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Results keep up Centrica pressure

Anger over rising energy bills is likely to be stoked this week with profit figures from British Gas owner Centrica, while BAE Systems is also due to report.

British Gas owner Centrica unveils full-year results on Thursday as it faces renewed political pressure over energy bills and the threat of the supplier being broken up.

Shares have plunged by more than a fifth since last autumn when Labour leader Ed Miliband pledged to freeze tariffs if the party wins power and were driven down further following a fresh intervention this month by Energy Secretary Ed Davey.

In a letter, he urged competition authorities to "think radically" as they consider whether to launch a full-scale investigation into the energy market that could see British Gas broken up.

Mr Davey's intervention highlighted its dominance in the gas supply market, citing figures that showed its margins were several times higher than they were for electricity, and claiming consumers could save £40 a year if they were brought in line.

There was a public outcry after a raft of energy price hikes at the end of last year, including an average increase of 9.2% by British Gas - 8.4% for gas and 10.4% on electricity from November.

But a shake-up of the Government's so-called green levies on bills saw savings which were passed on via a 3.3% reduction for the firm's customers from January.

Last November, Centrica slashed expectations that annual group earnings would rise by 3% to 4%, saying they were now likely to remain flat at £2.7 billion after being hit by challenging conditions in its business supply arm across the UK and United States.

It said profit margins in the residential supply business would hold firm with margins edging only slightly lower to just under 5%. The division raked in profits of £606 million in 2012 and any increase is likely to spark further public anger.

In the first half of 2013, they were up 3.2% to £356 million as Centrica cashed in on bitterly cold weather and tariff hikes.

Despite price rises ahead of the peak winter period, Charles Stanley analyst Tina Cook said profits at British Gas Residential were expected to fall slightly short of the company target of £600 million, with the energy supply margin slightly weaker than last year.

She said attention will also focus on customer numbers, which stood at 15.7 million in the third quarter, following a media campaign to raise customer awareness of switching.

Elsewhere, the group is in line to take over the energy supply arm of Ireland's state-owned Bord Gais. It is also looking for a successor to finance director Nick Luff.

BAE Systems reports annual profits on Thursday following a year in which it has shed hundreds of UK jobs and faced a major setback in its Typhoon jet programme.

The group announced in November that it would stop shipbuilding in Portsmouth with the loss of 940 jobs while there would be 835 redundancies in Glasgow, Rosyth, Fife, and at Filton, near Bristol.

In December, it revealed that a deal reportedly worth £6 billion to sell 60 Typhoon jets to the United Arab Emirates (UAE) had collapsed, despite Prime Minister David Cameron pressing the case for it during a Middle East visit.

It also said it was still in negotiations with Saudi Arabia over a Eurofighter Typhoon deal, adding that while good progress had been made, a definitive agreement had yet to be reached.

The group has said profits for the year would suffer if price negotiations for the jets dragged on beyond 2013.

Experts at Deutsche Bank are expecting group sales to have increased by 5.5% to £18.8 billion over 2013 and are pencilling in a 9% rise in underlying pre-tax profits to £1.8 billion, but this does not take into account the impact of the Saudi deal not being signed.

The analysts added in a note: "Following the December disappointment over the hoped for UAE Eurofighter contract, the market will be looking for an update on the remaining export contract pipeline.

"After the UAE news, management will likely need to work to rebuild confidence and credibility around this."

Elsewhere, BAE was hit by the US government shutdown late last year which saw more than 1,000 US intelligence, security and support staff sitting idle as Washington politicians squabbled over the budget.

Supermarket giant Asda will give its belated sales figures for Christmas trading on Thursday when US parent Wal-Mart reports its full-year results.

Figures from its UK rivals have already revealed how tough the festive period was for the "big four" supermarkets, with the chains resorting to aggressive discounting to lure in cost-conscious shoppers as they faced increasing competition from the likes of Aldi and Lidl.

Market leader Tesco blamed a weak market for its 2.4% drop in UK like-for-like sales over the six weeks to January 4, while a 5.6% decline in sales over the festive period for Morrisons led the Bradford-based chain to warn over profits.

Even resurgent player Sainsbury's posted largely flat sales over the quarter to January 4, up just 0.2%, in what it described as a "very tough sales environment".

Recent figures from Kantar Worldpanel signalled no let up in the difficult conditions, showing the weakest growth in the overall grocery sector since 2005.

The data revealed that till rolls were 2.4% higher in the 12 weeks to February 2 - which includes inflation of 2.1%.

Asda joined Tesco and Morrisons in losing market share over the period, to 17.3% from 17.7% a year earlier, even though it managed to grow sales by 0.5%, according to Kantar.

But Leeds-based Asda narrowly maintained its position as Britain's second biggest supermarket despite Sainsbury's closing the gap with a rise to 17.1%.

Andy Clarke, chief executive of Asda, cautioned last February that 2013 would be a "challenging and uncertain year".

His comments came as it reported a 0.1% rise in like-for-like sales, excluding petrol, for the 14 weeks to January 5, 2013, while full-year sales lifted 1%.

It has since suffered three quarters in a row of slowing growth, prompting the group to announce a £1 billion price-cutting plan in November.

Its parent group Wal-Mart has already warned over its annual results earlier this month after facing additional charges relating to its Brazilian business.

The group also said it expected sales at US stores to be slightly below expectations and cautioned that full-year adjusted earnings may come at or slightly below the low-end of its prior forecasts.

Newcastle United owner Mike Ashley's retail empire Sports Direct International posts third quarter figures on Wednesday, having recently revealed that trading had returned to more normal levels after last year's exceptional sales growth.

The admission came as a 17% rise in half-year profits to £146.2 million missed the elevated expectations of some analysts, sending shares sharply lower in December following a strong run that earned it promotion to the FTSE 100 Index.

But while third quarter sales growth is expected to have slowed, it is set to show a respectable rise given tough comparatives.

Analysts at Citi are pencilling in a 6% rise in like-for-like sales over the period, with comparable gross profits up 8.5%.

This comes despite a tough act to follow a year earlier, when like-for-like sales soared by 17% in the same quarter.

Citi's experts said this year's football World Cup in Brazil and weak competition after the demise of rival JJB Sports will continue to boost Sports Direct and make its target to achieve around 15% annual growth in underlying earnings over the next three years "increasingly plausible".

Sports Direct is also likely to face questions over its plans to work with Debenhams after striking a complex financial arrangement giving it the option to take a 6.6% stake in the department store group amid speculation it is lining up celebrity-sponsored sportswear ranges for the chain.

The group bought a near-5% stake in Debenhams and then sold the holding just days later, agreeing the option deal instead.

It said at the time it wanted to ''explore options'' over how the two could work together and was ''looking forward to meeting with Debenhams' senior management team in the near future''.

Mr Ashley, who founded Sports Direct and still owns 62% of the group, reportedly wants to introduce ranges endorsed by the likes of Sports Direct brand ambassadors double Olympic gold medal rower James Cracknell and tennis players John McEnroe and Pat Cash.

Sports Direct, which has 409 stores in the UK and also operates in 19 other countries, secured promotion to the FTSE 100 Index in September following a 70% leap in its share price.

As well as the absence of JJB, the group has benefited from the positive impact of a lucrative bonus scheme, which recently rewarded around 2,000 staff with shares worth more than £68,000.

While its half-year figures missed some expectations, it has kept the company on track to meet targets under a new four-year bonus scheme, due in the summer of 2015.


From Belfast Telegraph