Results set to test investor confidence

SEVERAL of the biggest names on the London market will test investor confidence this week, with results due from the likes of BT, BP, GlaxoSmithKline and the first of the big players from the banking sector.

Barclays will kick off the banks’ reporting season on Thursday with full-year results likely to set a downbeat tone. The bank is expected to provide evidence of the challenge facing the sector of having to grow income in an increasingly competitive market. NatWest Stockbrokers is predicting pre-tax profits of 3.6bn, a slight decrease on last year’s figure of 3.65bn.

Analysts are also concerned the bank is conceding ground on the high street to more competitive rivals such as HBOS and Northern Rock.

Lloyds TSB has already warned that full-year results on Friday will be gloomy, with higher bad debt provisions and 200m set aside to cover mis-sold endowment mortgages and pensions, including at life insurer Abbey Life.

Margins are also under pressure amid increased competition on the high street, although Lloyds said in December that it was pleased with demand.

Fund manager Gerrard expects pre-tax profits of 4.12bn, compared with 4.29bn a year earlier, and said there was a likelihood that Lloyds TSB could also consider a cut in its annual dividend.

Telecoms group BT will be under pressure on Thursday to show it can get somewhere near the ambitious targets set in April of 6% to 8% revenues growth over the following three years.

In BT’s last update in November, revenues edged ahead 2% in the six months to September 30 and analysts are not expecting spectacular figures this time around.

The market is likely to be looking for third-quarter pre-tax profits of 423m, up from 381m last time, as well as an encouraging update on the take-up of BT’s much-heralded broadband offering.

Pharmaceuticals group GlaxoSmithKline’s fourth quarter is expected to have been its toughest of the year after suffering from the impact of the weak US dollar and the launch of competition to its antibiotic Augmentin.

Despite this, like-for-like sales growth of 5% should be reported on Wednesday and Gerrard is forecasting annual pre-tax profits to increase to 6.77bn from the 6.17bn seen a year earlier.

Investors will be keen to see if British Airways can get the corporate week off to a flying start on Monday when the airline reports third-quarter figures.

Gerrard is predicting pre-tax profits for the nine-month period of 182m against the 250m loss announced last time. This estimate excludes any profits or losses from disposals.

When it released third-quarter traffic figures earlier this week, BA reiterated its warning that annual revenues this year would be lower than last and the threat of war in Iraq is unlikely to do much to aid the company’s outlook.

Oil giant BP is likely to report full-year results broadly in line with expectations on Tuesday but analysts are warning of disappointment ahead.

NatWest Stockbrokers expects the company to reveal that pre-tax profits have fallen by around 25% to 5.2bn from 7bn in the same period last year.

Speculation is rife that BP will abandon production growth targets after failing to meet them in 2002 and analysts believe such a move will represent a major change in the way such companies are valued by the City.

PizzaExpress’s interim results on Tuesday are set to confirm that trading at its London outlets continues to drag down group sales, despite the introduction of larger pizzas at its restaurants before Christmas.

The group is thought to have seen like-for-like sales decline by around 5% in recent months and fund manager Gerrard expects pre-tax profits for the half year to have fallen to 15m from 22m in the same period last year. The City will also be eager to see if PizzaExpress reveals any developments on possible takeover interest when it reports the figures.