The Week Ahead: Housebuilders to reveal effect of slowdown
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Your support makes all the difference.Turmoil in the financial markets and worries about a slowing economy have taken their toll on house builders, many of whom are due to publish their results this week. Last week, in a cautionary 16-page note, Dresdner Kleinwort said that updates are "expected to show the grim reality following builders' trading statements indicating it was too early to call the spring selling season", adding: "We reckon it will be dreadful."
Barratt Developments, which is due to publish its results mid-week, was singled out as the riskiest investment prospect. Dresdner chastised the company for "changing its business model to long land banking and move to 'more efficient gearing' at the worst possible time", and for overpaying for Wilson Bowden, the rival housebuilder which it acquired in April 2007. Dresdner predicts a freezing of the company's dividend for next year, "more", it said, "to symbolise the risk rather than a firm conviction that this will happen".
today: A mixed outlook is predicted for Hammerson, the commercial property developer. Its high-quality portfolio, which includes prime office space at 99 Bishopsgate and One London Wall, and its stake in the better-performing French market, are expected to offset any negative capital movements. That said, many in the market remain concerned about the company's net asset value, which is believed to have been affected by a more general decline in the value of commercialproperty. Forecasts vary, with some predicting a 9 per cent slump, whileothers foresee a sharper decline of up to 16 per cent.
Results/updates: Brammer, Robert Walters, Ultra Electronics, Hammerson, Minerva, Associated British Foods.
Tomorrow: Unlike Barratt Developments, Persimmon, the first housebuilder due to update the market this week, is expected to put on a satisfactory show. Dresdner, in its note last week, acknowledged as much, saying that the company was "widely revered as the best in class – and best equipped to withstand a downturn and emerge stronger".
Perhaps wary of deviating too far from its bearish theme, the bank did, however, warn that any "negative sentiments from management ... could take some of the shine off its premium rating".
The engineering group Bodycote International is forecast to reveal pre-tax profits of £81.8m, compared with £66.9m for 2006. Robust demand from aerospace, power generation and the European automotive sector is believed to have provided the impetus for growth in 2007.
Results/updates: Bodycote, Beazley, Persimmon, Inchcape, St James's Place, Standard Chartered, Hays.
Wednesday: HBOS, which is predicted to reveal an increase in full-year profits in its results, will be closely watched for its outlook on the year ahead: the combination of higher funding fees and a slowing property market are likely to bear heavily on the company's core mortgage lending operation.
Results/updates: Raymarine, Royal & SunAlliance, Old Mutual, Serco Group, Informa, HBOS, Barratt Developments, Kier Group, Ricardo, Serco.
Thursday: Since the onset of the credit crunch, and the consequent litany of writedowns at some of the world's best-known banks, the financial sector has given investors much cause for concern. On Thursday, when Royal of Bank of Scotland is due to update the market about the state of its business in 2007, the market will be watching with fingers firmly crossed. While RBS is expected to post a 9.5 per cent increase in full-year profits, following its December writedown of £1.25bn against debt-related investments, investors will be looking out for any new hits to the bank's balance sheet.
The paper and packaging group Mondi is due to publish its results, and analysts expect to see pre-tax profits of around £400m, up £95m compared with 2006.
Results/updates: British American Tobacco, National Express Group, Trinity Mirror, Royal Bank of Scotland, Rentokil Initial, Aviva, Mondi.
Friday: WPP, the global advertising and marketing conglomerate, is due to publish its full-year results at the end of this week. The group is believed to have benefited from a surge in contract wins in the final quarter of last year, and is expected to reveal organic revenue growth of around 5 per cent. Analysts expect total revenue to climb to around £6.1bn.
Beyond the numbers, investors will also be keen hear chief executive Sir Martin Sorrell's thoughts on the outlook for the advertising industry as it prepares to cope with a predicted slowdown in economic activity in Britain and America.
Rightmove, the property search website, is expected to reveal robust pre-tax profits of between £29.3m and £32.2m, well ahead of the £17.7m it earned in 2006.
Results/updates: United Business Media, WPP, Rightmove, Rank Group, MJ Gleeson.
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