The Week Ahead: Figures due from Sainsbury’s, Centrica, SSE, Vodafone, Carephone Warehouse and Flybe.
- Credit: PA
Another heavyweight week for blue-chip updates will see figures from supermarket Sainsbury’s and energy companies Centrica and SSE.
British Gas owner Centrica and rival SSE will unveil their latest financial figures amid a political storm over inflation-busting tariff increases for households.
The suppliers are under pressure over the increases after Labour challenged the Government by pledging to freeze tariffs if it wins power. Critics have challenged the assertion that rising wholesale energy costs and Government green levies are to blame for the sharp price rises, which come at a time when household incomes remain under pressure.
Amid the ongoing furore, Centrica chief executive Sam Laidlaw has decided not to take his bonus this year, which could be worth up to £1.7million.
He announced his decision after British Gas revealed last month that electricity bills were to rise by 10.4% and gas tariffs by 8.4%, in a move affecting 7.8m households. The company says average 5% profit margins from its residential arm are fair and used to fund investments ? and that the business would be loss-making in 2014 if it did not raise prices to cover costs.
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Half-year profits from the division this year rose 3.2% to £356m. Adjusted operating profits at parent Centrica were up 9% to £1.58billion. The company will unveil third quarter trading figures on Thursday.
SSE, which trades as Southern Electric, Swalec and Scottish Hydro, was the first of the major suppliers to announce a tariff rise, lifting prices by an average of 8.2%.
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It blamed the same factors as those cited by Centrica. It increased annual profits at its household retail arm by 28% to £410.1m in the year to March as gas consumption rose by a fifth, while overall pre-tax profits climbed to £1.41bn. However, in a trading update earlier this year, it revealed that it made a loss on its retail operations in the six months to the end of September as wholesale prices rose.
SSE publishes half-year results to the end of September on Wednesday. Its retail division made a profit of £75.7m over the same period in 2012. Analysts at Exane BNP Paribas expect to see a loss of £100m for the division over the period this year, and group pre-tax profits down 19% to £321m.
Sainsbury’s will turn up the heat on its supermarket rivals on Wednesday with a robust set of half-year figures after notching up further gains in market share. The group’s results are set to leave competitors Morrisons and sector leader Tesco trailing after the pair recently revealed difficult trading in a highly competitive UK market.
Sainsbury’s is the only one of the big four supermarkets growing its market share amid pressure from discounters Aldi and Lidl. Recent figures from Kantar Worldpanel revealed Sainsbury’s increased its share to 16.7% in the 12 weeks to October 13 from 16.6% a year earlier.
The group recently reported its 35th quarter of sales growth in a row, with non-fuel like-for-like sales up 2% for the 16 weeks to September 28.
This comes in stark contrast to sales fortunes at smaller rival Morrisons, which saw worsening trading in its third quarter to the start of November, when underlying sales fell 2.4%. Tesco has likewise been put consistently in the shade by Sainsbury’s, reporting flat UK sales in its second quarter, with wider group results dragged lower by a dismal overseas performance.
Analysts expect Sainsbury’s to report a 5% increase in half-year profits to £393m, helped by strong demand for its own-brand products and a burgeoning online delivery business. Its online arm grew by more than 15% in the second quarter and is now worth more than £1bn in annual sales.
However, the group is likely to echo comments made by fellow grocers on the tough retail environment as the sector is forced into heavy discounting to win over cash-strapped shoppers.
Barclays analysts said Sainsbury’s had produced a “consistently strong recent performance”. Its general merchandise and clothing business continues to grow at over twice the rate of food, with its recently relaunched Tu clothing brand now available in nearly 400 stores.
Vodafone unveils half-year results on Tuesday amid speculation that the mobile phone giant could fall into the hands of America’s AT&T.
The interim update is the first set of figures to be published since the group confirmed details of a long-mooted deal to sell its stake in US venture Verizon Wireless for 130bn US dollars (£84bn), one of the biggest transactions in corporate history.
Now the focus is on how Vodafone moves on, with talk of whether chief executive Vittorio Colao will look for takeover targets or face the group being swallowed up itself.
Financial news wire Bloomberg reported last week that AT&T was laying the groundwork for a potential deal for Vodafone. The communication giant’s chief executive Randall Stephenson is said to excited by the “huge opportunity” to invest in mobile broadband in Europe.
Meanwhile, Vodafone has been consolidating its grip on Germany, describing the country as its “most important market” as it snapped up the country’s biggest cable company, Kabel Deutschland, for £9.1 billion in the summer.
The link-up with millions of Kabel customers comes as operators are increasingly attracted to the “quad play” business model selling packages including mobile, landline, TV and internet services.
Analysts’ consensus is complicated by the inclusion of only five months of profits from Verizon Wireless for the half compared to the full six months for the previous year. Adjusted operating profit is expected to fall from £6.17bn to £5.57bn.
Citi’s Simon Weeden expects revenue declines to have deepened from the first quarter to the second quarter, driven by tough competition in Germany plus cuts in what it can charge to other operators for connecting to its network in Spain and Turkey.
The interim update comes in the wake of a ruling by Ofcom that Vodafone failed to meet a June 30 deadline to provide 3G coverage to 90% of the UK population, a target reached by its rivals EE, Three and O2.
Mobile phone retailer Carphone Warehouse will update on demand for the latest smartphones and mobile services when it publishes first-half results on Thursday.
Mobile networks are rolling out superfast fourth generation (4G) services and handsets, which allow users to watch films and TV on the go. The new iPhone 5S, which features fingerprint scanning, went on sale in late September, and analysts said the group is expected to earn a boost from demand for new technology.
Analysts at Deutsche Bank said: “We see the core Europe retail business as underpinned by a strong technology cycle and some early encouraging improvement in average revenue per user trends, which 4G technology should further support.”
The group will report on trading for the six months to the end of September, which analysts at Citigroup expect to show pre-tax profits of £11 million, although the numbers will be distorted by its acquisition of Best Buy’s 50% share of Carphone Warehouse Europe.
Carphone Warehouse reported strong demand for mobile phone contracts and tablet computers from the UK in the April to June quarter, helping drive a European sales surge of more than 10%. However, it was recently dealt a blow when mobile network Three decided to stop selling phones and services through the retailer.
Deutsche analysts expect the company to transform itself into a service provider over time, with its traditional retail activities becoming “less of a driver of growth”.
Tomorrow, the new boss of struggling airline Flybe is expected to set out his plans for the struggling airline, just days after the man credited with turning the carrier into a major European player announced he was leaving.
Saad Hammad became chief executive in August when he took over from long-serving boss Jim French, who initially stayed on as chairman but has now stepped down from the role.
Mr Hammad, a former chief commercial officer at rival easyJet, faces a battle to restore the Exeter-based carrier to profit growth after annual losses soared to £40.7m earlier this year. He launched a review of the business shortly after taking over in the summer, as first quarter figures revealed another fall in UK passenger revenues. Investors will be hoping for an update as the group sets out half-year results.
His new regime has already seen the departure of a raft of top executives culminating in Mr French, who ran the company for 12 years from 2001. He oversaw a major expansion and stock market float, and won a CBE in 2009.
But after entering its recent period of turbulence, Flybe has been focused on shoring up its core regional bases in Southampton, Manchester, Birmingham and the Channel Islands, selling its Gatwick Airport runway slots to easyJet for £20m.
The City has pencilled in underlying pre-tax profits of £2.2m for the full year. Analysts at HSBC expect Mr Hammad’s plans to include the withdrawal from Flybe Nordic, the airline’s joint venture with Finnair, and an exit from other non-core businesses in order to give clear focus on the UK regional airline.