BA, O2, BT all to provide updates next week

Companies in the telecoms and energy sectors will be among UK market heavyweights updating investors on their progress this week.

British Airways has seen traffic growth improve since October and the early benefits of a cost-cutting programme has led analysts to upgrade their full-year profits forecasts to £200m (€296.5m) from £75m (€111m)a year ago.

Its annual results announcement tomorrow will also provide an assessment of the current outlook and this is likely to focus on higher traffic in long-haul and premium flights, lower costs and rapid growth in earnings.

But fund manager Gerrard said worries over oil prices abound and it remains to be seen whether a ticket surcharge can be sustained in a competitive market, while terrorism and weakness in its short-haul business remain concerns.

Mobile phone group mmO2 is likely to report on Tuesday that it has built up solid momentum in Germany in the face of strong competition, with service revenue growth in the UK expected to be around 15%.

Although profits for the 12 months to March 31 are expected to climb to £436m (€646m) from a level of £276m (€409m) a year earlier, sentiment may be affected by weak guidance for the current financial year.

Takeover talk continues to surround mmO2 due to the share price remaining around 90p, although Dutch operator KPN is cooling its interest in the company after making an approach earlier this year.

Supermarket chain Sainsbury’s told investors in its last trading statement that like-for-like sales had slipped by 0.2%, with recent data showing a further deterioration in its market share.

Investors will therefore pay attention to the outlook for sales growth when Sainsbury’s reports its full-year results on Wednesday, which are expected to show profits of £643m (€953m) – down from £682m (€1bn) a year earlier.

Margins will also be under scrutiny in the wake of the merger between Morrisons and Safeway, which has led to its rivals cutting prices.

Fund manager Gerrard believes there could be a downside potential at Sainsbury’s for both margins and earnings forecasts over the next year as price competition in the food retail sector increases.

Pre-tax profits at telecoms group BT are tipped to rise to £2bn (€2.9bn) in the year to March 31 compared with £1.8bn (€2.7bn) a year ago, fuelled by increasing momentum in “new wave” businesses which grew revenues by 31% in the third quarter.

Analysts are expecting the group to use its results announcement on Thursday to adopt a more positive stance regarding dividend policy and act more aggressively in terms of a share buyback programme.

The company is also likely to defend its position after industry regulator Ofcom said it was considering the break-up of the group as part of a review of the telecoms sector. Media reports have highlighted potential bidders for its infrastructure network since the Ofcom announcement.

United Utilities set the scene for this week’s full-year figures when it released a trading statement in March saying it had performed in line with expectations.

Investors will now be looking at the group’s comments on regulatory reviews of both water and electricity prices. The main focus will be on the water review conducted by Ofwat, since this division is the biggest contributor to profits.

Smaller non-regulated operations are all expected to show good progress, including the group’s Vertex outsourcing arm – which clinched a new five-year deal to handle calls, orders and billing on behalf of Marks & Spencer on Friday.

Analysts expect United Utilities to post pre-tax profits of £345m (€511m)compared with £327m (€484.7m) when it updates the market on Thursday.

Power group National Grid Transco is expected to post a good set of figures on Thursday following an upbeat trading statement in April, with annual profits tipped to rise to £1.57bn (€2.3bn) from £868m (€1.3bn) a year ago.

Earnings growth will have been driven by higher operating profits – despite increased pension costs, the weak US dollar, more normal weather patterns and lower sterling interest costs.

The market will hope for an update on the auction of Transco’s local distribution zones as this is a potential source of a return of capital to shareholders, while plans for further US expansion could be on the cards.