The Week Ahead: Updates due from Shell, BT, BSkyB, Diageo, Rank and Carpetright
- Credit: Archant
WITH the festive period reporting season for retailers now largely over, results from oil giant Royal Dutch Shell and media and telecoms groups BT and BSkyB will ensure another significant week for investors.
BSkyB’s quarterly figures are likely to show that its drive for high definition (HD) customers slowed after a boom over the summer fuelled by Olympics Games viewing.
Experts at Numis predict the group, which now has more than 10 million customers, will have enticed 115,000 new HD contracts in the quarter to December 31, compared to 125,000 in the previous quarter.
And Numis expects the group to have taken on 149,000 broadband customers, up from 102,000 secured in the previous quarter.
Prices hikes, including a rise of £1 for its Sky Sports package and £1.50 for its Sky Entertainment package, will have helped the group grow revenues.
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Numis expects the move to have pushed revenues up 4.2% in the second quarter and predicts the group will post first half revenues of £3.5 billion. It will mark an improvement on sales growth from the first quarter when sales were 3.5% ahead.
The group also increased its line rental charges from £12.25 to £14.50, which came into force in December.
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But while price hikes will have helped revenues, Numis expects the group’s “churn” - or the proportion of customers who left Sky in the period - to have edged up to 9.8%, from 9.6% last year.
Numis analyst Paul Richards said in his view BSkyB was structurally robust.
He said Sky was underpinned by its product innovation, attractive pricing and customer service. He also highlighted its long-standing relationships with sport, movies and entertainment content owners.
The results will come after a challenging few months for the group, which was deemed fit and proper to hold a broadcasting licence in September after a review by media regulator Ofcom connected to its former chairman James Murdoch.
The City will also be watching closely to see if Sky and rival BT overpaid in their £3 billion Premier League deal. Shares dropped sharply last year on the news that the group had paid a higher than expected price for the football fixtures, which represented a 70% hike on the current partnership with Sky and ESPN.
Meanwhile, BSkyB rival BT is expected to show continued progress in its march for a bigger share of the broadband market when it reports third quarter figures on Friday.
The group added 81,000 retail broadband customers, nearly half of net additions across the whole market, in the previous quarter to September 30.
And Mike Williams, analyst at Exane Telecoms Research, said broadband growth should remain “resilient”, with BT expected to have taken market share again in the quarter.
The group is investing £2.5 billion on rolling out superfast broadband to two-thirds of the UK by the end of spring 2014.
But this will not stop revenues declining further as its global services business battles the economic woes in southern Europe.
City experts predict revenues will fall 6.1% to £4.5 billion in its third quarter, compared to a 5% fall in the same period last year.
This will not come as a surprise after the group recently warned it was cutting its revenue outlook for the full year as problems in the eurozone and the financial sector hit its business-focused Global Services division.
The City will also be interested in the first update of its joint venture, the subscription-free digital box YouView.
Smirnoff and Guinness owner Diageo is expected to toast another strong performance in emerging markets when it reports to the City on Thursday.
Analysts predict sales will have grown 5.2% to £6 billion in its first half results. The half year result will be slightly ahead of its first quarter, when sales were 5%, but will be down from a 7% jump in the same period last year.
Experts at Oriel Securities, which is pencilling in a 5.3% jump, predict sales will be driven by double digit growth in emerging markets, with strong beer sales in Africa and a thirst for scotch in Latin America.
But the debt-ridden southern eurozone markets will continue to suffer along with the UK market.
Chris Wickham, analyst at Oriel, said that US growth would be slower than in its first quarter, but underlying trade in the region remained strong.
It comes after a year when Diageo went on a spree of acquisitions in emerging markets, most recently taking a 53.4% stake in Asian drinks giant United Spirit.
But the group ended talks to buy the Jose Cuervo tequila brand from Mexico’s Beckmann family in December and a decade-long agreement to distribute the spirit in the US.
Diageo is the world’s biggest drinks company and sells to 180 countries after ramping up its focus on emerging markets in recent years.
Whisky accounts for about a third of its sales and as well as Johnnie Walker it makes Bell’s, J&B and The Singleton.
The continued strength of Brent crude in commodity markets is expected to narrow recent falls in profits at oil giant Royal Dutch Shell on Thursday.
Experts predict fourth quarter profits will be 3% lower at 6.3 billion US dollars (£4 billion), down from 6.5 billion US dollars (£4.1 billion) in the same period last year.
It comes after the previous quarter when the group weathered a 15% drop in profits in the face of “volatile” energy markets.
Lower oil and gas prices and pressure on margins in chemicals resulted in a fall in profits to 6.13 billion US dollars (£3.8 billion) in the three months to September 30, although this beat the previous quarter.
At its last update chief executive Peter Voser said the company continued to make progress, despite difficult industry conditions.
Sheridan Admans, investment research manager at The Share Centre, said: “Investors should be pleased to see that Brent crude oil is still trading above 100 US dollars a barrel and will be keen to see the impact on Royal Dutch Shell’s underlying earnings.”
She said investors would also be looking for updates on the group’s capital investment and cost cutting programmes.
Shell has sold assets in recent years as it looks to improve financial headroom for projects with greater growth potential.
A continuing programme of shop revamps is expected to help floor coverings retailer Carpetright continue on the road to recovery when it updates the City on Tuesday.
Boss Darren Shapland, who joined the group last year, expects 180 - or 40% - of its shops to sport a new contemporary look by its financial year end in April.
John Stevenson, analyst at Peel Hunt, said the store revamp project was providing “clear impetus”, with the new look helping push sales at each refurbished store up 10%.
UK like-for-like sales in the first half of the financial year were 0.7% ahead, or 3% excluding its wholesale business.
And Matthew Taylor, analyst at Numis, said he expected similar progress in the third quarter trading update on Tuesday, which should be much more upbeat than last year, when it issued a profits warning after sales fell 0.5%.
Alastair Davies, analyst at Oriel Securities, said the group’s wider range of products was helping it to gain market share.
He said expanded ranges of products such as laminate flooring and bedding were paying off, while he also highlighted the group’s use of the internet for marketing and showing off its ranges.
But the group, which was hit hard by the housing downturn, is still struggling with its European business. It has seen declines in the Netherlands and Belgium where consumer confidence has been dented by political uncertainty and impending austerity measures.
Gaming operator Rank’s expected half-year profits growth on Thursday will be overshadowed by the wait to see if a deal to take over Gala casinos is given the green light.
The group has been warned by the Competition Commission it may have to sell several UK casinos before a merger deal with rival Gala can go ahead.
The planned acquisition of the 23 sites by the Mecca Bingo owner would see it leapfrog Malaysian firm Genting as the UK’s biggest player, giving Rank’s Grosvenor casino division 57 sites.
In its first quarter, Maidenhead-based Rank unveiled a 5% like-for-like rise in sales, driven by 8% growth at Grosvenor Casinos and a 2% rise at Mecca.
But Simon French, analyst at Panmure Gordon, was disappointed by the like-for-like decline in customer numbers across all three of the group’s land-based divisions.
Rank said that its Grosvenor Casinos had benefited from 13% growth in customer spend, which offset a 5% drop in customer visits in the 15 weeks to October 14.
Mr French is predicting the group will see pre-tax profits rise 5% to £34 million on Thursday, slower than the 8% rise in pre-tax profits to £32.4 million in the same period last year.
Rank said in its last update it would complete the refurbishment of its Grosvenor casino in Portsmouth to the new G casino format and plans to open a new G casino format venue in Reading in its third quarter.
The majority of Rank’s casinos are outside London, with the company focused on the faster roll-out of its G Casino format, which attracts a younger, less formal crowd. The Rank business employs more than 3,500 staff.
Rank is listed on the London Stock Exchange but majority owned by Guoco, the investment vehicle of Malaysian billionaire Quek Leng Chan.