Tuesday preview: Barclays, M&S, Vodafone

8th Nov 2010 15:29

Barclays is the last of the big four banks this month to give a trading update on Tuesday when it issues an interim management statement.Deutsche Bank is predicting the stalwart of the UK high street will announce third quarter revenues of £2.7bn.All eyes will be on write-downs and other exceptional items, however, and Deutsche expects "substantial own debt losses to distort stated results".It would be a surprise were the company to "do a Standard Chartered" and, using impending Basel III banking regulations as a reason, spring a surprise huge rights issue on the market. Bob Diamond, due to take over as chief executive in March of next year, has previously assured the market that the bank does not need to raise equity from shareholders.Diamond is currently head of the investment banking arm, Barclays Capital (BarCap), the major engine of profits growth for the company. BarCap's performance is likely to overshadow that of the retail bank.Mobile phone network giant Vodafone has seen its shares return to fashion in the second half of the year, partly on expectations that it might soon start receiving dividend income again from its 45% owned stake in US operator Verizon Wireless.Tuesday's interim results are likely to be accompanied by an update from chief executive Vittorio Colao on strategy.Colao's first strategic overhaul saw Vodafone focus heavily on growing mobile data traffic, a move that looks a good call.Pundits suggest that Colao will stick with the emphasis on mobile data, as margins decline in traditional voice offerings.Market consensus is for earnings before interest, tax, depreciation and amortisation of around £7.29bn, on marginally improved sales of $22.4bn. The group returned to organic revenue growth in the April to June quarter of 2010 for the first time since the near global recession. High street bellwether Marks & Spencer (M&S) is another stock where a strategic overview is expected, this time from new chief executive, Marc Bolland, who has been working on his vision for the last six months. "Key areas on which he is likely to concentrate include the launch of an on-line food offer; international strategy; the structure of the UK store portfolio (high street vs. out-of-town locations); and the role of brands within the business," reckons Charles Stanley analyst Sam Hart. "An update is also likely to be provided on previously announced restructuring of logistics and IT infrastructure, which is targeting £250m of annualized savings (c.9% of operating costs) by 2015/16," Hart added.On the numbers side Panmure Gordon is not expecting any fireworks. "The market has seen M&S's interim sales data, and has given fairly close gross margin and operating cost guidance. We will be interested to see the level of staff bonus being provided for, given better than expected top line growth; we raised our forecast for this to £60m (full year) from £35m following the Q2 trading statement. This compares with £80.9m paid last year," Panmure Gordon said. The broker is forecasting interim revenues of £4,571m, up 5.4% on last year, earnings before interest and tax of £413.7m (up 13.3%) and profit before tax of £251.7m (+14.7%). It has pencilled in a figure of 16.0p (+14.5%) for earnings per share and expects the dividend to be bumped up by 10% to 6p. As is usually the case with results from Associated British Foods, the focus will be on what Jeremy Batstone-Carr, head of research at Charles Stanley, described as "Primark's seeming ability to defy tough trading conditions across the sector." Batstone-Carr has forecast £10,120m for group sales, up from £9,255m last year. He thinks that Primark's operating profit will be around 30% ahead of last year at £330m. "We suspect that investors will watch the outlook statement closely for indications regarding like for like sales trends, especially as we suspect that profitability could be adversely impacted by higher cotton prices, higher shipping costs and the adverse impact of the VAT increase in both the UK and Spain," the broker suggested. "In Sugar we suspect that divisional profits may have peaked in the light of the expected EU decision not to allow significant export activity over the near-term. Thus divisional expansion rests on South African Illovo and on operations in China, thus exposing the business to even greater potential volatility in commodity and FX issues. In Grocery we believe that the operating environment remains extremely tough. We expect promotional activity to increase while rising input costs are likely to squeeze divisional margins," Batstone-Carr said.INTERIMS Babcock International Group, Blinkx, DCC, Kewill, Marks & Spencer Group, Northern Foods, Toshiba Corp., Umeco, Vodafone Group, Yell Group INTERNATIONAL ECONOMIC ANNOUNCEMENTS Bankruptcies (JPN) Machine Tool Orders (JPN) Consumer Price Index (GER) (07:00) Bank of France Business Sentiment (FRA) (07:30) Trade Balance (FRA) (07:45) NFIB Small Business Optimism (US) (12:30) Wholesales Inventories (US) (15:00) ABC Consumer Confidence (US) (22:00) Q2 Yell Group Q3 First Quantum Minerals Ltd., InterContinental Hotels Group, Planet Payment Inc. GMS Sinosoft Technology FINALS Associated British Foods, BowLeven IMSS Barclays, Capital & Counties Properties , CRH, Drax Group, Legal & General Group, Management Consulting Group EGMS Cashbox AGMS A&J Mucklow Group, Centamin Egypt Ltd., Crown Place VCT, Energy XXI (Bermuda) (Reg S), Quayle Munro Holdings, Strategic Equity Capital TRADING ANNOUNCEMENTS Legal & General Group, Safestore Holdings UK ECONOMIC ANNOUNCEMENTS BRC Sales Monitor (00:01) RICS House Price Balance (00:01) Balance of Trade (09:30) Industrial Production (09:30) Manufacturing Production (09:30) NIESR Gross Domestic Product estimate FINAL DIVIDEND PAYMENT DATE HMV Group