Tate & Lyle and AstraZeneca among this week's reporting firms

Oct 28 2007

British Airways and Tate & Lyle will be among firms reporting this week during another busy few days for corporate results.

Analysts are expecting a healthy increase in interim profits from British Airways on Friday despite a turbulent quarter for the company.

The company hit the headlines in August after being hit with £270 million in fines from the US Department of Justice and Office of Fair Trading for collusion over passenger fuel surcharges.

But at the operating level, half-year numbers should benefit from comparison with last year’s August terrorist scares, which caused the carrier serious disruption - costing it £100 million - as well as frustration for millions of passengers.

This summer’s poor weather also hindered the carrier in July, while in September record oil prices will have put the airline’s costs under strain.

Despite the problems, consensus forecasts for the carrier’s half-year operating profits range from £533 million to £563 million, after the firm posted profits of £263 million for the first quarter back in August.

Collins Stewart analyst Andrew Fitchie estimates profits will be around 19% higher at £548 million.

He said: “We’ll be looking out for what they’ll say about full-year guidance, and whether they reiterate their margin target, also the impact of higher oil prices and any costs they’ve managed to take out of the business.”

Sugar and ingredients group Tate & Lyle has already braced the City for the worst from Wednesday’s interim results after a profits warning in September triggered a dramatic collapse of nearly 30% in the company’s share price.

Analysts slashed forecasts after the company warned of a host problems including a small loss for its sugars business, and flat half-year results for sugar substitute Splenda.

The weakness of the US dollar has also slashed profits by £12 million - with a further currency hit expected in the second half results.

Other reasons for pessimism for Tate include significantly higher maize costs which have the potential to increasingly hit profits at its European ingredients division.

Deutsche Bank analyst Sara Welford is predicting adjusted pre-tax profits of around £115 million for the six months to September 30, more than 30% below last year’s £169 million.

She said: “Following the profit warning we do not expect further material news with the results. The market’s confidence in the story is still low and it will take a while to rebuild.”

Tate & Lyle has 65 production facilities in 29 countries, mainly in Europe, the Americas and South East Asia. It employs 7,000 people in its subsidiaries with a further 4,800 working for joint ventures.

Television production firm RDF Media joined the BBC at the centre of a storm this summer after the company’s re-edited trailer for its documentary, A Year With The Queen, showed the monarch appearing to storm out of a photo shoot.

The Palace was outraged at the misrepresentation when newspapers leapt on the story, and the scandal cost RDF’s creative director Stephen Lambert his job after an independent inquiry by Will Wyatt, a former BBC executive.

Company watchers will be looking closely at the firm’s comments on the commissioning outlook to judge the extent of the damage in the company’s interim results on Wednesday, although any impact will not be felt until the second half of the year.

ITV temporarily suspended the commissioning of new programmes from RDF when the row erupted in July, although it moved to lift the ban following the Wyatt report. RDF accepted the report’s findings and said it was in the process “of re-establishing normal commissioning relations” with the BBC.

Analysts are now cautious about full-year prospects, with Altium Securities’ Roddy Davidson downgrading revenues by 3% to £116.6 million.

He said: “Continued uncertainty regarding the resumption of trading with the BBC remains a concern and could derail management’s earlier assertion that ”a pause in commissioning“ from the BBC and ITV will ”not have a material impact on the group’s results“.

Satellite broadcaster BSkyB is due to publish first quarter trading figures on Friday, ahead of its annual general meeting in London.

Dresdner Kleinwort said it expected a more muted trading performance, with net additions - a figure that factors in those leaving the service - set to be 2% lower on the same period a year ago at 80,000.

One reason for the decline may be the fall in demand from cable homes, signalling a possible end to the upheaval seen in the sector after the withdrawal of Sky’s basic channels from the Virgin platform.

Dresdner said average revenues per user may also ease - £394 compared with £398 in the previous quarter - after Prem Plus pay-per-view soccer matches came to an end last season.

While BSkyB’s overall trading performance has remained reasonably robust, the company is under pressure on other fronts.

In particular, BSkyB faces the prospect of having to sell down its 17.9% stake in ITV, which it acquired for £940 million last November, after the Competition Commission said it believed it operated against the public interest.

The Commission has been consulting on possible remedies. And Ofcom, the UK media regulator, is looking at BSkyB’s proposals to charge for the channels it plans to offer on Freeview, the free-to-air digital platform.

Just as GlaxoSmithKline reported disappointing sales of some key products in its third quarter results, rival AstraZeneca will be forced to address similar concerns when it posts results on Thursday.

While sales of key products should have grown in the quarter, analysts are concerned about the company’s long-term prospects given that all five of its top selling products face generic challenge within the next decade.

Astra has already said the company, as well as the industry, needs to face up to the challenges posed by patent expirations and pricing pressures brought about by governments and private sector firms.

The industry has responded with a wide-scale efficiency drive, which recently saw Astra announce a three-year cost-cutting campaign that could result in the loss of 7,600 jobs worldwide.

The group employs around 65,000 people worldwide, including 2,500 at its main base at Macclesfield, Cheshire. It has a number of other sites around the UK, including at Avlon near Bristol.

Astra will also look to speed up the delivery of new products. The company’s drugs pipeline now extends to 157 projects, helped by the addition of biotech firm MedImmune which brought 14 products in clinical development and a further 28 projects.

Charles Stanley stockbrokers expects quarterly sales of seven billion US dollars (£3.42bn), up from 6.52 billion US dollars (£3.18bn) a year earlier. Key products include cholesterol-lowering product Crestor.

Profits are likely to be lower at 1.8bn US dollars (£878.5 million), against 2.18bn (£1.06bn) a year earlier.

The UK’s largest nightclub operator Luminar has so far shrugged off fears that a nationwide smoking ban would lead to a slump in the number of revellers visiting its venues.

The group, which operates the Oceana, Lava & Ignite and Liquid nightclub brands, recently announced that like-for-like sales at its branded clubs rose 13.4% in the first half of the financial year.

That was supported by rebranding work, promotion and event management activity, as well as weaker comparatives in June and July of last year.

And with the smell of cigarette smoke gone, Luminar has been pumping fragrances into clubs in order to counteract the sweaty smells generated by clubbers.

The improved performance should result in impressive half-year figures on Tuesday, with analyst Douglas Jack of stockbrokers Panmure Gordon pencilling in a 48% rise in earnings to £12 million.

He is unlikely to change his full-year forecasts ahead of the important festive trading period, which should benefit from Christmas and New Year’s Eve falling on a Monday, compared with a Sunday in 2006.

Luminar, which owns 122 clubs across the UK, wants to create a business of 120 high quality venues by 2009 after the sale of its majority stake in its entertainment division, including Jumpin’ Jaks and Chicago Rock venues, for £76.8 million last year.