Market Watch: AstraZeneca results set to reflect tough year

ASTRAZENECA will be among the heavyweights kicking off the blue-chip results season this week. It has had a torrid year, which is likely to be reflected in subdued profits growth in its annual figures on Thursday.

The group has been hampered by problems with its newest medicines, increased legal costs and greater competition from cheaper rivals.

The company last month revealed it had discontinued its Motavizumab drug, used to prevent serious lung disease, leading to a 287 million accounting charge.

This update came shortly after AstraZeneca confirmed there would be further delays in winning approval from US regulators for its heart medicine Brilinta.

The US Food and Drug Administration (FDA) wanted further analysis of research into the blood-thinning pill before clearing the drug for sale.

But the firm announced on Friday it had already responded to the FDA - quicker than analysts had expected - and this could lead to the drug being available in the US sooner than hoped.

Earlier in the year, the group said its profits dropped 26 per cent in the third quarter after it paid out nearly 300m in claims relating to its Seroquel drug. It set aside 128.6m to resolve 18,250 claims in the US amid allegations that the schizophrenia treatment caused diabetes and other side-effects in some patients.

Keith Bowman, an analyst at Hargreaves Lansdown stockbrokers, said the Anglo-Swedish pharmaceutical group is expected to post a 1.9 per cent rise in pre-tax profits of 8.2 billion.

He said: "The absence of last year's windfall from the H1N1 pandemic - swine flu - vaccine may provide some drag, although a continued thrust to expand drug sales across the emerging markets could compensate."

AstraZeneca, which employs 11,000 staff in the UK and has sites in Edinburgh, Brixham, Loughborough, Luton, Macclesfield and Wilmslow in Cheshire, shifted its focus to new drugs such as Brilinta in the wake of increased competition from cheaper rivals against its core range.WH Smith will reveal how its business stood up to December's Arctic weather when it gives the market on Wednesday a trading update for its second quarter.

Before the snow fell, the City forecast that like-for-like sales at its high street and travel hubs would decline by 5 per cent and 1 per cent respectively.

Several retailers have reported that the snow kept shoppers at home over Christmas and it remains to be seen what impact it will have had on WH Smith, particularly given the position of many of its stores at travel hubs.

WH Smith has moved away from selling higher priced, lower margin goods such as CDs and has focused on selling confectionery, books and stationery.

Its like-for-like sales have declined as a result of this shift in strategy, but profits have been creeping up.

The group achieved a 9 per cent hike in full-year profits to 89m in the year to August 2010 despite a 4 per cent drop in like-for-like sales.

It followed that with a solid performance in the last quarter when like-for-like sales in its travel shops dropped 1 per cent, while high street sales declined 4 per cent.

Analysts predict WH Smith will make a 93m pre-tax profit, a 4.5 per cent increase on the previous year.

WH Smith's travel business operates 516 outlets at airports, train stations and motorway service areas, while the high street business has 573 sites.

Shareholders in Britain's biggest shopping centre group will vote on controversial plans to buy the Trafford Centre in a 1.6bn deal on Wednesday.

Plans by Capital Shopping Centres to buy the centre sparked a rebellion from 5 per cent shareholder Simon Property Group, which complained that too many shares were being offered to finance the deal.

But analysts expect the transaction to go through, because it is reported to have the backing of major shareholders, including the South African businessman Donald Gordon, who owns a 13.3 per cent stake.

Capital, which owns the Lakeside and Metro malls, agreed to buy the 1.9 million square foot retail park from Peel Holdings, which is controlled by billionaire John Whittaker.