Tuesday preview: SW Water to put on spurt at Pennon

Date: Monday 28 May 2012

Water company Pennon, a firm favourite with risk-averse investors, is set to to release full year results on Tuesday.

Market expectations are for profit before tax of £196.2m on revenue of £1.22bn.

Earnings per share (EPS) are expected to be in the region of 43.29p and the all-important divi is topped to rise to 26.63p, which would give a yield of around 3.7%. The firm has committed to 4% real growth per annum in the dividend until 2015.

Broker Charles Stanley is forecasting revenue of £1,274m and operating profit of £271m, with growth from the more defensive water utility (South West Water) offsetting a slightly weaker performance from the smaller more cyclical waste division (Viridor).

According to Charles Stanley analyst, Tina Cook: "SW Water is expected to deliver growth in underlying operating profit to £201m (FY11 £190m), driven by allowed price increases of 8% (3.4% real price rise plus RPI of 4.7%), offset by lower volumes, higher operating costs and a substantial increase in capital investment over the prior year. The business continues to perform strongly against the 2010-15 (K5) regulatory targets."

Cook thinks Viridor's profits will be a little bit below last year at £71m, "due to a reduction in recyclate prices in weak economic conditions and higher bid costs resulting from increased activity on long-term projects, partly offset by initial contributions from recent acquisitions."

"The near-term outlook for Viridor is likely to be a key focus with the UK back in recession. Management are expected to confirm that medium-term prospects remain on track, underpinned by a growing pipeline of long-term projects to drive future growth (e.g. 25-year contract for treatment of Glasgow’s residual waste and preferred bidder in South London with many potential energy-from-waste plants in the pipeline)," Cook added.

Web-hosting and data storage company Iomart issued a confident update in the middle of March, which could account for Singer Capital Markets' decision to initiate coverage with a "buy" recommendation and a price target of 165p.

The market has pencilled in £6.7m for profit before tax on revenue of £33.2m.

"Iomart is benefiting from the shift towards outsourcing IT infrastructure and can point to good levels of recurring revenue, sticky customers and forward visibility," notes Northland Capital Partners.

However, the broker adds the caveat that this seems to be reflected in the price, with the company trading on around 20.2 times projected earnings for the financial year just ended, and 16.2 times earnings forecast for the current year.

On the economic front, the CBI Distributive Trades Survey for May is scheduled for release on Tuesday. Barclays Capital is above consensus in expecting the total sales balance to rise to 0 from -6 (consensus -8).



INTERIMS
Brewin Dolphin Holdings, Topps Tiles

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Confidence (US) (15:00)

FINALS
Acal, API Group, De La Rue, FFastFill, Iomart, Mckay Securities, NewRiver Retail Ltd. (Reg S), Pennon Group, Renold, Scapa Group, Torotrak

ANNUAL REPORT
Sphere Medical Holding

IMSS
Wolseley

AGMS
Alkane Energy, Concurrent Technologies, Continental Farmers Group , Corac Group, Dillistone Group, Edinburgh US Tracker Trust, Eleco, Empresaria Group, Empresaria Group, F&C Commercial Property Trust Ltd., ISIS Property Trust Ltd., JSC KazMunaiGaz Exploration Production GDR (Reg S), Lonrho, New Britain Palm Oil Ltd. (DI), Oracle Coalfields, Oxford Advanced Surfaces Group, Tamar European Industrial Fund Ltd., Valiant Petroleum, Valirx

UK ECONOMIC ANNOUNCEMENTS
CBI Distributive Trades Surveys (11:00)

FINAL DIVIDEND PAYMENT DATE
APR Energy, Hochschild Mining, Randgold Resources Ltd.

FINAL EX-DIVIDEND DATE
Kakuzi Ltd.

Q1
Public Power GDR SA (Reg S)


JH

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