Tuesday preview: Marks & Spencer, AB Foods, RBS

Date: Monday 03 Nov 2008

Retail giant Marks & Spencer has shed almost two-thirds of its share price in the last year as the competition hots up at the same time as consumer spending cools down.

Tuesday’s interim results are not expected to prompt a share price revival, with pre-tax profits projected to slump to £290m from £452m at the half-way stage last year.

Analysts have increasingly been turning negative on the stock, with Pali International and Seymour Pierce rating the stock a “sell” while JP Morgan recently cut its share price target for the clothes and food retailer by 15p to 235p.

M&S’s lack of foresight has led to over-expansion, over-ordering and a large increase in operating costs while long overdue work on its infrastructure has been neglected, according to JP Morgan, which keeps its “neutral” recommendation on the stock.

One of the stores providing stiffer competition for M&S is Primark, part of the Associated British Foods (ABF) group.

ABF releases full year results, with analysts going for pre-tax profit of £614.5m on turnover of £7,867m.

Primark is playing an increasingly important part in the sugar company’s fortunes, as the sugar business labours under the burden of low sugar prices following a bumper Chinese sugar crop. If the “Aldi effect” of customers trading down applies to clothing, Primark will almost certainly be benefiting at the expense of Marks & Sparks.

Write-downs and impairment charges will be uppermost on the minds of Royal Bank of Scotland shareholders when it gives a trading update on Tuesday. The share price is right on the cusp of the rights issue price so the tone of the trading update could determine whether the rights issue gets away successfully or whether Joe Taxpayer ends up owning a large chunk of the fallen banking giant.

The construction purchasing managers index is predicted to fall to 37.5 in October from 38.8 in September. A value of less than 50 indicates contraction. Housebuilding has largely been responsible for the index plummeting to its lowest levels since the series started in 1997 but there is now evidence that the slow-down has spread to other parts of the construction industry.


FINALS
Associated British Foods, Punch Taverns

INTERIMS
Kewill Systems, Marks & Spencer Group, Media Square, Pierre Consulting, Umeco

INTERIM DIVIDEND PAYMENT DATE
Lamprell, Rexam

QUARTERLIES
BG Group, Prodesse Investment

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Factory Orders (US) (16:00) , Producer Price Index (EU) (11:00)

TRADING STATEMENTS
Antofagasta (quarterly production), Croda International, ITV, Royal Bank of Scotland

AGMS
Craneware, JD Wetherspoon

UK ECONOMIC ANNOUNCEMENTS
PMI Construction (10:30)

QUARTERLY RESULTS
Energy XXI (Bermuda) (Reg S)

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