Smaller firms to get UK spotlight

With no major UK companies reporting results this week, the spotlight will move on to the FTSE 250 Index and give the minnows a chance to shine.

Music and books retailer HMV cheered investors in April by forecasting annual profits at the top end of expectations after its strong Christmas performance continued into the rest of the financial year.

Analysts expect HMV to unveil pre-tax profits of £116m (€174.2m) on Wednesday against £96.5m (€144.9m) at the same stage last year.

The increase in profits will reflect lower interest charges, reduced losses in North America and strong sales of DVDs in the UK where the group trades as Waterstone’s and the HMV music chain.

According to fund manager Investec, the group will be broadly debt free by April and management is likely to use these results to highlight a strategy of returning up to £50m (€75.1m) in cash to shareholders each year.

Floorings retailer Carpetright overcame tough trading conditions last year to record an upturn in sales just before Christmas, while aggressive price promotions at the start of January have also helped to boost sales.

On Tuesday, the group is due to report its results for the 12 months to May 1 and analysts are expecting pre-tax profits of up to £64m (€96.1m) compared with £57.1m (€85.7m) posted last year.

But the focus will be on current sales and whether Carpetright has managed to maintain sales growth, especially as data from the British Retail Consortium suggest carpet sales have been relatively flat.

Fund manager Arbuthnot says the company has good prospects going forward with carpet reportedly making a comeback as a fashion trend. Carpetright’s positioning as a mass market price leader should also stand it in good stead in any consumer slowdown.

Investors will be looking for evidence that Somerfield’s shake-up of Kwik Save is gathering pace when the combined supermarket group reports full year figures on Wednesday.

Deutsche Bank is seeking pre-tax profits of £46m (€69.1m) for 2003/4 and £60m (€90.1m) for 2004/5, assuming an acceleration in refits and disposals of Kwik Save outlets following Somerfield’s acquisition of the discount chain in 1998.

Lower running costs resulting from the integration of the two businesses and better cost management meant Somerfield delivered first half profits at the top end of expectations.

“Many questions remain unanswered, particularly surrounding the pace of restructuring at Kwik Save,” Deutsche said.

“However, there is no doubt that as Somerfield gradually establishes a track record of delivery, it becomes easier to forecast and to have some confidence in the shape of the business going forward.”

Photo booth operator Photo-Me International is expected to restore dividend payments to shareholders when it unveils its full-year results tomorrow after a substantial recovery over the past 12 months.

Delays in rolling out new digital minilabs and stiff competition drove the company £2.2m (€3.3m) into the red last year, but it is expected to bounce back with annual pre-tax profits of £20.6m (€30.9m) this time around.

Investors will focus on performance of the two aspects of its business with particular potential – the manufacture of minilabs and the operation of Digital Media Kiosks.

The kiosks are being rolled out alongside many of its 26,000 photo booths worldwide and offer users the chance to plug the memory chips of their digital cameras or mobile phones into the machines for an instant print.

Pub operator Honeycombe Leisure is expected to report more subdued trading at some of its Inns and Taverns outlets when it posts full year results tomorrow.

Broker Charles Stanley has consequently reduced its forecast of pre-tax profits before goodwill and exceptionals for 2004 by £70,000 (€105,100) to £1.85m (€28m).

The broker said the managed pub operator is likely to report a continued satisfactory performance, although trading conditions had been mixed since the announcement of the interim results in January.

It expects the group’s Last Orders outlets to have benefited from the strong Champions League run by some UK football clubs, while the Nectar business had also continued to perform well.

While there had been limited news on further management agreements with Punch Taverns, activity in that area is understood to have increased and positive announcements are expected in due course.

Software and IT services supplier Northgate Information Solutions is tipped to turn in a 35% increase in adjusted pre-tax profits to £8.1m (€12.2m) when it posts full year figures tomorrow.

Broker Baird says the business is fundamentally stronger than it was a couple of years ago thanks to closures, disposals and acquisitions.

The business has a clear strategy and growth opportunities in its two chosen markets of personnel outsourcing and the police and emergency services are significant.

Baird said it was comfortable with Northgate’s acquisition of RebusHR, given the clear strategic rationale for the deal and its modestly earnings-enhancing qualities.

“Both from a business and financial perspective, 2005 will be the year when Northgate really starts to reap the benefits from its recent acquisitions and EPS should increase by over 35%,” Baird said.