Tuesday preview: Tesco, Game, Southern Cross

7th Dec 2009 16:14

Supermarket giant Tesco has recovered some of its bounce recently, as the effects of its double-points Clubcard promotional offer feed through to the top line. The company will issue a third quarter trading update on Tuesday. The performance in the third quarter last year was below par which means this year's figures should look good in comparison, but against that, falling food inflation in the UK means that top line growth will be harder to come by.Excluding petrol and including VAT, second quarter like-for-like (LFL) sales grew 2.1% in the UK from a year earlier (+3.1% on a VAT-adjusted basis), and a similar third quarter performance is on the cards. UBS forecasts a 2.7% increase in LFL sales (excluding fuel and VAT) in the UK, while Nomura and Citigroup go for a 3% hike. Shore Capital is hedging its bets and predicting growth in the 2.5% to 3% range. JP Morgan trumps them all, however, with predictions of a 3.4% rise. 'We believe space growth will remain consistent at 2.5-3.0% growth, meaning underlying ex-fuel growth of 6% in the UK. Internationally, we forecast total growth of c.6% at constant exchange rates with Europe at c.1-2% and Asia at 11%,' Nomura Securities predicts.Citigroup thinks 'non-food trends may have picked up again across the quarter,' and highlights that this is an area where Tesco is stronger than its rivals Sainsbury and Morrisons.Just in time for the onslaught of the Christmas shopping season, video game retailer Game issues a trading update. Though hardware sales may be tailing off as the current generation of games consoles begin to show their age, there has been a rash of hotly anticipated games released recently, including follow-ups to Assassin's Creed, Modern Warfare and Uncharted.Though broker Morgan Stanley thinks the supermarkets muscling in on the video game market spells bad news for specialist retailers such as Game and HMV, UBS said 'Game is expected to have retained its market share in key titles and continued to increase gross margin.'Care home operator Southern Cross releases dull year results, with the market expecting profit before tax of £42.3m on revenues of £939.3m. Earnings before interest, tax, depreciation and amortisation is tipped to be in the region of £72.4m.The company is exposed to local authority spending cuts, with around 80% of its beds purchased on an ad hoc basis by local health authorities, but Panmure Gordon argues that if the company can achieve high feedback ratings for the quality of its care, it could help offset the pricing pressure that is coming down the pike. 'The latest data indicates that approximately 73% of its care homes are rated as either good or excellent, indicating significant scope for improvement,' the broker said..System on chip developer Imagination Technologies should show 'strong growth in royalties and improved revenues from the Pure consumer electronics business,' according to Panmure Gordon. The broker is going for half-year revenues of £36.8m, up 35% on the first half of the preceding year but little changed from sales in the second half of last year. The British Retail Consortium (BRC) sales monitor for November is due out on the stroke of midnight and should highlight a recovery in consumer confidence compared to the dark days of November 2008, when the world's financial markets looked in danger of imminent collapse.Total sales are expected to be up 4.9% on a year earlier, or 4.0% on a like-for-like basis. Last year's comparatives are very weak, but there may also be genuine signs of consumers - those that still have jobs, at any rate - spending a bit more on their Christmas shopping this year, ahead of the resumption of the regular VAT rate in the New Year.The UK industrial production index for October is expected to be around 0.5% higher than October's level, but down 7.6% from a year earlier. An annual fall of 7.6% would, at least, represent an improvement on September's 10.3% year-on-year decline.The Confederation of British Industry (CBI) releases its Industrial Trends survey for December and should show a continued if gradual improvement in order levels. The balance of manufacturers reporting that orders are at normal levels rose to an 11-month high of -45% in September and economists expect it to improve another notch in December to -45%.INTERIMSAnite Group, Northgate, Park GroupINTERNATIONAL ECONOMIC ANNOUNCEMENTSCoincident Index (JPN) (05:00)Consumer Confidence (AUS) (23:30)Consumer Confidence (US) (22:00)Crude Oil Inventories (US) (21:30)Current Account (AUS) (00:30)Gross Domestic Product (JPN) (23:50)Industrial Production (GER) (11:00)FINALSDomino Printing, Pressure Technologies, Southern Cross Healthcare GroupAGMSAvanti Capital, Billing Services Group, Downing Protected VCT I, EmblazeTRADING ANNOUNCEMENTTesco, GameUK ECONOMIC ANNOUNCEMENTSBRC Sales Monitor (10:30)Industrial Production (09:30)Manufacturing Production (09:30)Retail Sales (00:01)CBI Industrial Trends, total Orders, December: -44%FINAL DIVIDEND PAYMENT DATECraneware