The week ahead (21/11 - 25/11/11)

The lively momentum continues for the UK markets this week, as a whole host of companies prepare to unveil their latest results.

Diploma is first up on Monday and should get the week off to a good start with a substantial increase in full-year profit.

Trading was strong in the fourth quarter and analysts are expecting the recovery in the seals and controls business to continue into the current quarter, albeit at a slightly lower level.

Enterprise Inns takes to the stage 24 hours later and is set to report weaker pre-tax profit due to like-for-like net income falling sharply in the non-core estate.

James Dawson, analyst at Charles Stanley, said the fundamental issues still remain with this stock, specifically when the group will be able to return to sustainable like-for-like EBITDA (earnings before interest, taxes, depreciation and amortisation) growth, debt reduction places and pub portfolio contraction progress.

'An improvement in consumer spending habits would provide a major catalyst for this stock, although at present we do not anticipate any such comments until at least the first half of 2012,' he added.

Despite this, Charles Stanley remains a "buy" on the company in light of the profitability of retained pubs stabilising but recognises that Enterprise Inns 'is a higher risk investment relative to others within the sector'.

Homeserve is due to update the market on the same day with its interim results which should show modest growth in what is the seasonally weaker half year.

However, the stockmarket's focus is likely to be upon the current issue of potential mis-selling. Investors will be looking for an updated timetable on when both inbound and outbound sales activity is likely to be fully restored, according to Numis analyst Mike Murphy.

'The US offers the greatest long-term growth potential and customer numbers are expected to be 15 per cent higher. In Europe, good progress in the established businesses is likely to be partially offset by increased investment in new markets. We believe the group has substantial long-term growth prospects and the shares look cheap,' he added.

Smiths Group is also up for the taking on Tuesday, but investors need not brace themselves for any major surprises following its preliminary results. Analysts are expecting a broadly flat revenue performance with the potential for modest margin expansion.

Midweek sees an update from Compass Group less than two months after its pre-close statement reported encouraging organic growth.

This year has seen more activity in terms of acquisitions and constant currency revenue growth is expected to reach 9 per cent. While the priority of the company is to grow organically, with its strong cash generation it is able to spend free cash flow on bolt-on acquisitions as well as increasing the dividend to shareholders.

Tony Shepard, analyst at Charles Stanley, said: 'Overall, the group sees great potential across all geographies and more potential from efficiencies. Over the medium term, further progress in the operating margin is expected. We maintain our "buy" recommendation.'

Johnson Matthey is also set to make an appearance on Wednesday and in its July statement, indicated that the outlook for 2012 was good, resulting in the group's performance for the first half 'expected to be significantly ahead of the same period in 2010/11'.

Travel operator Thomas Cook Group flies onto the scene on Thursday, a month after it announced an important amendment to its bank facilities, giving it increased flexibility. It also agreed a new £100 million bank facility to provide additional head room around the seasonal cash low point at the end of December.

Numis analyst Wyn Ellis said the announcement 'came as a relief to some in the market who had feared an equity issue. Nonetheless, debt levels remain very high and the trading outlook is difficult. Consequently, the shares remain depressed and it is difficult to see a near-term positive catalyst in our view'.

And flying the flag for the miners on Thursday will be FTSE 100-listed supermajor Antofagasta. The sector has had a turbulent year so far with commodity prices see-sawing amid concerns for global growth, especially from China.

Antofagasta has also had problems with its workforce – strikes have seen some of its main sites forced to shut down. Although Nick Raynor, investment advisor at the Share Centre, doesn't believe this will have too much of an effect on the results, he does prefer other copper miners in the sector.

It's the turn of Fuller Smith and Turner to report the next day and it should hopefully give investors a reason to raise a toast with a slight rise in half-year pre-tax profit.

Specifically, Numis is forecasting a 3 per cent climb to £16.2 million, supported by positive trading. The company has been acquiring pubs and expansion offers an attractive upside to investors, although the benefit of recent purchases is unlikely to feed through until 2013.

And last but not least, Severn Trent wraps up events for the companies next week. The firm's share price has benefited from the defensive attractions that utilities provide in these uncertain economic times, but investors are not expecting the group to provide anything to get their juices flowing. Rather these results should just confirm that group trading is in line with expectations.

Meanwhile, making waves over on the economic calendar will be third-quarter GDP data due out on Thursday.

It is on track to confirm the provisional estimate showing that the economy grew 0.5 per cent quarter-on-quarter in the three months to end-September. It is clear that there was a boost to growth in the period from the making up of activity that was lost to a number of 'one-off' disruptive factors that limited second-quarter expansion to just 0.1 per cent.

Details will be released for the first time on the expenditure side of the economy in the third quarter and it is likely that overall consumer spending increased modestly during the period.

Howard Archer, chief UK and European economist at IHS Global Insight, said: 'We assume the economy will be stagnant in the final quarter of 2011 and we certainly would not rule out modest contraction. Heavily squeezed consumer purchasing power, rising unemployment, fiscal tightening and weakened global growth are expected to seriously restrict UK economic activity.'

GDP growth aside, public finances data is also due out next week and is on track to show a slight improvement compared to a year earlier. Economists are predicting a decline to £7 billion in October from a shortfall of £7.7 billion during the same month of 2010 when the figures are reported on Tuesday.

This modest progress is expected as a result of January's VAT rise and other fiscal measures that have increasingly kicked in since April.

Midweek sees the release of the minutes from the Bank of England's (BoE) Monetary Policy Committee (MPC) meeting, which resulted in no change in monetary policy.

The recently-released BoE quarterly inflation report for November clearly highlighted the bank's heightened concerns over the economy and strongly suggested that it was more a 'when' rather than an 'if' more quantitative easing is enacted.

And last but not least, the CBI Industrial Trends Survey for November is pushed on Wednesday and is forecast to show that manufacturing activity extended its softening trend in November and is substantially below the levels seen during 2010 and early 2011.

Monday 21 November


(Final) Diploma

(Interim) Invista Foundation Property Trust, MITIE Group


Origin Enterprises, Thames River Multi Hedge, Worldspreads Group

Tuesday 22 November


(Final) Enterprise Inns, Mitchells & Butlers, Optos, Paragon Diamonds, Renew Holdings

(Interim) AFI Development, Big Yellow Group, Carclo, CML Microsystems, FFastFill, Halma, Hamworthy, Heath (Samuel) & Sons, Homeserve, Intermediate Capital, KCOM Group, Sgnet Jewelers, Telecom, Victoria


Clinton Cards, Discovery Metals, Eurovestech, Greatland Gold, Pantheon International Participations, Plaza Centers, Smiths Group

Wednesday 23 November


(Final) Avon Rubber, Compass Group, Daily Mail and General Trust, Majedie Investments

(Interim) Assura Group, Hyder Consulting, Johnson Matthey, Liontrust Asset Management, McKay Securities, QinetiQ Group, Sepura, TR Property Investment Sigma, United Utilities Group

Trading update

DRS Data & Research Services, French Connection Group


Ceramic Fuel Cells, Cap-XX, Coal of Africa, Fidelity Asian Values, International Ferro Metals, K3 Business Technology Group, Sabien Technology, Thor Mining

Ex-dividend payment Date

Aseana Properties, Balfour Beatty B Shares, Braemar Shipping Services, Charles Stanley Group, Carnical, Dunelm Group, Man Group, GETECH Group, Hill & Smith Holdings, HSBC Holdings, Jarvis Securities, Lancashire Holdings, Northern Venture Trust, Next, REA Holdings, Ultimate Finance Group

Thursday 24 November


(Final) F&C Capital & Income Investment Trust, Future, Grainger, Phytopharm, Thomas Cook Group

(Interim) Antofagasta, Castings, Dixons Retail, Hampson Industries, Helical Bar, London Mining, Latham, PayPoint, Pennon Group, Severn Trent, Young & Co's Brewery


JSC Acron, eServGlobal, Hangar8, Impax Asian Environmental Markets, Leyshon Resources, Netcall, Ruffer Investment Company, Wildhorse Energy

Friday 25 November


(Final) Lowland Investment Company, Scottish Investment Trust

(Interim) Fuller Smith & Turner, Omega Diagnostics Group, Public Power Corporation, Severn Trent


Air China, Aquarius Platinum, Ferrum Crescent, Hargreaves Lansdown, Nyota Minerals, Petmin

This was written for our sister website, Interactive Investor

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment