Wednesday preview: BoE minutes, Reckitt, Home Retail

19th Apr 2011 17:31

Minutes of the March meeting of the Monetary Policy Committee (MPC), the team that determines the Bank of England's interest rate policy, will be as keenly analysed as ever, though for the first time this year there are not so many people suggesting that the number of members voting for a rate hike might have gone up.That's because the inflation trend finally headed down in March, a development of which the MPC would have been aware at the time it made its decision. As such, it is probable that the committee felt under less pressure to lift rates in order to rein in rising prices, so the expectation is that the voting was the same as in February, with two members voting for a quarter point hike and one for a half point increase, while the rest voted for the status quo."We will look for language in the minutes offering guidance on the committee's thinking ahead of May's meeting, where the market has more or less priced out the chance of a rate hike although we still think it is too early to dismiss this," a research note from Bar-clays Capital suggested.On the company front, Cillit Bang maker Reckitt Benckiser gives a third quarter update at noon on Wednesday which shareholders hope will be a catalyst for the shares to recover some of the losses seen last week in the aftermath of the decision by chief executive Bart Becht to retire.Panmure Gordon thinks there is little cause for optimism, however. "We believe the picture will remain one of low, or no, category growth in developed markets, continued high levels of promotional activity and only modest price inflation despite seemingly ever increasing commodity costs. These factors, we believe, will continue be the drivers of investor senti-ment, rather than the first full quarter of SSL, continued good growth in developing markets and another quarter with no generic entry for Suboxone." Specifically, the broker forecasts first quarter sales growth of 12.5% to £2,253m, versus a consensus of £2,279m, made up of 4.0% like for like growth (3.6% excluding Pharma), 9.7% from the acquisition of SSL and -1.1% currency. "We forecast 0% growth in Europe, 2% growth in North America & Australia and 13% growth in Developing markets. We expect the modest growth achieved in developed mar-kets to represent market share growth by Reckitt. For Pharma, we pencil in 10% growth in Q1, with the switch to lower price Suboxone Film continuing to dilute growth, but creating a more defensible business in a post generic world," Panmure Gordon said.Royal Bank of Scotland (RBS), meanwhile, expects the overall trends to be similar to those seen in 2010, "given the continued high promotional intensity in Europe and depressed developed markets growth."It forecasts underlying sales growth of 4.6% and a one-tenth of a percentage point im-provement in operating margin, driving net income up 10% and earnings per share (EPS) up 9%, with currency headwinds trimming a couple of percentage points off EPS growth. "We expect a continuation of the trading trends seen in 2010, with base business growth depressed by weak demand in developed markets. Uncertainty surrounding the timing and impact of generic Suboxone competition looks set to continue to weigh on the shares," RBS said.Results from Tesco on Tuesday did not go down too well with the market but they probably gave the board members of Argos owner Home Retail a scare, as the supermarket giant vowed to step up its efforts in non-food. Argos is already feeling the heat of competition from Tesco Direct and the other supermarkets, and is likely to be the sickly child of the Home Retail brood, with the group's Homebase stores expected to be making a better fist of trading in a difficult consumer environment.Sam Hart at broker Charles Stanley is in the middle of the retailer's guidance range of £250m to £255m for pre-tax profits with his forecast of £253m, down from £293m the year before.Hart goes for earnings before interest, tax and amortisation (EBITA) of £250m, down from £290m the year before, on sales of £5.58bn, down from £6.0bn. The full year dividend is forecast to remain unchanged at 14.7p.The focus of attention will be on operating margins, outlook comments and any strategy update, Hart reckons."Argos is forecast to report a 19% fall in operating profit to £215m, with operating margin contracting by 100bps [one percentage point] to 5.1%," Hart writes. "The weak underlying sales performance has been driven by the videogaming, audio and TV categories. Stronger categories have included laptops, white goods and toys." The broker tips Homebase to report a 21% rise in operating profit, and an expansion of the operating margin by six-tenths of a percentage point to 3.2%. "Outlook comments from Chief Executive, Terry Duddy, are expected to be relatively downbeat," Hart continued. "A lot of bad news is probably now discounted, but we retain concerns that Argos could remain under long term structural pressure from food retailers moving aggressively into non-food. Strong cash generation, a sound balance sheet and the attractive yield, however, means we retain our Hold recommendation in advance of results," Charles Stanley said.INTERIM DIVIDEND PAYMENT DATEClose Brothers Group, Haynes Publishing Group, Matrix Income & Growth 2 VCT, News Corp. 'A' SharesINTERIM EX-DIVIDEND DATECarr's Milling Industries, James Halstead, JD Wetherspoon, Mcbride, Ultimate Finance GroupQUARTERLY EX-DIVIDEND DATECaterpillar Inc., Colgate-Palmolive Co, JPMorgan Claverhouse Inv TrustINTERNATIONAL ECONOMIC ANNOUNCEMENTSProducer Price Index (GER) (07:00)Existing Home Sales (US) (15:00)Crude Oil Inventories (US) (15:30)FINALSAseana Properties Ltd., Home Retail Group, Integra Group GDR (Reg S)IMSSComputacenterAGMSAngel Biotechnology Holdings, Bunzl, Charter International, Dialight, Hunting, Lavendon Group, LSL Property Services, Meggitt, Modern Water, Reed Elsevier, STV GroupTRADING ANNOUNCEMENTSDS SmithUK ECONOMIC ANNOUNCEMENTSBoE Interest Rate Minutes (09:30)Public Sector Finances (09:30)FINAL DIVIDEND PAYMENT DATEHeavitree Brewery, Heavitree Brewery 'A' Shares, Lancashire Holdings, Law Debenture Corp.FINAL EX-DIVIDEND DATEAga Rangemaster Group, BAE Systems, Balfour Beatty, Brady, Churchill China, Dunedin Income Growth Inv Trust, EMIS Group, Fiberweb, GKN, Greggs, Hellenic Carriers Ltd., Invesco Perpetual UK Small Companies Inv Trust, Johnson Service Group, Kazakhmys, Legal & General Group, Lookers, Molins, National Express Group, North Midland Construction, office2office, Petrofac Ltd., Portmeirion Group, Reed Elsevier, Regus, Resolution Ltd., ReThink Group, StatPro Group, T Clarke, Tullett Prebon, Vitec Group, Xstrata, ZotefoamsQ1Reckitt Benckiser Group, Virgin Media Inc.---jh