The week ahead (16/12-20/12)

Economic news will more than make up for a quiet week, as the various authorities look to clear their desks before the holidays.

Monday 16 December

Temporary power generation company Aggreko kicks off the last full trading week before Christmas, with a trading update. Its last statement for the third quarter was issued on 28 October, so Monday's news will cover the six-week interim period.

Analysts' expectations: UBS analyst George Gregory says local revenue grew 4 per cent on an underlying basis in the third quarter and he predicts 5 per cent organic growth for the second half of 2013. 

'The period October to March is seasonally the most important period for orders in power projects and as such it is important that orders come through if 2014 estimates are to be underpinned. We assume 1000 megawatts (MW) compared with our estimate of 700MW for 2013).

'For the group we forecast pre-tax profit of £331 million for 2013 and £306 million for 2014.' 

Valuation: Aggreko is trading on almost 17 times price/earnings (P/E) on 2013 estimates.

Also reporting on Monday will be textile service business Berendsen, with a pre-close trading update.

Recent news: In November Berendsen reported that the underlying revenue growth rate had picked up from 2 per cent in the first half to 4 per cent in the third quarter, and UBS analyst William Vanderpump expects 'little change in trends' in the latest update. 

Analysts' expectations: 'In Core, Berendsen is seeing acceleration in Facility and UK Flat Linen, while in Value there has been a strong summer in Sweden hotels,' says Vanderpump. 

'Operating margin has improved in the period, but no quantification will be given (we forecast an increase of 60 basis points in the second half after an increase of 80 in the first half) and the company also implied a lower interest charge due to stronger cash flow year to date.'

He has a 'neutral' rating on Berendsen.

Valuation: The stock trades on a 2013 P/E multiple of almost 16 times.

Trading statements

Cohort, F&C Global Smaller Companies, GCP Infrastructure Investments, Aggreko, Berendsen.


Leaf Clean Energy Company

Tuesday 17 December

First to report on Tuesday will be electronics retailer Dixons Retail, with its first-half results.

Analysts' expectations: 'We suspect that trading conditions for Dixons in the UK have been very favourable with electrical products the must-have gift for another year and Dixons facing a relatively easy comparative in the second quarter compared to last year,' predicts UBS analyst Adam Cochrane.

'With the benefit of refurbished stores and much more competitive pricing we think the share gains seen over the last few years will continue.' 

He forecasts pre-tax profit of £14 million (up from a £22 million loss in the equivalent period of 2012) and a 5 per cent increase in group like-for-like sales, and rates Dixons a 'buy'.

Numis analyst Matthew Taylor also expects good things from Dixons, predicting that the results will show 'robust underlying progress' and 'steady' gross margins, but he is less confident in the value of the company's shares, rating it a 'hold'.

Valuation: Dixons is trading on a 2014 P/E multiple of around 19 times on UBS estimates.

This will be followed by a full-year interim management statement from National Express.

Analysts' expectations: Alex Brignall from UBS does not expect much deviance from the third-quarter results in this statement. 

'We would expect a small acceleration in Spain from the flat levels in the third quarter (1.5 per cent year to date), in UK Bus we would expect little change from the 2 per cent increase in the third quarter (1.5 per cent year to date), whilst UK Coach growth is likely to be slightly slower than the 9 per cent seen in the third quarter (5 per cent year to date),' he comments.

'UK Schools growth has been 3 per cent year to date and we would not expect significant change to this.'

Valuation: The stock trades on a 2013 P/E multiple of around 12 times.

Economic news

The economic week will open with November's consumer and producer price indices (CPI and PPI) on Tuesday.

In October, CPI inflation fell to 2.2 per cent from 2.7 per cent and Investec economist Philip Shaw expects it to 'ease back again' to 2 per cent in November. 

'We expect downside pressures to include food (current disinflation compared with a sharp hike a year ago) and gas and electricity (hikes not yet taking effect against increases a year ago),' he says.

'Upside influences include furniture (an unusually small fall in November 2012); and petrol (decline this time not matching last year's).'

He also expects moderation from output price inflation in the PPI, forecasting headline output inflation of 0.7 per cent year-on-year and core output inflation of 0.8 per cent. 

'Input prices should have fallen for the seventh month in eight in November, thanks to widespread falls in commodity prices and a further appreciation in sterling's trade weighted index,' he adds, predicting a month-on-month decline in input prices of 0.7 per cent.

Meanwhile, Howard Archer, chief European and UK economist at IHS Global Insight thinks CPI is likely to continue to run well ahead of earnings growth. He predicts a 2.2 per cent reading on Tuesday and thinks it will hover in a 2 per cent to 2.5 per cent range over the coming months.

Trading statements 

Provexis, Dixons Retail, National Express Group.


dotDigital Group, Henderson Diversified Income, Strategic Natural Resources, Physiomics, Edinburgh Dragon Trust, Tanfield Group.

Wednesday 18 December

Wednesday will see first-half results from electricals retailer Darty.

Analysts' expectations: 'We expect this to highlight evidence of the operational improvement and better conditions in France,' says Cochrane.

He forecasts first-half pre-tax profit of €3.5 million (£2.95 million), up from a loss of €22 million in the equivalent period of 2012, €22 million of first-half EBIT from France and second-quarter group like-for-like sales up 3 per cent. He expects the dividend to be held flat.

Cochrane has a 'buy' rating on Darty, which he explains is 'a most-preferred stock in the general retail sector'.

Valuation: The stock is trading on a 2014 P/E multiple of almost 22 times.

Economic news

 Described as this week's 'main event' by Investec analysts, the US Federal Open Market Committee (FOMC) will have one final chance to announce the start of tapering in 2013.

'A number of above consensus key US indicators, the past two months of jobs data in particular, have combined to make this meeting a close call in terms of whether the Fed will begin to taper its $85 billion per month QE programme,' Investec says.

'Our major objection to beginning tapering now concerns conditions in the housing market, which at best could be labelled uncertain,' it adds.

In the UK, the unemployment rate is predicted to have come down 'appreciably further' on both the claimant count basis (in November) and on the International Labour Organisation (ILO) measure in the three months to October, according to Archer.

Specifically he sees the claimant count falling by a further 35,000 in November, to reach a 58-month low of 1.27 million. The unemployment on the ILO measure is seen falling by 47,000 in the three months to October to 2.44 million, and a rate of 7.6 per cent over the period, although it could drop to 7.5 per cent.

Depite this pick up on the jobs front, the Bank of England's Monetary Policy Committee is likely to state it is no hurry to raise interest rates when it releases the minutes of its December meeting.

Trading statements



Henderson Far East Income, Baronsmead VCT, Henderson Internationl Income Trust, Standard Life Equity Income Trust, Hunter Resources, Henderson Asian Growth Trust, Starvest, Baronsmead VCT, City Natural Resources High Yield Trust, Epistem Holdings, Stellar Diamonds, Nanoco Group. 

Thursday 19 December

Government services company Serco Group will publish a pre-close trading statement on Thursday.

Analysts' expectations: 'We expect Serco's statement to be cautious given the lack of new contract wins in the second half following the issues with the Ministry of Justice in the UK,' comments Numis analyst Mike Murphy.

'Discretionary spending by government has also reduced and we believe volumes from the Australian Department of Immigration and Customs continue to fall.' 

He has a 'hold' rating on Serco, while George Gregory from UBS rates the stock a 'buy'.

Valuation: Serco trades on a 2013 P/E multiple of almost 11 times on UBS estimates.

Economic news

UK retail sales for November will be out on Thursday and could well only show a modest growth, confirming the impression coming from the British Retail Consortium and CBI surveys that investors took a breather in November, according to Archer.

'With many people's purchasing power squeezed by inflation persistently running well above earnings growth, it may well be that a large number of consumers felt the need to control their spending ahead of Christmas,' he explains. 

Investec says retail sales have been in an 'up and down pattern' for the past few months, which suggests November's outturn should have a 'plus' sign in front of it following October's 0.7 per cent decline. Analysts are forecasting a 0.4 per cent monthly rise in volumes.

Trading statements 

Goodwin, Serco Group, Keller Group. 


Power Capital Global, Schroder Income Growth Fund, JPMorgan Elect PLC Managed Income, Plaza Centers, Rangers International Football Club, Hayward Tyler Group, Chelverton Growth Trust, British Empire Securities & General Trust, Westmount Energy, JPMorgan Elect PLC Managed Cash, Sylvania Platinum, JPMorgan Elect PLC Managed Growth, International Consolidated Airlines Group.

Friday 20 December

Cruise operator Carnival will round off the week's company news with its final results.

Analysts' expectations: 'The fourth quarter for Carnival is relatively small and seasonally weak and we do not expect any surprises as far as the full year results are concerned,' predicts Numis analyst Wyn Ellis. 

According to company guidance, Carnival will report a 3 per cent decline in net revenue yields, a 4 per cent increase in net cruise costs per available lower berth day, and pre-exceptional earnings per share in the range of $1.51 (£0.93) to $1.57. 

Ellis forecasts earnings per share of $1.55, and has a 'hold' rating on the stock.

Economic news

Come Friday, and hopefully providing some pre-Christmas cheer, is the third estimate of the UK GDP growth in the third quarter.

Archer expects expansion to be confirmed at 0.8 per cent quarter-on-quarter and 1.5 per cent year-on-year. 

'On the output side of the economy it is likely to be confirmed that growth was relatively well balanced with the dominant services sector leading the way and healthy contributions from both construction and manufacturing.

'On the expenditure side of the economy, the data will likely confirm that growth was very much led by consumer spending while there was a welcome, albeit limited, pick up in business investment from a very low base after extended weakness,' he adds.

Investec also sees no revisions to the previous GDP estimate of quarter on quarter, although the year-on-year rate could be impact by construction data out last Friday.

Looking further forward, Archer believes GDP growth looks largely on course for another strong gain in the fourth quarter, and will likely come in close to the 0.8 per cent achieved in the third quarter.

Trading statements 

Berendsen, Carnival.


Zambeef Products, Peninsular Gold, Kolar Gold, Mining Investments Resources, Hangar8, Botswana Diamonds, Kedco, JPMorgan Japanese Investment Trust.

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