Bookmaker Ladbrokes is set to announce full year results on Thursday and Credit Suisse is betting the firm will report a robust underlying fourth quarter performance.
"Machine gross win growth of 20% could more than offset sporting results related margin weakness in Oct and Nov," the Swiss bank said, though even with the growth in revenue from betting machines Credit Suisse thinks 2011 retail profits are likely to be no better than 2010.
"We think Ladbrokes caught up with William Hill in the fourth quarter (£924 gross win/week). This would imply small upside to our retail earnings before interest and tax (EBIT) estimates," Credit Suisse suggested.
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Market consensus is for profit before tax of £151.9m on revenue of £981.3m. Panmure Gordon is predicting a 7.3% decline in full year EBIT, excluding the highly volatile impact of high rollers, to £187.5m, which is just below market consensus of £190.7m.
"We expect the current trading update to be lacklustre, reflecting the recent poor weather, and we are cautious ahead of the announcement of the inaugural rate of Machine Gaming Duty (MGD) in the Budget on 21 March," said Panmure Gordon, which is bearish on the stock.
In contrast, Peel Hunt is a buyer of the stock. "We are looking for the group to deliver an operating profit of £189.6m (pre-high rollers) against £202.3m last time. Consensus range is £181.7m to £201.2m," Peel Hunt observes.
"Without a World Cup, we still expect a relatively resilient performance from Retail, with machines offsetting most, but not all, of the decline within OTC [over the counter]. As a consequence we are forecasting Retail profits of £148m vs £149m last time," Peel Hunt added.
"For eGaming, a key area of interest will be the success of the recent marketing
campaign. While it is too early to see how profitable any new customers signed up
will be, the volume of new customers will be interesting. The additional marketing
spend and increased level of investment in the division means that profits [for eGaming] are likely to be lower. We forecast operating profits of £57m against £63m in 2010 (this is towards the bottom end of consensus). International operations should contribute c£11m (£14m), while we expect Telephone to chip in with a loss of around £4m," Peel Hunt said.
DIY barn chain owner Kingfisher's fourth quarter (to end-January) trading update should "demonstrate the ongoing benefit of internal self help and market share gains, despite a challenging environment," reckons Credit Suisse.
The Swiss outfit is sticking with its fiscal 2011/12 profit before tax estimate of £800m, ever so slightly below market consensus of £801.3m. The market is expecting full year sales of £10.86bn.
Credit Suisse thinks B&Q in the UK will see like-for-like (LFL) sales in the fism's fourth quarter ease 1.0% from a year earlier, "with ongoing softness within bigger ticket [items] but core decorative trends remaining stable."
In France, Credit Suisse sees the Castorama chain increasing LFL sales by 1.5% while Brico Depot is tipped to show fourth quarter LFL sales growth of 2.0%.
"For Poland we expect trading conditions to have remained volatile and forecast LFL sales -1.0% (although we expect a positive move on gross margins vs Q3 [third quarter] where Kingfisher undertook a higher level of marketing activity). Overall we forecast ongoing structural gross margin gains continue to be achieved across the group and our full year 2011/12 profit before tax estimate is predicated on fourth quarter group retail profit of £126m, +5% year-on-year," Credit Suisse said.
Panmure Gordon notes that while the trading period from November to end of January may be an important one for many retailers, it is not the case for Kingfisher, as it accounted for just 16% of last year's profits.
"We expect to see a 1.5% decline in B&Q's like-for-like sales (consensus is for -2%), with France still seeing like-for-like sales growth (1% and 2% at Castorama and Brico Depot respectively, in line with consensus) and we expect International markets to be negative (with Poland down by 2% and China, by around 4%, both again in line with consensus)," Panmure Gordon said.
INTERIMS
Alumasc Group
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Bloomberg Consumer Confidence (US) (14:45)
Building Permits (US) (13:30)
Continuing Claims (US) (13:30)
ECB Report (EU) (09:00)
Housing Starts (US) (13:30)
Initial Jobless Claims (US) (13:30)
New Car Registrations (EU) (10:00)
Philadelphia Fed Index (US) (15:00)
Producer Price Index (US) (13:30)
Q4
Norsk Hydro ASA, Talvivaara Mining Company
GMS
Downing Planned Exit VCT 4
FINALS
African Barrick Gold , BAE Systems, Corio NV, Eramet SA, Ladbrokes, Norsk Hydro ASA, Reed Elsevier, Talvivaara Mining Company
IMSS
Cable & Wireless Worldwide, Norcros
AGMS
Baring Emerging Europe, Media Corp.
TRADING ANNOUNCEMENTS
Kingfisher
UK ECONOMIC ANNOUNCEMENTS
Producer Price Index (09:30)
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