Market heavyweights will again be missing from the corporate spotlight this week as some of the stock market’s lesser lights prepare to update the market on trading.
Plant hire group Ashtead is set to pass a milestone in its recovery on Thursday when it unveils pretax profits before exceptional items of around £1m for the year to 30 April, compared with losses last year of £1.8m.
This improvement will have been achieved despite a likely fall in turnover over the past year to £500m from a level of £539.5m.
Analysts at stockbrokers Investec said the group – driven close to bankruptcy by the size of its debts – can now look forward to rapid growth over the next few years, especially as the US plant hire market is becoming stronger.
An increase of just 4% in utilisation rates has the potential to lift Ashtead’s US profits by more than 50%, while a similar rise in rental rates would lift earnings by a further 30%, they added.
Discount clothing retailer Matalan is expected to announce that its trading revival has continued when it reports on its first-quarter performance on Thursday.
Sales improved by 3.1% on a like-for-like basis in the first nine weeks of the financial year against a comparative period in which they fell 8%, and analysts are forecasting growth of 4% during the quarter as a whole.
Analysts at stockbrokers Arbuthnot believe trading data will improve as the year progresses, comparatives weaken and the ongoing refurbishment programme boosts sales.
Speculation has swirled in the City recently that Matalan might be subject to a takeover bid and it is thought that chairman John Hargreaves may be willing to sell his stake. This should prop up the share price in the longer-term.
Car dealer Reg Vardy has benefited from a favourable market for new and used vehicles in 2004 and is expected to unveil a 14% hike in annual profits of £40.8m on Wednesday from £35.8m a year ago.
Although the market for used cars appears to have peaked, fund manager Dresdner Kleinwort Wasserstein said the company would continue to grow and it remains on target for 100 dealerships by the end of the year.
Reg Vardy has reported improved profitability in all sectors of its business since January – except specialist new vehicles that are being sold at lower margins.
In contrast, positive trading has continued at its contract hire arm that leases cars to companies on 36-month deals, with several new additions to its fleet.
Spirits group Diageo unveiled a 6% rise in half yearly profits to £1.2bn earlier this year but said demand for ready-to-drink brands such as Smirnoff Ice had declined.
It also warned that the weakness of the US dollar was likely to have a greater impact in the second half of the year.
Fund manager Gerrard expects year-on-year underlying operating profits to be flat when the company issues a trading update on Thursday.
It added that ready-to-drink volumes continued to weaken in the UK, with this phenomenon seeming to be well past its peak.
Defence manufacturer Chemring is expected to turn in operating profits of £7.4m on revenues of £60m when it reports interim results tomorrow.
Investors are hoping to hear news on the progress of the United Airlines consortium, of which Chemring is a member, in the US Department of Homeland Security initiative for commercial aircraft.
The consortium is one of three bidders whose products are being considered and a narrowing-down to two is expected in the next few months.
Broker Evolution Beeson Gregory (EBG) said the Fareham-based group’s countermeasures business, which makes equipment that protects military aircraft, ships and land vehicles against attack, is the main driver behind its current growth.
The broker said the group’s commercial marine and pyrotechnics businesses are not as impressive in terms of growth as countermeasures, but continue to generate profits and cash.
“We do not expect these businesses to disappoint or excite,” said EBG, which rates the stock as an add.
Door-to-door catalogue sales business Kleeneze is expected to report full year pretax earnings before interest and goodwill of £9.12m on Wednesday – in line with forecasts.
The Swindon-based firm, which sells mops, dusters and other household items through its core Kleeneze UK arm, should see revenues fall modestly due to a shortfall in the first half, which reflected declines in active distributor numbers and a weak response to its catalogues in the first quarter.
However, broker ABN Amro said the seasonal uplift in distributor numbers and revenues appeared to have come through in the approach to last Christmas, underpinning full year profit assumptions.
The broker said it had reduced its 2004 full year sales forecast by 1.5% to £168.7m, but was retaining its pretax profits figure at £8.6m, with earnings per share of 13p.
Recommending investors to add, it said there was significant scope for the management to raise the growth profile of the business through efficiency gains, expanding it into continental Europe and looking for catalogue acquisitions.
References: EGi News 05/07/04
