Thursday preview: Morrisons, Redrow, BoE rate decision

8th Sep 2010 17:40

Supermarket chain Wm. Morrison releases interim figures on Thursday, the first results to be released since Dalton Philips first sat down in the chief executive's chair back in late March."Philips is expected to present his initial thoughts on the business, rather than a full-blown strategic review. Specific targets and timeframes are more likely to be set with full year results in March," predicted Charles Stanley analyst Sam Hart. "We expect his approach to be evolutionary, given that Morrison already appears to be on the right strategic path and that he was specifically recruited to apply his operational expertise. Key decisions, however, will have to be made on whether to expand more aggressively into non-food, launch an on-line offer and develop a convenience format. The group is conspicuous by its absence from these three areas, which are generally perceived as the industry's main growth channels," the broker added.Charles Stanley is forecasting an interim pre-tax profit of £415m, up from £359m last year, and earnings before interest, tax and amortisation of £435m, up from £382m. Revenue is tipped to improve to £8,150m from £7,458m."Like-for-like sales (ex-fuel and VAT) are forecast to be up by 0.9% during the first half, with growth in the second quarter likely to have been similar to the 0.8% reported for the first quarter. The subdued like-for-like performance will reflect a sharp fall in food price inflation (close to zero) and a tough consumer environment. Operating margin is likely to be broadly flat at 5.1%, held back by an increased mix contribution from low margin petrol," Hart said.Shares in entertainment products retailer HMV shot up on Wednesday, the day before the company issues a trading update covering the first quarter of its new financial year. The stock is a favourite choice of short-sellers so whether the rise was due to "shorters" closing out their positions as a precaution or due to optimism about the retailer's prospects is hard to say. Nomura is predicting an 11.3% fall in like for like (LFL) sales for HMV UK, for a period that included the World Cup and which "also suffered from a poor release schedule, continued pressure on the gaming market and a weaker DVD market.""If trends persist, our full year LFL [forecast] of -4.5% may appear optimistic and despite tight cost/margin control, there could be an element of downside risk to consensus forecasts for HMV UK, in our view," the broker gloomily notes.On the bright side, Nomura is expecting the troubled book-selling arm, Waterstones to show some improvement "given self-help initiatives and improved market data". Here, the broker is predicting a 4.0% fall in LFL sales from a year earlier."In the Live division, the successful completion of summer festivals including LoveBox and Global Gathering could see a strong performance from Live, in our view," the broker adds. Completing the review, Nomura thinks the performance of the international stores will have been weak but that the digital initiatives (song downloads) should show progress. Housebuilder Redrow issues final results the day after sector peers Barratt Developments and Berkeley Group reported. Panmure Gordon says: "Our forecasts indicate that the group will complete 2,200 homes in 2010E at an average selling price of £148,000 (+7.7% year on year). We forecast full-year net margin of 0.4% and a full-year profit before tax of £-8.4m. After the £8.7m loss reported in the first half of the year, this implies that the group will have returned to profitability in the second half of the year. We forecast June 2010E earnings per share of -2.4p and net asset value of 142p."Most housebuilders have been gearing down as fast as possible since the onset of the credit crunch but Panmure Gordon would not be surprised to see this trend reversed at Redrow. In April, Redrow's debt stood at £50m. "However, with the group increasing its activity in the land market we would not be surprised to see this debt position move a little higher. For the full year to June 2010E, we forecast debt of £80.4m (18.3% geared) - a comfortable position, in our view," Panmure Gordon said.Spread betting firm IG Group issues a trading statement covering its first quarter (June to August, inclusive). "We anticipate a good revenue outcome for Q1 of £84m, +22% YOY [year on year], supported by recent market volatility," Panmure Gordon said. That would represent a 2% decline on the preceding quarter's revenue.In Panmure Gordon's view the things to look out for will be the effect of lower market volatility in August on trading volumes; whether the group is still recovering from its setbacks in Japan; what the competitive landscape is like in the UK and what the opportunities are in the US.On the economic front the interest rate decision by the Bank of England's Monetary Policy Committee (MPC) is expected to be the usual non-event. The key interest rate has been stuck at 0.50% for 17 months in a row and it would be a major surprise were that streak not to be extended to 18 months.Notwithstanding the current hike in wheat prices there is evidence that inflationary pressures are receding while recent surveys covering construction, manufacturing and services activity in August have not painted a picture of an economy enjoying a robust recovery. INTERIMSDataCash Group, Globus Maritime, Morrison Wm., Ocean Power Technologies, Premier Farnell, TikitINTERIM DIVIDEND PAYMENT DATEDevelopment Securities, F&C Inv Trust, New Europe Property Investments, Rio TintoINTERNATIONAL ECONOMIC ANNOUNCEMENTSBalance of Trade (US) (13:30)Consumer Price Index (GER) (07:00)Continuing Claims (US) (13:30)ECB Report (EU) (09:00)Initial Jobless Claims (US) (13:30)Consumer Confidence (JPN)Q2Premier FarnellGMSCharacter Group, Western Coal Corp.FINALSAlumasc Group, Redrow, System C HealthcareIMSSHMV Group, IG Group HoldingsEGMSNaya Bharat Property CompanyAGMSAssura Group, Atkins (WS), Carpetright, Falkland Islands Holdings, Hartest Holdings, HMV Group, Invista Foundation Property Trust, Matrix Income & Growth 2 VCT, Matrix Income & Growth 2 VCT 'C' Shares, Naya Bharat Property Company, Northgate, PHSC, Polar Capital Holdings, Provexis, Southern Bear, Thames River Multi Hedge PCC Ltd. Realisation Shares, Western Coal Corp., Zoo DigitalTRADING ANNOUNCEMENTSHome Retail GroupUK ECONOMIC ANNOUNCEMENTSBalance of Trade (09:30)BoE Interest Rate Decision (12:00)FINAL DIVIDEND PAYMENT DATECarcloQ1Ocean Power Technologies