Tuesday preview: M&S, De La Rue

23rd May 2011 17:23

Tuesday could see a bit of good news for the beleaguered UK High Street, as the bellwether of the retail sector, Marks and Spencer, is expected to issue a solid set of full year figures.The market is anticipating pre-tax profits of £714m on sales of £9.79bn, and earnings per share (EPS) of 32.92p. Sales data has already been released with the fourth quarter trading update, so the focus will be on margins, outlook comments and any update on strategy, ac-cording to broker Charles Stanley."Outlook comments from Chief Executive, Marc Bolland, are likely to be cautious," suggests Charles Stanley analyst, Sam Hart. "International is anticipated to be an area of particular focus following the announcement in early April that the company is to re-enter France. Investors will also be keen to hear if any decision has been made on whether to launch an online food offer. An update should be provided on the overhaul of IT, logistic and supply chain infrastructure, which is targeting £300m of annual savings by 2015/16," Hart added.Matrix Group, meanwhile, thinks the retailer may have enjoyed a boost from the royal wedding, among other things, but that did not prevent the broker from downgrading the stock from "buy" to "add", though the price target of 407p is maintained."Following a surprisingly strong Q4 ... we believe M&S has continued to benefit from the recent resurgence led by weather, multiple bank holidays and the Middleton family. While it will not publish a current trading statement, momentum remains with the company, in our view. We forecast a solid a year end, with profit before tax of £711m and EPS of 32.7p, both in line with consensus," Matrix said.Looking at current and future trading, Matrix added: "With what was reported at the recent M&S Autumn/Winter range launch to have been a very good start to this Spring/Summer selling season, we expect even less mark-down pressure through the first half, while cotton prices have peaked. There is a lag effect in falling cotton prices, because of a large amount of higher-priced cotton still in the system, but pricing pressure should begin to ease into the second half."With the independence of De La Rue still in doubt, the announcement of the bank notes and passports printer's new strategic plan, to be unveiled by new boss Tim Cobbold on Tuesday alongside full year results, will attract keen interest.Recent press comment suggests that though De La Rue sent Oberthur away with a flea in its ear back in January when its French rival launched a bid, the French firm could be back for another crack. Oberthur, according to French press reports, has recently proposed to sell 60% of its smart card business, a move that would bulk out the war chest but which would also leave Oberthur a much smaller company, at least in terms of sales generated.As for the results, market consensus is for pre-tax profit of £31m, a sharp decline from the previous year's figure of £96.6m, reflecting much publicised problems at one of its paper production sites which reputedly endangered the renewal of a lucrative contract from a major customer.Sales are expected to fall to £459m from £561m the year before. Numis Securities, which has pencilled in a figure £30.9m for profit before tax, reckons the full-year dividend will be cut to 26p, which would leave the dividend covered 1.7 times on Numis's EPS forecast. "Whilst net debt/ebitda [earnings before interest, tax, depreciation and amortisation] is comfortable at the nadir (less than 1:00) there is dividend cover to rebuild and reasonable sized outgoings (pension and potential reorganisation costs)," Numis said, adding that the company "has the option to do a special dividend in a few years' time when the recovery is delivered."INTERIMSDatong, Greencore Group, Holidaybreak, Paragon Group Of Companies, Renew Holdings, VictrexINTERNATIONAL ECONOMIC ANNOUNCEMENTSGDP (GER) (07:00)Domestic Demand (GER) (7:00)Government Spending (GER) (7:00)Exports (GER) (7:00)Imports (GER) (7:00)Production Outlook Indicator (FRA) (7:45)Business Confidence Indicator (FRA) (7:45)IFO Business Climate (GER) (09:00)IFO Current Assessment (GER) (09:00)IFO Expectations (GER) (09:00)Industrial New Orders (EU) (10:00)New Homes Sales (US) (15:00)Richmond Fed Manufacturing Index (US) (15:00)Q4Big Yellow GroupGMSEMIS GroupFINALSBig Yellow Group, Cable & Wireless Worldwide, Chamberlin, De La Rue, Great Portland Estates, Homeserve, KCOM Group, Marks & Spencer, Pennon GroupAGMSANT, Better Capital Ltd., Corero, EMIS Group, Essenden, Fairpoint Group, Gulfsands Petroleum, Japan Residential Investment Co Ltd., Metalrax Group, Solomon Gold, SQS Software Quality Systems AG, Standard Life Investments Property Income Trust Ltd., Tanfield Group, Third Point Offshore Investors Ltd. EUR Shares, Third Point Offshore Investors Ltd. GBP Shares, Third Point Offshore Investors Ltd. USD Shares, Zenergy PowerUK ECONOMIC ANNOUNCEMENTSPublic Sector Finances (09:30)CBI Reported Sales (11:00)FINAL DIVIDEND PAYMENT DATEBrady, Holders Technology, Jupiter Fund Management , ZotefoamsQ1Alpha Bank GDR (Reg S) USD, Espirito Santo Financial Group SA, Frutarom Indstries Ltd.GDR (Reg S), OJSC Cherkizovo Group GDR (Reg S)---jh