Thursday preview: RBS, Centrica, Capita ...

23rd Feb 2011 16:36

Thursday is the big day for results, as usual, with the likes of British American Tobacco, Barratt Developments, Capita, Centrica, National Express, Royal Bank of Scotland, RSA Insurance and St. James's Place all updating the market.Nomura Securities is predicting total 2010 operating profit for RBS of £2.4bn, and pre-provision core profits of £11.4bn, down from £13.0bn in 2009, with the shortfall largely due to the Global Banking and Markets (GBM) division."RBS is relatively geared towards capital markets, with its GBM division accounting for one third of group risk weighted assets (more under Basel 3)," the Japanese broker notes. "We expect an even weaker trading quarter for GBM in the fourth quarter (19% down on an already subdued third quarter). The dominant part of revenues relates to Fixed Income Clearing Corporation [FICC] trading, which has been down quarter-on-quarter on average circa 30% across global peers in the fourth quarter," Nomura added."Unlike for Lloyds, we see top-line growth as required to achieve its target 15% return. At the third quarter, management conceded that higher interest rates and a stronger economic backdrop would be required to achieve its target," Nomura notes.Charles Stanley is going for a profit before tax of £2,004m for RBS, versus a loss of £6,762m in 2009. Earnings per share (EPS) are tipped to be 1.1p. Utility group Centrica should prove the enduring truth of the old adage that it's an ill wind that blows nobody any good, as results should have received a boost from December's cold snap.Volumes should be up, but broker Matrix reckons that there may be disappointments in other parts of the business, "with growing competitive pressures in energy services and poor prices in the US upstream". The broker reckons that margins in the energy services business will have come under pressure.Market consensus is for full year pre-tax profit of £2,025m on sales of £21,683m, earnings per share (EPS) of 25.11p and a full year dividend of 13.74p.Matrix predicts earnings before interest, tax, depreciation and amortisation (EBITDA) of £3,248m on sales of £20,349m, and is below consensus on the dividend front, going for 13.5p. It reckons adjusted pre-tax profit will be £2,083m, up from £1,635m in 2009."Cold weather means better volumes, and Centrica should see better energy-supply profits as a result, in our view. Wholesale pricing did not fully reflect the increased demand, though, as there was a reasonable supply of gas, and we expect the upstream business impact to be a little more marginal," the broker predicts.Outsourcer Capita seems to have escaped the sort of battering that sector peer Xchanging has received recently, but the November trading update was by no means a jolly affair. The company said back then that the pressures on public spending are having a bigger than expected impact on a small number of the group's trading activities than envisaged at the halfway point of the year.The market is looking for £355.3m at the pre-tax level on revenue of £2,743m. Broker Panmure Gordon is more optimistic than many of its peers, and thinks revenue could be as high as £2,798m and adjusted profit before tax will be around £358m, with cash generation and margin progress set to be the key positives of the results."The key focus is likely to be on organic growth improvement, which is likely to be skewed more towards the second half of 2011 in our view," the broker said. "Investors will seek reassurance on this from the bid pipeline, which stood at a record level of £4.4bn in July. That said, a lack of significant contract wins is a concern to some, despite the chief executive officer stating his hope to announce some significant contracts in Life & Pensions in November," Panmure Gordon added. "Acquisitions have featured more strongly in recent months with top line organic growth more difficult to come by, and we would not be surprised to see the company signalling its intention to do more mergers & acquisitions this year. We expect such transactions to be more bolt on in nature rather than game changing in our view," the broker said.Rail and bus operator National Express had a good first half of the year and Nomura thinks the return journey will be just as good."In general, we expect the significant restructuring activity through 1H [first half] to have had a positive impact in 2H. In particular, the improvement in UK bus profitability should be more tangible in 2H, with no London bus EBITA [earnings before interest, tax and amortisation] contribution in 2H last year," the broker reckons."Elsewhere, US schoolbus should benefit from the cost saving programmes started in the first half, with revenues now also growing again. For UK coach and Spain we expect limited y-o-y [year-on-year] growth in EBITA in 2H. Outlining the company's plans for rail refranchising as well as changes in refranchising policy should also be of interest," it added.Market expectations are for pre-tax profit of £158.7m on revenue of £2,144.7m.Tobacco giant British American Tobacco should produce in-line results, Charles Stanley predicts, which, by the broker's reckoning, means pre-tax profit of £5,006m, earnings per share of 174.7p and a full year dividend of 113.6p."The world's second largest global tobacco firm is expected to deliver revenue growth in a positive price environment with growth from Global Drive Brands (c6%), despite ongoing pressure on volumes (tougher comparables in H2)," Charles Stanley said."Organic volumes declines are expected to stabilise at under -3% for the full year. Emphasis on cost control offers margin support and progress continues on the £800m five-year cost savings programme (2008-2012). We anticipate further movement towards the 35% operating margin targeted by 2012 (Full year 2009 31.4%). We are looking for a dividend payout consistent with the current policy of 65% of EPS (H1 33.2p) and there is some anticipation that BAT will reinstate its share buyback programme (would be well received)," the broker added.As for insurer RSA, Charles Stanley is predicting profit before tax of £479m, down from £554m in 2009.EPS are tipped to dip to 11.3p from 12.1p but the dividend is seen rising to 8.8p from 8.3p."RSA expects full year 2010 UK net written premium growth to be close to the nine month level and that International will deliver mid-single digit growth. Emerging markets are expected to return to double digit growth in 2011 and be close to achieving this in 2010," the broker notes.INTERIMSAshmore Group, Barratt Developments, Centaur Media, Kier Group, Sinclair Pharma, Sportingbet, Wilmington GroupINTERNATIONAL ECONOMIC ANNOUNCEMENTSConsumer Prices Index (JPN) GfK Consumer Confidence Survey (GER) (07:00)Gross Domestic Product (GER) (07:00)Consumer Confidence Indicator (FRA) (07:45)Business Climate Indicator (EU) (10:00)Economic Sentiment Indicator (EU) (10:00)Chicago Fed National Activity Index (13:30)Durable Goods Orders (US) (13:30)Continuing Claims (US) (13:30)Crude Oil Inventories (US) (15:30)New Homes Sales (US) (15:00)Jobseekers Net Change (EU) (17:00)UK ECONOMIC ANNOUNCEMENTSCBI Reported Sales (11:00)Q4London MiningFINALSBritish American Tobacco, Capita Group, Centrica, Filtrona PLC, Hunting, London Mining, Microgen, National Express Group, New World Resources NV (DI), Primary Health Properties, Royal Bank of Scotland Group, RSA Insurance Group, Ruukki Group (DI), St James's Place, STV GroupEGMSKDD Group NV (DI), MedicX Fund Ltd.AGMS2 ergo Group, Electra Private Equity, MedicX Fund Ltd.FINAL DIVIDEND PAYMENT DATERenew Holdings