Wednesday preview: Hays, Millennium and Copthorne, house builders, BoE minutes

Recruitment firm Hays could slice the dividend when it announces interim figures on Wednesday.

Recruitment firm Hays could slice the dividend when it announces interim figures on Wednesday.

Charles Stanley reckons the interim divi will be rebased - City code for "reduced" - to a penny from 1.85p last year.

"Unfortunately, for shareholders, the dividend is probably no longer affordable and the interim results could see a rebasing of the dividend payout. In particular, poor UK profitability and lack of potential recovery here has added pressure to the cost of maintaining the dividend," speculates Tony Shepard at Charles Stanley.

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"The group has been expanding its global footprint and the performance here has been good but the very low level of UK profitability is a worry and here a small loss is likely in the first half of the year," Shepard predicts.

Charles Stanley reckons other parts of the business will pick up the slack and that profit before tax for the whole group will rise to £56m from £52.7m in the second half of 2010.

Hotels group Millennium & Copthorne is expected to declare profit before tax of £159.6m for 2011 on revenue of £794.5m on Wednesday. Earnings per share are tipped to rise to 34.16p and the full year dividend is seen rising to 11.74p from 10p in 2010.

Credit Suisse recently increased its revenue per available room - or RevPAR, one of the key metrics in the hotels business - to show 4.3% growth from 2010. Considering the Swiss bank was previously expecting zero RevPAR growth, this is a fairly significant upgrade, which Credit Suisse largely attributes to popularity of hotel rooms in New York, London and Singapore.

More stable leading indicators in Europe - i.e. those economic indicators which presage an upturn in economic fortunes - plus improving US corporate expenditure trends have also jogged Credit Suisse into cranking up its RevPAR forecast.

"We look to management for positive catalysts, through: 1) a clearer strategy aimed at releasing value in the estate over a set time frame (TP [target price] set at 34% below adjusted NAV [net asset value]); 2) more disclosure on the timing of revenue recognition for the City Spring project in 2012; 3) progress on the refurbishment schedule," Credit Suisse analyst Tim Ramskill said.

A flurry of trading updates from house builders is scheduled this week. Northland Capital Partners thinks Barratt Developments has performed ahead of expectations "as margin recovery and its sales (notably in London) remain ahead of the general market."

"Of particular importance is the increasing proportion of new higher margin land coming into production on a larger number of active sites. Higher margin land currently accounts for 33% of output and we estimate the rapid growth in this proportion to 60% next fiscal year will markedly [have an] impact [on] the rate of margin recovery," Northland believes.

Panmure Gordon is also expecting a "robust tradng update" from Barratt. "We expect the group to report few surprises in its interim results given the detailed trading update issued in January. We expect the group to report 5,198 completions (+8% YOY [year-on-year) and an average selling price of £181,000 (+3% YOY). Net margins should have increased by 140bps [basis points] YOY to 6.4%. We forecast H1 PBT [first half profit before tax] of £15m versus a loss last year," Panmure Gordon said

As for sector peer Galliford Try, this company's south of England bias gives it a clear advantage, Northland believes.

"With a good combination of new sites and land coming into production with gross margins above 20% and the ability to position product to meet regional demand trends, we believe the group has considerable upside using its current strategy," the broker said.

The Bank of England will release the minutes of the February meeting of the Monetary Policy Committee (MPC) at 9:30.

The minutes will go into more depth on the reasoning behind the MPC's decision to add another £50bn to the asset purchase programme, taking it up to £325bn.

The official word on the day the decision was announced was: "In the light of its most recent economic projections, the Committee judged that the weak near-term growth outlook and associated downward pressure from economic slack meant that, without further monetary stimulus, it was more likely than not that inflation would undershoot the 2% target in the medium term."


A&J Mucklow Group, Barratt Developments, Galliford Try, Hays


Downing Absolute Income VCT 2, Heath (Samuel) & Sons, Mid Wynd International Inv Trust, Mountview Estate, PZ Cussons


Barclays, Carnival


Existing Home Sales (US) (15:00)

Industrial New Orders (EU) (10:00)

MBA Mortgage Applications (US) (12:00)


Millennium & Copthorne Hotels


Anglo Pacific Group, Filtrona PLC, Logica, London Capital Group Holdings, Millennium & Copthorne Hotels, Rexam, St James's Place, Telecom Egypt SAE GDS (Regs), Travis Perkins


F&C Managed Portfolio Trust Income Shares, Independent Inv Trust


Banco de Chile ADR


Banco de Chile ADR, Gooch & Housego


BoE Interest Rate Minutes (09:30)


Brunner Inv Trust, Chrysalis VCT, Domino's Pizza UK & IRL, Framlington AIM VCT, Independent Inv Trust, Jersey Electricity 'A' Shares, Reckitt Benckiser Group, Throgmorton Trust