The Week Ahead: Updates due from SSE, Centrica, Vodafone, TalkTalk, Sainsbury’s and ITV
RISING energy bills and the battle for supermarket and mobile phone customers will be in the spotlight this week with figures due from SSE, Vodafone and Sainsbury’s.
The heat will be on energy giant SSE on Wednesday when it reveals how much money it is making for the first time since a winter price increase.
SSE, formally known as Scottish & Southern Energy, recently increased prices by an average of 9% in a move which will affect five million electricity customers and 3.4 million gas customers.
Customers will be looking at interim results closely amid anger that firms are leaving customers out in the cold while they continue to turn in huge profits.
But the energy companies have blamed the rises on wholesale prices and increased running costs, especially for transporting gas and electricity to customers’ homes, plus the cost of energy efficiency programmes.
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In May, SSE posted a 2% rise in annual profits to �1.3 billion but the surplus from domestic operations was down 21% to �271.7 million as it battled higher costs and falling consumption.
SSE was the first of the “big six” energy companies to increase prices, but it was followed by all the other major suppliers apart from E.ON which made a promise not to raise tariffs this year.
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Investors will also be watching to see if the unseasonably chilly autumn has boosted consumption.
British Gas owner Centrica will also be in the spotlight on Thursday, having announced it will increase its prices by an average of 6% on November 16.
The UK’s biggest energy supplier, which is due to post a trading update, came under fire in July for making residential operating profits of �345 million in the space of six months, equivalent to �1.9 million a day.
Vodafone investors will find out on Tuesday if an initiative to keep UK customers until the widespread roll out of 4G technology has struck a chord.
It comes after a year which has seen revenues fall as the mobile phone giant loses ground to rivals offering unlimited deals.
Vodafone will have to wait until the spring to launch its 4G products after EE, formally known as Everything Everywhere, got the go-ahead to offer services on the network, which has speeds up to five times faster than 3G.
Vodafone’s new “4G phone promise” offers customers the chance to bring an eligible phone into any store and have 70% knocked off their remaining contract, in exchange for taking on a 4G device.
But while it battles in the fiercely competitive UK market, Vodafone is likely to be buoyed by earnings from its stake in America’s largest mobile phone network.
The City expects revenues in its interim results on Tuesday will be �21.8 billion, down from �23.5 billion for the same period last year, while underlying profit will fall from �7.5 billion to �6.8 billion.
The Newbury-based firm’s performance has been hit by recessions in Spain and Italy, while the fees it can charge for connecting mobile calls are being reduced in markets such as the UK.
Its last update disappointed investors after its European business suffered a 1.7% underlying revenue decline in the final quarter of 2011, helping slow the group’s growth for the third quarter in a row.
Paralympics sponsorship and investment in cheaper own-brand products has helped supermarket Sainsbury’s take market share from rivals Tesco and Morrisons.
The country’s third largest grocer was the star performer in recent data from researcher Kantar as its share of the market jumped to 16.8% while Tesco and Morrisons saw their positions weaken.
And it is expected to build on its strong run in half-year results on Wednesday when it unveils a 5% rise in underlying pre-tax profits in the six months to �371 million.
The group has benefited heavily from its sponsorship of the London 2012 Paralympics as well as its Brand Match scheme and higher investment in its own labels.
It continued to put struggling rival Tesco into the shade as it revealed a 1.9% rise in like-for-like sales excluding fuel but including VAT in its second quarter to September 29.
The figures came as UK number one Tesco revealed 0.2% growth in like-for-like sales also excluding fuel and including VAT - although Tesco’s second quarter covered a different trading period.
The City will be looking for long-term growth plans as much of the supermarket’s recent growth has been driven by one-off benefits, such as the London Games.
However, Sainsbury’s, which operates more than 1,000 stores, has seen a good performance from its top-end Taste The Difference range as consumer spending power gradually recovers.
It also continues to see strong sales of non-food products, an area in which Tesco is struggling to succeed, with growth at a pace around three times that of food in its last update.
Sainsbury’s has an aggressive approach to expansion, which continued through its second quarter, albeit at a more moderate pace.
It opened five supermarkets, 28 convenience stores and two extensions, adding 267,000 square feet to its estate over the period.
And an emphasis on the convenience store format - Sainsbury’s Local - continued as it opened 49 outlets in the first half with a target of opening one to two per week.
TalkTalk will hope to put its troubled past behind it on Tuesday as the broadband and television firm reveals a return to customer growth.
The company was last year hit with a �3 million fine for shoddy service and was forced to pay out �2.5 million to customers who were billed despite cancelling their packages.
It had been haemorrhaging customers but analysts believe this will have been reversed in its second quarter after it confirmed it had returned to net growth in June.
In addition, TalkTalk will reveal underlying earnings, excluding television, more than doubled to �348 million in the first six months of the year to September 30.
Andrew Lee, an analyst at Goldman Sachs, who upgraded his recommendation on TalkTalk to buy from hold, said: “We believe TalkTalk offers attractive top-line growth potential, compounded by one of the best self-help opportunities in the sector.”
The City will be keen to see how the group’s push into television is progressing.
TalkTalk launched a TalkTalk Plus package, which offers customers a free YouView internet TV set top box, with a 12 month subscription to LOVEFiLM Instant and access to pay channels such as Sky Sports.
The launch was seen as a bid to take on rivals BT and Virgin Media, which have bolstered their services with acquired rights to Premiership football games and the recordable, on-demand TiVo service respectively.
The group reported a net loss of 19,000 broadband subscribers in the first quarter of its financial year as poor weather hit the rate at which it could connect new customers.
Wall-to-wall coverage of the London 2012 Olympics will have hit commercial broadcaster ITV when it unveils its July to September trading update on Tuesday.
Popular shows such as Britain’s Got Talent and the Euro 2012 football tournament helped ITV’s ad revenues rise 3% in the first six months of the year, resulting in a 15% rise in underlying profits to �235 million.
And while favourites such as X-Factor and Downton Abbey have returned, the group previously warned revenues are likely to be down by as much as 10% and 11% in July and August respectively.
Brokers Numis Securities have forecast third-quarter revenues to drop between 7% and 9%, although it held its full-year profit expectations at �430 million.
Advertisers reined in spending over the summer as viewers tuned into the Olympics games coverage on the BBC, although the broader slowdown in the economy was also to blame.
Chief executive Adam Crozier is in the midst of rolling out his turnaround plan, which focuses on its Studios arm, which grew revenues by 34% to �355 million in the first half of the year.
Sheridan Admans, investment research manager at The Share Centre, said: “Management have been delivering on the restructuring of the business so any updates on cost reductions and, perhaps more importantly for the longer term, how advertising is holding up will be worth noting.
“The market will be expecting more good news from the studios and its productions.”
ITV is also growing online, which is another key plank of the recovery plan, as the number of shows being watched through ITV Player rose 20% in the first half.
While online content will remain free to view for up to 30 days, it has completed trials of a paid-for service, which it hopes to roll out later this year and will make 1,000 hours of archive footage available.
The return of the world’s most famous spy to UK cinemas should have given Cineworld a boost in figures due to be posted on Tuesday.
Skyfall secured the biggest seven-day gross takings of all time in the UK of �37.2 million, overtaking Harry Potter And The Deathly Hallows Part 2’s first-week figure of �35.7 million, according to entertainment website Deadline.
The UK’s largest cinema operator has looked to the hit starring Daniel Craig to bolster admissions following a summer of Olympic and Paralympic fever.
Hopes for the Bond movie and the release of the final instalment of the vampire romance Twilight and The Hobbit, come after the Chiswick, west London-based group saw box office admissions drop 0.8% in the 26 weeks to June 28.
Revenues held up as the group increased average ticket prices by 5% to �5.15. Total revenues were 1.1% higher at �165.4 million in the half year, while operating profits increased by 21.5% to �15.8 million.
But 007 is not likely to have completely saved the trading figures for the third quarter with analyst Douglas Jack at Numis Securities predicting Cineworld is unlikely to have bucked the market trend of admissions falling 16.8%, undermined by the Olympics and relatively weak subsequent film releases.
Analyst Lindsey Kerrigan from Panmure Gordon said that while she expects Cineworld to report strong current trading for the last three weeks of the third quarter, she did not think it was enough to demonstrate prolonged confidence.
She said: “Trade is expected to be strongest in the last two months of the year which makes us nervous as it leaves a very short space of time for admissions to play catch-up on the relative underperformance over the past three months.”