The week ahead: Scottish & Southern to feel the heat of profits squeeze

Scottish & Southern Energy, which plans to increase gas bills by an average of 9.4 per cent on 1 December, will update the market on Wednesday with its half-year results. Analysts expect profits to have been squeezed.

The UK's second-biggest energy firm, which owns Southern Electric, Swalec and Scottish Hydro Electric, is the first of the major suppliers to raise its charges this year. It says its gas arm has made a loss for years and blames the bigger bills on a 25 per cent increase in wholesale gas prices this year.

Analysts at JP Morgan Cazenove expect operating profits from the generation and supply business, recently the driving force of profits growth, to fall for the first time since 2003. SSE's renewable electricity generation from wind farms and hydroelectric power plants suffered poor output in the first quarter as a result of a lack of wind and rain. The company compensated by producing more power from burning coal and gas, which has a lower profit margin.

JP Morgan reckons pre-tax profits will have fallen by 10.4 per cent year-on-year in the first half - from 410.5 million to 368m.

Analysts at Citi are equally gloomy and have forecast that operating profits will fall by 5.7 per cent.

Investors in Vodafone will be hoping for signs of further improvements in key markets such as the UK when the mobile phone giant posts half-year results tomorrow.

But consensus forecasts show that operating profits for the six months to June are flat year on year, at 5.9 billion.

The company recently unveiled moves to offload its stake in China Mobile for nearly double the price it paid ten years ago. The plans come amid pressure from shareholders to dispose of the company's minority stakes, which also include 45 per cent of America's Verizon Wireless.

Maurice Patrick, analyst at Barclays Capital, said that in the short-term cuts to regulation, strong data usage and a rebound in emerging markets should lift Vodafone's full-year hopes.

The Newbury-based group may choose to shed more light on its tax position, after it denied allegations that it had been let off a 6bn tax bill by HM Revenue & Customs.

HMRC also denied the reports, but this did not stop a series of protests outside Vodafone stores in the last couple of weeks.

J Sainsbury's half-year results on Wednesday will be watched with interest to see whether the company can convert its sales performance into stronger profits. The supermarket sector is proving increasingly competitive as cash-strapped consumers prove resistant to price hikes caused by commodity-price inflation.

But Sainsbury's is one of the strongest players in the market - its like-for-likes, excluding fuel, grew by 2 per cent in the past half, compared with 1.3 per cent in the last quarter at Morrisons and 1.2 per cent at Tesco's UK stores in the last half-year.Analysts' consensus is for adjusted pre-tax profits of 330m - an increase of 7 per cent.

Arden Partners analyst Nick Bubb said: "Seven per cent growth is not fantastic and Sainsbury's is still nothing like as profitable as Morrisons or Tesco. It's their bottom line that they really need to work on."

The real growth in the supermarket sector is coming not from like-for-like sales growth but from a space race, with the rush to open new stores now the biggest in the history of the UK supermarkets.

Sainsbury's is planning to expand more rapidly than its competitors over the next year by increasing its store space by 2 or 3 per cent through new supermarkets and its Local chain of convenience stores.