City diary: Week ahead in the markets

By This Is Money
Updated: 10:53 EDT, 1 April 2011

The embattled retail sector will remain in focus next week when high street giant Marks & Spencer reports back on recent trading, while restaurant chain Prezzo will also shed light on consumer conditions.

MONDAY

No major corporate or economic news is scheduled.

TUESDAY

Oil and gas production and development company EnQuest is scheduled to report full-year results.

Nick Raynor of online broker The Share Centre commented: 'Investors will be keen to hear the company's view on the recent tax rise for North Sea producers that was included in last week's Government Budget.

'The steady rise in oil prices should ensure a solid set of results. Future strategy and any change in production targets may have a further impact.'

On the economics front, the US Federal Reserve will publish the minutes of its March rate-setting meeting.

WEDNESDAY

Marks & Spencer is expected to add to evidence of a sharp slowdown in consumer spending when it posts a fourth quarter trading update.

Companies such as Next, Currys and PC World owner Dixons Retail and Argos parent Home Retail Group have reported disappointing growth since the festive season as customers tighten their belts.

M&S bucked the trend over Christmas and traded well while many of its rivals were hit by the severe weather.

But analysts have forecast a decline in like-for-like sales of 2.5% in the 13 weeks to April 2 at the household name.

The retailer is expected to reveal a particularly weak performance in its general merchandise sales, including clothing, which are expected to have dropped 6.2% on a same-store basis.

However, analysts have forecast a 1.3% rise in like-for-like growth for food sales at the chain, down slightly on the 1.8% rise seen in the third quarter, as it continues to be boosted by inflation.

Meanwhile, the City will be looking for further details and progress on new chief executive Marc Bolland's strategic vision for the business. Mr Bolland's latest move was to reveal plans for the chain to return to France - a decade after it pulled out of the country.

It aims to open a three-storey outlet on the Champs Elysees in Paris towards the end of 2011. M&S exited France when it closed its 38 stores in continental Europe in 2001 to concentrate on turning around its UK business.

Mr Bolland's strategy for the group, outlined in November, also involves a drive to place the chain's own brand at the forefront of the vision for the business.

In clothing, as well as boosting its own brand, the company plans to invest in its sub-brands - such as womenswear ranges Per Una and Indigo Collection - through improved marketing and clearer positioning in stores.

Pizza and pasta restaurant chain Prezzo will reveal whether January's VAT hike and the soaring cost of food has affected its recovery when it announces full-year results.

Like many restaurants and businesses in the leisure sector, Prezzo saw its profits hit by the recession as it was forced to put on more promotions to compete for trade.

It scaled back restaurant openings as profits stalled, but a strong performance in its half-year results gave it the confidence to announce that it was back in growth mode.

Prezzo, which has more than 150 outlets, announced last month that it bought six properties from Caffe Uno Brasseries for £550,000 as part of its plans to open 20 restaurants in 2011.

These are in addition to the 11 properties it bought from the company last August along with the right to use the Caffe Uno name as part of a £3.1m deal.

When Prezzo last updated the market with results in September, it revealed underlying profits rose 21% to £6.2m in the six months to June 27 on sales up 11%.

Nigel Parsons, an analyst at Evolution Securities, expects Prezzo to make underlying annual profits of £17.8m a 9% increase on the previous year.

But the market will be keen for news on trading since the year-end amid a slump in consumer spending.

Mr Parsons believes Prezzo's plans to open 20 new sites mean it can continue to grow its profits next year and will become more well known as it spreads.

The chain is majority owned by ASK pizza chain founders Adam and Sam Kaye. They built up Prezzo's core chain of restaurants in London and southern England before the business spread its reach nationwide.

The pair also founded Tasty, which operates restaurants under the 'dim t' brand name.

Further signs of a recovery in the recruitment market is expected to be revealed when Robert Walters (Wednesday) and Hays (Thursday) provide trading updates.

The industry suffered in the recession as companies reduced their manpower, but recruitment companies are making a comeback after making their own efficiency savings and as the private sector jobs market picks up.

The UK's public sector jobs market is in decline as the Government's austerity measures begin to bite, but recruitment firms have the opportunity to grow their businesses through taking advantage of growth in the private sector and overseas markets.

Analysts at Royal Bank of Scotland believe they are also benefiting as companies use more temporary staff to cope with growing demand.

Robert Walters is expected to report another robust performance in its first quarter update.

The agency - which has 43 offices in 20 countries - has large operations in the rapidly growing Asia Pacific region which helped revenues to grow by 41% to £424.2m in 2010, while net fee income rose 49% to £155.4m.

Although its growth rate slowed to 37% in its final quarter from 56% in its third quarter, analysts at RBS expect a strong update.

On the economic front, the Bank of England's rate-setters are expected to keep the cost of borrowing on hold again.

THURSDAY

There are fears of further gloom from the retail sector when car parts and bicycle group Halfords reports back on trading.

The group, which has 464 stores in the UK and Ireland, had a disappointing Christmas seasons for cycle sales, which slumped 16% on a like-for-like basis.

The company said it was hit as fewer bikes were given as presents and premium products were affected by a slowdown in Cycle-to-Work sales.

Declining sales look set to continue in the fourth quarter to April, with economists at Investec forecasting a 2% decline in like-for-like sales across the whole group.

David Jeary, analyst at Investec, said: 'Under a scenario of squeezed disposable incomes - arising from inflation across less discretionary spending areas such as food, fuel and utilities, exacerbated by direct and indirect tax rises - retailers of bigger ticket and more discretionary categories are likely to come under greater pressure.'

Halfords is part of the Cycle-to-Work Alliance, which recently said changes relating to the fair market value guidance on the worth of second-hand bicycles threatened the attractiveness and take-up of the scheme.

Demand for premium cycles under the Government's scheme, which provides tax-free bikes to workers on a salary sacrifice scheme, may have been impacted by recent rule changes introduced by HM Revenue and Customs.

The City will also look for progress in the rebranding of Nationwide Autocentres, which Halfords bought in February last year.

Hays is expected to report further strong growth when it updates on third quarter trading.

The company said underlying profits increased 48% to £52.1m in its half-year, while net fees rose 23% to £326.1m as its overseas markets, such as Continental Europe and Asia Pacific, showed rapid expansion.

Its UK business, which now only accounts for a third of its sales, was flat as private sector growth offset public sector weakness thanks to increased demand from City, finance and IT firms.

The group reported that net fees in the final quarter of 2010 were up 1% in the UK and Ireland compared to a year ago, helped by 28% growth in the private sector.

But the Government's austerity drive meant its revenues from placing workers in public sector roles were down by 38% on the previous year, which was worse than in the previous quarter and 45% below peak levels.

The number of recruitment consultants employed by Hays in the UK decreased by 8% over the period as it balanced the private sector recovery with the difficulties it faced in the public sector.

Analysts at RBS expect the company's underlying earnings to increase 39% to £132m in the full year.

FRIDAY

Miner Vedanta Resources is scheduled to report full-year results.