Market watch: City looks for lift as British Airways finals approach

Published on Saturday 10 May 2008 14:25

BAD news from the US wiped out the FTSE 100 Index's earlier advances in a shortened trading week, leaving the blue-chip index virtually unmoved.

Huge credit crunch losses from US insurance giant AIG, a profit warning from Toyota and downbeat news on the US economy set the FTSE back 1% in the final session of the week.

With policymakers at the Bank of England thwarting hopes of an interest rate cut on Thursday, and record oil prices above $126 a barrel overshadowing markets, the FTSE closed the week 10.8 points lower at 6204.7.

Annual results from Sainsbury's and British Airways are the highlights of a busy week, which also sees figures from travel giants TUI Travel and Thomas Cook.

BA reports full year figures on Friday after a torrid past year for the group, blighted by its chaotic move to Heathrow's Terminal 5 and fuel price woes from soaring oil costs.

The shambolic opening of T5 saw the group suffer embarrassment worldwide, while the latest passenger statistics showed it also impacted on business, with 7.9% fewer passenger travelling with BA last month year-on-year.

Friday's figures will not show any financial hit from the T5 troubles, coming right at the end of its financial year, but they are likely to reveal the true cost of BA's vulnerability to the rocketing cost of crude.

The carrier has already said that it expects its fuel bill to be 2.1bn in the year to March 31 and warned that it could have to fork out 2.5bn in the current financial year.

With oil passing $126 at one stage in recent days, travel groups have been hammered as investors fear the inevitable bottom-line impact.

Despite its cost pressures, BA is expected to increase pre-tax profits by 44% to 877m. Its full-year success is set to come after it banked a better-than-expected 35% hike in profits for the nine months to December, at 788m, with a weak dollar helping offset fuel price hikes.

Pub owner Enterprise Inns is set to unveil its results for the six months to March 31 on Tuesday. The group admitted in a trading statement released on March 28 that it had shelved its refinancing plans as a result of troubled debt markets and difficult trading conditions. However, it also announced that it may be able to convert into a low tax Real Estate Investment Trust (REIT). Analysts believe that attaining REIT status could add an extra 150p to the fair value of the group. But Enterprise made a point of saying the smoking ban and reduced consumer confidence levels had affected trading. Sales for the year to September 2008 are forecast to come in at 914.5m, rising to 934.7m in the following year.

Sainsbury's has had a far more successful year, as annual results are expected to reveal on Wednesday. It heaped the pressure on its 'big four' rivals in March with news of a 4.1% hike in fourth quarter like-for-like sales, which saw full-year comparative sales lift by 3.9%.

Against Tesco's annual sales growth of 3.5%, excluding petrol, the result signalled that Sainsbury's is reclaiming the ground lost to competitors in recent years.

Its revival strategy has delivered 2.7bn of sales growth since its launch three years ago, compared with original hopes for a 2.5bn improvement. The sales success is set to be reflected in its results for the year to March 22, with analysts pencilling in a double digit rise in underlying pre-tax profits to 485m, up 28% on the previous year's 380m.

The week ahead

TOMORROW

Robert Wiseman Dairies, Stobart (Finals); Southern Cross Healthcare (Interims); HSBC (Trading Update); Centrica (AGM)

TUESDAY

Babcock International (Finals); Enodis, Enterprise Inns, TUI Travel (Interims); Premier Foods (Trading Updates); Alliance & Leicester, Greggs, Lookers, Next, Travis Perkins (AGMs)

WEDNESDAY

FirstGroup, Sainsbury's (Finals); Compass (Interims); Logica, Rentokil Initial, Unilever (AGMs)

THURSDAY

3i, BT, National Grid, SABMiller (Finals); Thomas Cook (Interims); Barclays (Trading Update)

FRIDAY

British Airways (Finals); Holidaybreak (Interims); SMG, UTV Media, Ladbrokes (AGMs)