British banks to release half-year updates

Rising mortgage costs and the future direction of house prices will be a major consideration for British investors this week as banks and property-based firms are among those companies due to update the market.

Rising mortgage costs and the future direction of house prices will be a major consideration for British investors this week as banks and property-based firms are among those companies due to update the market.

Banking groups Lloyds TSB, HBOS and Bradford & Bingley are expected to confirm that trading conditions remain favourable yet highly competitive when the trio round off the season for half-year trading updates in the banking sector.

Lloyds issues its statement today, with the bank under pressure to show that it is not losing out in the consumer savings market – an area that has become more demanding since ING Direct’s launch.

The main focus for HBOS on Thursday will be margin pressure as the mortgage market in which it is a clear leader faces up to higher interest rates and the prospect of a house-price crash.

Specialist lender Bradford & Bingley reports on Friday and is likely to be quizzed on progress in selling non-core businesses.

Full-year results from electrical retailer Dixons should hold few surprises on Wednesday following its upbeat performance over Christmas and stable consumer spending data in the first five months of the year, broker Gerrard says.

The company is expected to raise its full year dividend by about 10% and investors will be keen to hear what Dixons intends to do with the extra capital raised through its sale of shares in internet service provider Wanadoo.

Earnings upgrades are likely to drive further share price appreciation, but the dividend yield of more than five per cent and the potential for a share buyback will also support the shares, Gerrard said.

The broker forecasts pre-tax profits of £315m (€477.5m), up from £287m (€435.1m) last time.

Investors in Stagecoach will be looking for an update on Wednesday about a proposed return to shareholders of £250m (€379m) by the Scottish bus and rail group.

Attention is also expected to focus on the outlook for 2004/2005, for which forecasts envisage a fall in operating profits. The reasons for this are disposals plus lower profits from South West Trains and franchise bidding costs.

Stagecoach said in April that its UK bus operations and the US coach division ended 2003/2004 in line with expectations, but UK rail was ahead of forecasts, leading to earnings upgrades for last year. Guidance for 2004/2005 was unchanged.

Profits are expected to come in only slightly ahead of last year, at £119m (€180.4m) against £113m (€171.3m) previously.

Civil engineering consultancy WS Atkins is tipped to unveil a turnaround in profits when it reports full-year results tomorrow.

The group, which does design work on projects in a range of sectors including water, rail, health and education, is expected to turn in pre-tax profits of £50.1m (€75.9m) in the year to March, against £14m (€21.1m) previously.

The significant upturn is likely to have resulted from better utilisation of consultants as the business benefits from improved market conditions. It has also tackled cost increases and IT system problems that prevented it billing customers.

Broker Arbuthnot is hoping for another upgrade in profit expectations for the current financial year, on top of the two that the company has already unveiled.

“There is a possibility of another upgrade and I’m hoping for a good set of results,” said Arbuthnot’s Mike Morris.

Packaging and office products group DS Smith is expected to blame tough market conditions for a drop in full-year profits on Thursday.

The group, which is awaiting a verdict from the Competition Commission on its £170m (€257.7m) acquisition of Linpac Containers, has suffered from the impact of fluctuating raw material costs on its core paper operation.

With other divisions thought to be performing more robustly, analysts expect profits in the region of £72m (€109.1m), down from the £80m (€121.3m) reported a year earlier. Customers of Lincolnshire-based DS Smith include Unilever, Nestle and Belgian brewer Interbrew.

Comments from Berkeley Group will be closely watched on Friday as economists and investors continue to fret over the future direction of the housing market.

The company, which is due to announce full-year results, has 85% of its operations in the south of England, where new property movements are usually seen first.

Fund manager Gerrard expects profits to move ahead to £230m (€348.6m), from £223m (€338m) last time, as the company continues its transition from a traditional home building company to “Britain’s premier urban regenerator”.

Berkeley, which operates through three main divisions – Berkeley Homes, St George and Crosby Homes – is likely to have seen an average selling price of £285,000 (€432,000) and the number of completions rising to 3,900.

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