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Thursday preview: Diageo, G4S, Hikma
Wed, 08 Feb, 2012
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Thursday preview: Diageo, G4S, Hikma
Wed, 25 Aug 2010, 16:36:00
Full year results from Guinness brewer <b>Diageo </b> should see the company announcing an increase in profit and a continuation of the improving trend seen in the group's third quarter. The group, famous for brands such as Smirnoff, Johnnie Walker, Captain Morgan and Baileys, said back in May it was on course for low single digit organic operating profit for the year to end-June. Charles Stanley thinks earnings before interest, tax and amortisation (EBITA) will climb to £2,715m from £2,613m the year before, on the back of an improvement in net sales to £9,750m from last year's £9,311m. Market consensus for profit before tax is £2,344.7m on revenue of £9,688m. Charles Stanley reckons profit before tax will be around £2,300m, below market consensus but still up from the previous year's £2,185m. The broker thinks operating profit in North America will be broadly flat at £1,145m, while Europe should see an improvement of 1% to around £864m. The international division is seen reporting a 19% increase in operating profit to £770m, while Asia Pacific is also pegged to show a 19% gain, to £190m. "An update will be provided on the restructuring programme announced in February 2009 to offset some of the pressures created by the global economic downturn. £120m of annual savings were targeted in 2009/10, rising to £185m in 2011/12. An associated £200m restructuring charge is expected to have been taken," Charles Stanley said. "Outlook comments will be closely analysed for any further evidence that consumers are starting to trade up and that recovery is coming through. Particular attention will be paid to organic operating profit growth guidance for 2011. Management has consistently stated that it believes the group is capable of delivering high single-digit growth in organic operating profit in the long term, but we think this level of growth is unlikely to be achieved in the current economic environment," the broker added. Half year results from security group <b>G4S </b>should see the company deliver an above average organic growth rate relative to its peers, according to Panmure Gordon. "We are forecasting revenues of £3612.2m, some 3.6% ahead of last year (2.8% organic growth assumed), amounting to an adjusted profit before tax of £181.6m vs. £172.2m last year on static margin assumptions. If achieved this would equate to adjusted earnings per share (EPS) of 8.6p vs. 8.5p last year, with 6% growth in the interim dividend at 3.2p pencilled in," the broker predicted. "Consensus from the company suggests that we are broadly in line with revenues of £3.6bn and PBITA [profit before interest, tax and amortisation] of £236.0m (Panmure Gordon £236.6m)," the broker added. Charles Stanley is ahead of consensus with its G4S PBITA forecast of £240m, up from £229.8m the year before. It thinks the dividend will be ratcheted up to 3.25p from 3p. "UK government spending cuts are a topical issue. Total government related business accounts for about 28% of group revenue and UK government work is about 9% of the group," Charles Stanley notes. "Interim results will be subdued as the first quarter was the toughest for the group," Charles Stanley thinks. "Although the organic growth rate was slow in the first quarter, the group anticipates broadly similar organic growth rate in 2010 to 2009 which was +3.7%. This is predicated on improved economic growth and better pricing in developed markets," the broker continued. FTSE 250 stock <b>Hikma Pharmacueticals </b>should announce an interim operating profit of $67.5m, up from $57.2m in the first half of last year, according to Charles Stanley. The broker has pencilled in group sales for the pharmaceutical firm of $365m, up from $321.5m at the half way stage of 2009. "We look for a 10.7% increase in group sales to $360m within which the largest division (Branded) should report growth of 7%. This would be in keeping with management's view that Branded sales are likely to be spread more evenly over the year than has hitherto been the case (c.54% growth over the first half of 2009)," Charles Stanley suggests. "Keep a close eye out for comments pertaining to improvements in Algeria, a key market for the company but which has proved weak over H1 2010," the broker advised. "Elsewhere, Injectables and Generics are expected to grow by 18% in each case with the outlook for the former boosted by the timing of Middle East North Africa (MENA) tendering. Group operating profit is forecast to grow from $53m to $67m resulting in an operating margin in excess of 18%. EPS growth is expected to be constrained by a higher tax charge, the function of a higher proportion of business being undertaken in the US," Charles Stanley said. Panmure Gordon is a little more conservative on the sales front, and is forecasting that revenues will grow 9% to $350m, with the gross margin set to fatten to 48.0% and the operating margin to advance by 2.4 percentage points to 18.3%. It thinks operating profit growth will rise 12% to $64m while EPS are set to climb 5% to $0.24. Panmure Gordon has pencilled in a profit before tax figure of $58m. "Gross margin of the generics business is expected to expand by 910bp [basis points] to 42.9%. Similarly, we forecast the injectable business to expand gross margin by some 310bp to 46.3%, whilst the branded business could decline modestly by 250bp to 50.5%," Panmure Gordon predicts. In the oil sector <b>Premier Oil </b>and <b>Salamander Energy </b>are set to report interim figures and are also expected to announce revised drilling timetables, as both have active exploration programmes scheduled for the fourth quarter of the year. It's been a thin week for UK economic indicators so the <b>CBI Distributive Trends Survey</b> will give those economists who have not cannily booked their annual holiday for this week something to get their teeth into. INTERIMS Amec, Asterand, Avis Europe, Biocompatibles International, Bloomsbury Publishing, Carillion, Chaucer Holdings, Chesnara, Churchill China, Communisis, CPP Group, Filtrona PLC, G4S, Henry Boot, Hikma Pharmaceuticals, Hunting, Huntsworth, IMI, International Public Partnerships Ltd., IP Group, Kazakhmys, Macfarlane Group, New World Resources, office2office, Petropavlovsk, Premier Oil, Public Power GDR (Reg S), Robert Walters, Salamander Energy, Savills, SEGRO, Signet Jewelers, Soco International, Sportech, STV Group, Unite Group, William Hill, X5 Retail Group GDR (Reg S) INTERIM DIVIDEND PAYMENT DATE Charter European Trust INTERNATIONAL ECONOMIC ANNOUNCEMENTS Continuing Claims (US) (13:30) GFK Consumer Confidence (GER) (07:00) Initial Jobless Claims (US) (13:30) M3 Money Supply (EU) (09:00) GMS DS Smith FINALS Diageo, Haynes Publishing Group, Impala Platinum AGMS Canisp, Phoenix IT Group, Plant Impact, Puma VCT I, Puma VCT II, Puma VCT III, Puma VCT IV TRADING ANNOUNCEMENTS Haynes Publishing Group UK ECONOMIC ANNOUNCEMENTS CBI Distributive Trends Surveys (11:00)
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