Market Watch: City analysts put spending in the spotlight

CONSUMER spending ahead of the key Christmas season will come under the spotlight this week with a trading update from Dixons Retail.

The electrical retailer, which owns Currys and PC World, reports half-year results on Thursday after recent trading figures suggested its recovery plan was paying off.

At its first-quarter update in September the group revealed UK like-for-like sales increased by 6 per cent, buoyed by an exclusive deal to market the iPad, as well as promotions on televisions at the time of the football World Cup.

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Analysts at Execution Noble are expecting interim figures to show the same positive trends after it surveyed 700 customers at Lakeside Thurrock shopping centre, where the Currys brand competes with Best Buy and Comet. Execution claimed the results signalled that Currys' price perception was strong and that it can compete on price with Best Buy, which recently launched in the UK.

Execution Noble recently raised its profits forecast for Dixons Retail for the full year by 15 per cent to 138 million.

The group - formerly known as DSG International - is two-thirds of the way through a three-year revival plan.

It reported a 61 per cent rise in underlying pre-tax profits to 90.5m for the year to 1 May.

The world's biggest catering company, Compass, recently raised expectations for revenues, but the market will be combing Wednesday's full-year figures for assurances over the impact of spending cuts.

The Surrey-based firm derives around 35 per cent of revenues from the education and healthcare sectors, according to analysts at Deutsche Bank, which are two sectors that have been hit hard by the UK government's austerity drive. UK sales have been under pressure for the group, but improved in the second half.

The company, which provides catering at venues including Chelsea Football Club and the All England Tennis Club, saw revenue growth of 5 per cent in the second half to September. Overall growth has been driven by new business in North America, such as contracts with Oracle and Amazon, and in Australia and Brazil.

Rather than suffering from belt-tightening following the recession, Compass has seen growth boosted by "a relentless drive for private and public sector organisations to save money by outsourcing their catering requirements," said Oriel Securities analyst Jeffrey Harwood. He is forecasting a 17 per cent rise in underlying pre-tax profits to 920m from 784m a year earlier.

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A year on from Ofwat's "tough" ruling on household bills, water company Severn Trent is expected to disclose its dividend policy for the four years to 2015 when it presents half-year results on Tuesday.

The utility giant, which serves more than eight million customers across the UK, has already announced a one-off 10 per cent cut to its dividend in 2010/11 following the Ofwat determination, which required Severn to cut average household bills by 4 per cent in real terms by 2015. Severn called the ruling "tough", but in the year to date Morgan Stanley said Severn and the UK's three other listed water stocks have seen their shares rise by about 25 per cent, compared with a 9 per cent fall for the broader utility sector.

The publisher of the Daily Mail and Mail on Sunday also reports annual results on Thursday after a resurgent year for the group. Daily Mail & General Trust returned to profits growth in the half year thanks to a recovery in hard-hit advertising markets and previous hefty cost-cutting efforts.

The group said at the end of September the turnaround had continued into the second half and said it was on track for an "outcome for the year at least in line with City consensus expectations". At the 11-month stage, total group underlying sales were up 2 per cent.

Banknote printer De La Rue has already warned of a hefty blow to half-year profits - due out on Tuesday - following its recent production crisis. It said in September that production problems at part of its major factory in Overton, Hampshire, would hit profits by at least 35m for the half year to the end of September as sales volumes were also affected.

The debacle has already cost the group its chief executive, with James Hussey resigning in August. The group further shocked the market when it revealed in September that investigations into the production troubles allegedly found staff had "deliberately falsified" documents.

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