Wednesday preview: Standard Chartered, Serco, ITV

1st Mar 2011 17:49

With results from HSBC out of the way, it is time for the other London-listed Asia-focused banking giant, Standard Chartered, to take centre stage on Wednesday.Standard Chartered makes around three-quarters of its profits from Asia, and competition has been hotting up in the region, putting margins under pressure. At the tail end of 2010 the bank said that it was on course for another record year of profit and income, but it warned that net interest margins have fallen fractionally from levels seen in 2009 due to pressure on asset margins in several products. Cost growth is expected to exceed income growth as the bank has invested in both its businesses (Consumer Banking and Wholesale Banking), opening new branches, hiring new staff and investing in the brand. Increasing competition for staff and higher compliance and regulatory costs have also been exerting upward pressure, the bank said.Deutsche Bank has predicted that Standard Chartered's net interest margin, the gap between the interest rate it charges borrowers and the rate itpays savers, will fall to 3.52% from 3.76% in 2009, as the company fights for business with the likes of the Industrial and Commercial Bank of China.Market expectations are for Standard Chartered to announce a 25% increase in post-tax profit to $4.2bn, reflecting a decline in the value of bad debts. Pre-tax profit is tipped to rise to $6.15bn from $5.15bn in 2009. Bad loan provisions are seen tumbling to less than a billion dollars from $2.1bn the year before.Broker Charles Stanley predicts earnings per share of $1.97, up from $1.59 in 2009, and a full year dividend of $0.70, up from $0.64."We will be looking at the full year results to see whether the recent slower income growth and negative 'jaws' was just a function of slower investment spend in H1 [first half] 2009 or whether it is something more enduring. However, Standard Chartered stated that it has 'excellent momentum' going into 2011 and that cost growth will be a shade below income growth in 2011," said Charles Stanley banking analyst Nic Clarke.Outsourcing giant Serco is expected to announce pre-tax profit of £226.4m on revenue of £4,310m for 2010, but Panmure Gordon thinks things will start to get tougher from here on in.The broker is close to consensus with its forecast of adjusted profit before tax of £227.7m, up from £194.7m last year, while its revenue projection of £4,312m is also near to the median forecast among investment analysts. It thinks organic revenue growth will be around 7.5%. Panmure Gordon reckons the full year dividend will be 7.3p, a little bit more generous than the market consensus of 7.25p."We lowered our growth expectations for 2011 estimated earnings in January this year post the closure of Regional Development Agencies, the taking of the Bradford Education contract back in house, as well as the loss of some rail track access charges," the broker said."There was also some evidence that revenue opportunities had been passed post the Francis Maude suppliers review/signing of MoU [memorandum of understanding]. On the margin front, the company is confident it will exceed its 6% target by 2012, which will be primarily driven by its overseas business, which accounts for in excess of 30% of group revenues. The order book is expected to stand in excess of £16bn, with a substantial pipeline valued at £28.0bn," the broker added.The new management at terrestrial broadcaster ITV are either genii or their timing is better than an expensive Swiss watch. Since taking up the role of chief executive in April last year Adam Crozier has seen advertising revenues recover sharply. Crozier and the company chairman Archie Norman - not long in the hot seat himself - unveiled a five year transformation plan back in August that was aimed at halving the company's dependence on advertising revenues.It is fair to say that while earnings in 2010 are expected to have rebounded sharply, hardly any of that is down to the transformation plan, though cost savings will have played their part. ITV's business is such that any upturn in advertising revenue gushes through to the bottom line.In 2009, adjusted pre-tax profits were £108m, and that number is expected to almost triple to £295m in 2010, while revenue is seen growing to £2,052m from £1,879m in 2009.Charles Stanley is ahead of consensus with its pre-tax profit forecast of £315m. It predicts earnings before interest, tax and amortisation (EBITA) of £395m, up from £202m. It forecasts earnings per share of 5.7p (consensus: 5.36p), up from 1.8p in 2009, but no resumption of dividend payments."Broadcasting & Online is forecast to report a 190% increase in operating profit to £310m. Total Broadcasting advertising revenues are expected to be up by 15.5% to £1,750m, driven by ITV1. Online revenues remain relatively insignificant in a group context, but are expected to be up by c.25% to £30m," the broker said."ITV Studios is forecast to report a 6.6% decline in operating profit to £85m. The soft performance will reflect tough conditions in the UK and international TV production markets. The weak advertising environment in 2009 meant many broadcasters lacked confidence to commission new productions, although we would expect sentiment to have improved through 2010 as advertising markets recovered. Competition in the industry is also intense, particularly from the vertically integrated US production houses," Charles Stanley noted.Down among the small caps, promotional products producer 4imprint should see normalised profit before tax almost double to £9.2m, according to Peel Hunt. "2010 should reveal itself to be a year of material recovery, with a near-doubling of profit on the back of a high teens rise in revenue. Bank debt is modest and the yield substantial. The legacy of pension fund deficit remains an issue that diverts attention from the core commercial strengths of the company," the broker said.At the halfway point of 2010 the company had a pension fund deficit of £23.0m. A triennial revaluation was due to be finalised in the second half of last year, Peel Hunt notes. Bank debt should fall to around £2.0m, the broker added.INTERIM DIVIDEND PAYMENT DATECohort, Stagecoach Theatre ArtsINTERIM EX-DIVIDEND DATEAnglo & Overseas, Aquarius Platinum Ltd., Carclo, Casdon plc, Colefax Group, Diageo, Downing Distribution VCT 2 , Hansard Global, Hargreaves Services, JPMorgan Mid Cap Inv Trust, Jupiter Primadona Growth Trust, Kesa Electricals, Kier Group, Oxford Instruments, Park Group, Ruffer Investment Company Ltd., Stewart & WightQUARTERLY PAYMENT DATEM&G Equity Inv Trust Income SharesQUARTERLY EX-DIVIDEND DATECanaccord Financial Inc.INTERNATIONAL ECONOMIC ANNOUNCEMENTSProducer Price Index (EU) (10:00)GMSBerkeley Resources Ltd. (DI)FINALS4imprint Group, Admiral Group, Amlin, BBA Aviation, Cape, Capital & Counties Properties , Carillion, Fiberweb, Fyffes, GlobeOp Financial Services SA (DI), Goldenport Holdings Inc., International Personal Finance, International Power, Irish Life & Permanent Group Holding, ITV, LSL Property Services, Macfarlane Group, Oxford Biomedica, RPS Group, Serco Group, Standard Chartered, Unite GroupSPECIAL EX-DIVIDEND PAYMENT DATEBeazleyEGMSChaarat Gold Holdings Ltd. (DI), Infrastructure IndiaAGMSAberforth Geared Capital & Income Trust Capital Shares, Aberforth Smaller Companies Trust, Holidaybreak, Impax Asset Management Group, Innovise, Sage GroupFINAL DIVIDEND PAYMENT DATEGooch & HousegoFINAL EX-DIVIDEND DATEElectronic Data Processing, Income & Growth VCT , LPA Group, New Europe Property Investments, Rights & Issues Inv Trust Capital Shares, Rights & Issues Inv Trust Income Shares, Rio Tinto, RSA Insurance Group, Sanderson Group, St James's Place, THB Group