stanley said.Market consensus is for 2010 profit before tax of £305m, up from £246m in 2009. Charles Stanley is £1m above consensus but is bang on the money with its forecast of earnings per share (EPS) of 70p. The broker is expecting a full year dividend of 19p, up from 10.65p last year, and ahead of market consensus of 18.38p.INTERIMSGroup NBT, IndigoVision GroupINTERIM DIVIDEND PAYMENT DATEAnglo & Overseas, Penna ConsultingQUARTERLY PAYMENT DATEIBM Corp., Lilly (Eli) & CoINTERNATIONAL ECONOMIC ANNOUNCEMENTSMachine Tool Orders (JPN)Non-farm Payroll (FRA) (06:30)Industrial Production (FRA) (07:45)Manufacturing Output (FRA) (07:45)Balance of Trade (GER) (07:00)Current Account (GER) (07:00)Retail Price Index (GER) (07:00)ECB Report (EU) (09:00)Weekly Jobless Claims (US) (13:30)Trade Balance (US) (13:30)Monthly Budget Statement (US) (19:00)GMSAnglo & Overseas, TXOFINALSAggreko, Cineworld Group, Clarkson, Computacenter, Derwent London, Dignity, H&T Group, Morrison (Wm) Supermarkets, Schroders, Standard Life, Tikit GroupANNUAL REPORTBank Pekao SA GDS (Reg S)EGMSCritical Information Group, Davenham GroupAGMSAcuity Growth VCT , Acuity Growth VCT 'C' Shares, Avesco Group, Banco Bilbao Vizcaya Argentaria SA, Sanderson Group, Sperati CATRADING ANNOUNCEMENTSHome Retail Group, Punch TavernsUK ECONOMIC ANNOUNCEMENTSIndustrial Production (UK) (09:30)Manufacturing Output (UK) (09:30)BoE Interest Rate Decision (12:00)NIESR GDP estimate (UK)