Belfast Telegraph

Tough times predicted for the UK's hard-pressed retail trade

By Toby Green

In a quiet week for results, the retail sector will once again be in focus with Home Retail Group announcing its interim management statement on Thursday.

After a warning last week from its blue-chip peer Kingfisher that the rest of the year looks likely to be tough for the UK retailers, there is plenty of caution ahead of its first-quarter figures, although its Homebase subsidiary is expected to follow B-amp;Q and reveal that it has enjoyed a positive start to 2011 thanks to the sunny weather and numerous bank holidays.

Arden Partner's Nick Bubb believes the DIY chain will have seen its like-for-like sales rise between one and 2%, although the analyst does point out that it represents only a small part of the company. He says Argos, however, has "big structural problems" and predicts its sales could drop by as much as 6%.

Numis Securities' Andrew Wade, meanwhile, feels Argos will see an improvement in its like-for-like sales trend, but is more cautious on its cost efficiencies than the group. He expects its full-year profit before tax to come in at £217m and says there are better stocks to choose in the sector.

Synergy Health releases its full-year results on Tuesday, and analysts are not expecting many shocks. The healthcare outsourcer, which specialises in sterilisation services, last updated the market in April - alongside its announcement that it had bought the US group BeamOne for an initial sum of $35m - when it said in a brief statement it was on track to meet expectations. Its house broker, Investec, is estimating that its profit before tax will be close to £38m, an increase of more than 15%, while it also points out that its earnings per share prediction of 51.6p is marginally below the general consensus of 52p.

In terms of the outlook, investors will be focused on its contract wins as well as comments on the situation in the UK, particularly about the NHS which is under pressure to cut costs.

The company also looks as if it could have the ability to make more acquisitions, so the market will be looking for any news on this front.

With its interim management statement set to be announced tomorrow, Punch Taverns is another company expected to have received a boost from the recent good weather. Numis Securities' Douglas Jack says that the recent sun means that the strong earnings trend seen in the first half of the year should continue. The company is in the process of splitting off its managed Spirit unit to tackle its debt, so an update will be expected on how the demerger is going. Mr Jack notes it is highly likely Punch's 12-month results will never be published: the analyst says the move could be completed before the end of its financial year in August.

PZ Cussons issues its trading update on Thursday ahead of next month's full-year results, with input costs likely to be a major focus. The soapmaker has suffered for a while now from the rising price of commodities.

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