Marketwatch: Appetite for Isas set to lift Legal & General

INSURANCE and pensions firm Legal & General and international security group G4S will be hoping to provide some cheer to the markets in what is likely to be a difficult week following recent losses across the board.

The signs ahead of Thursday's results from L&G look promising after figures from rivals Aviva, Prudential and Standard Life benefited from a recovery in demand for savings products in the UK, as well as more stable stock markets.

L&G recently reported record UK savings sales for the first nine months of its year, up 43 per cent to 961 million.

The group has benefited from an increased appetite to save, with Isa sales rising in particular as confidence has returned to equity markets and following the increase in the annual Isa limit to 10,200.

Unit trusts and pensions also saw a pick-up in 2010, although sales of housing-related and protection products have weakened amid a slowdown in the property market.

Kevin Ryan, an analyst at Investec Securities, said: "People are getting so fed up with bank deposit rates, they are having a go at insurance-based products. The UK savings market is clearly back to stay."

But despite the savings boost, L&G's figures are expected to struggle to make headway against the strong performance seen in 2009. Analysts are forecasting underlying pre-tax profits to remain flat at 1.07 billion, while they expect operating profits to fall 5 per cent to 1.05bn.

In recent years, L&G has been increasing its efficiency and focusing new business activity on the markets it considers to be the most attractive in terms of growth potential.

It slashed its UK workforce by 17 per cent in 2009 as part of aims to control costs.

Results from security group G4S will be scanned on Tuesday for evidence that government spending cuts have delivered the hoped-for boost in outsourcing.

The largest employer quoted on the London Stock Exchange, with 595,000 staff in more than 110 countries, has said it does not expect sales or profits from UK government contracts to drop this year.Government security accounts for around 29 per cent of the group's sales, within which the UK government represents around 9 per cent.

Analysts at JP Morgan Cazenove said while there was "strong debate" over the impact of austerity cuts on G4S's government security business, they believe spending cuts, on balance, will be positive for outsourcing.

Any hit in the UK will also be limited by the Crawley-based firm's burgeoning emerging markets business, which now accounts for more than a third of group profits.

Trade in these areas drove a 5.6 per cent rise in revenues in the first nine months of 2010, up 4.2 per cent when adjusted for currency movements.

Analysts are expecting profits to rise by 13.3 per cent to 411m for the full year.

JP Morgan's experts said G4S has a "good track record of growth", having never reported a sales decline in any quarter throughout the recent recession.

They added: "The main risk is the outlook for the cash services business, but this may now be benefiting from a recovery in global interest rates and cost cutting actions taken last year."

French Connection is expected to cheer investors with its full year results on Friday after it emerged relatively unscathed from freezing December. The fashion retailer last month said pre-tax profits will be least 6.8m in the year to 31 January, compared to 1.6m the previous year and well ahead of previous estimates of between 2.6m and 5.1m.