Market watch: Road ahead looking bumpier for FirstGroup

TRANSPORT firm FirstGroup has had a smooth ride for its last financial year but analysts will be looking for any signs of trouble further down the road when it reports full-year results on Wednesday.

In its last update, Aberdeen-based First flagged in-line trading for the year to March but painted a much more challenging picture for the new financial year. It said it was accelerating a plan to significantly reposition its portfolio with selective disposals and targeted investment.

Tony Shepard, an analyst at Charles Stanley, forecast pre-tax profits of £268 million for the group, down slightly from last year’s £275m.

He said: “FirstGroup is expected to deliver on its targets for financial year 2012 but its March trading update warned of more problems in 2013 and the share price dived.”

More details on the rescue plan for Mothercare’s UK operation are set to be unveiled on Thursday when new chief executive Simon Calver presents full-year figures. He is expected to endorse the transformation strategy announced by executive chairman Alan Parker last month, which involves cutting the number of UK stores from 311 to 200 while pushing the online business and expanding overseas.

It follows months of weak trade, including a 9.5 per cent drop in like-for-like sales in the 12 weeks to 31 March. Panmure Gordon analyst Jean Roche said annual profits were likely to dwindle to just £1.1m, driven by the impact of competition from supermarkets, specialist chains and Amazon.

That contrasts with luxury goods group Burberry, which is expected to report that profits have risen by a quarter.

Burberry recently allayed fears that the slowdown in China would hurt its growth when it reported that sales were still rising in the six months to the end of March. The City has pencilled in profits for the year of about £376m, compared to £298m a year ago.