Week ahead in London: BAA profits expected to rise by 19%

Companies ranging from airports operator BAA to ugar producer Tate & Lyle will be making the news during a busy week ahead in London.

Airports group BAA is expected to turn in a 19% rise in profits to £370m (€532m) when it reports half-yearly figures on Tuesday.

Analysts will be keen to hear the group’s verdict on trading in its important second quarter, which covers the summer holiday period.

After a period of recovery from the Iraq war, international passenger growth is settling back to the long term trend of 4% to 5%.

Broker Charles Stanley sees BAA’s shares as fairly valued and is advising shareholders to hold on to them.

All eyes will be on discount retailer Matalan’s current trading figures when it updates the market on the first year of its financial year on Tuesday.

Investors will be looking for evidence that Matalan can show a significant uplift in profits following a weak performance in the second half of last year.

The signs so far this year have been positive, with the retailer reporting an “encouraging” 4.5% improvement in like-for-like sales for the first six months, in a pre-close update last month.

Matalan has been bouncing back from a 48% slump in annual profits with a range of initiatives, and broker Charles Stanley expects it to post pre-tax profits of £43.6m (€62.7m), up from £41.2m (€59.3m), on Tuesday.

News on upcoming rail franchise awards is going to be key for bus and rail company First Group, which reports interim figures on Wednesday, analysts say.

Although rail passenger volumes have improved, the profits outlook of the UK’s biggest bus operator, which also runs four rail franchises, depends on the success or otherwise of bids for franchises such as East Coast or Integrated Kent. First Great Western, which First already runs, is a downside risk if it loses it.

In UK buses, the group is expected to report volume growth especially in London, while in the provinces, fare increases have helped the group to offset some cost pressures like labour and fuel. A half year profit forecast was not available, but the group made £56.8m (€81.7m) last time and one broker is advising investors to hold the shares.

The Scottish power market is expected to be in the spotlight next week with both Scottish Power (SP) and Scottish & Southern Energy (SSE) reporting interims.

Fund manager Gerrard expects SP to post pre-tax profits of £423m (€608.4m) against £393m (€562.2m) last time, while SSE is tipped to turn in an 11% rise in profits to £255m (€366.7m).

SP is likely to say it saw an improved first half operational performance compared to last year, with the well flagged weaknesses in the first quarter being reversed.

The group is set to report a reasonably flat second quarter from its north American arm Pacificorp, but better profits in the UK.

SSE is also tipped to post a good first half, buoyed by rising wholesale electricity prices, its investment in renewable energy and cost controls.

The group is also likely to say it has benefited from increased contributions from its non-core operations, in particular contracting and gas storage.

Glass maker Pilkington already told the market last month that half yearly profits would be flat on last year, and analysts are not expecting this to change when it reports on Thursday.

Rising energy costs and the strong pound have hit the business, which is one of the world’s largest glass makers. Investors will be looking at its efforts to restore fortunes through cost reduction measures.

The company has pledged tight control of capital and a drive to reduce costs in order to deliver a strong cash performance.

Fund manager Gerrard has pencilled in interim pre-tax profits of £81m (€116.5m) for Wednesday, against £80m (€115m) last time.

Strong demand for sweeteners from American diet drinks manufacturers and lower raw materials costs recently led Tate & Lyle to replace forecasts of a decline with hopes for a modest improvement.

The sugar producer later went on to say that exceptional growth by its Splenda Sucralose sweetening product contributed to a rise in profits in the five months to August.

According to fund manager Gerrard, the group will report interim pre-tax profits of £120m (€172.6m) on Thursday, up from £119m (€171.1m) last time.

High oil prices represent the main negative point among an otherwise positive showing from Tate.