Quarterly results from BP and GlaxoSmithKline will dominate attention this week as the City’s current reporting season steps up a gear.
Oil giant BP is expected to reveal an 11 per cent drop in profits on Tuesday as the fall-out from the Gulf of Mexico oil disaster continues to hit production and pile pressure on chief executive Bob Dudley.
BP’s profits are forecast to be in the region of $4.9 billion in the third quarter, an 8 per cent fall on the previous quarter.
Production output for the period is likely to be down 12 per cent year on year, analysts at JP Morgan Cazenove said, to just over three million barrels of oil a day. BP was producing four million barrels before the disaster.
Mr Dudley has faced an uphill struggle in restoring BP’s reputation following last year’s explosion in the Gulf of Mexico, which killed 11 workers and triggered the biggest oil spill in US history.
The American, brought in to replace Tony Hayward, saw a major deal with Russia’s state-owned Rosneft fail, while a sale of Argentinian assets is reportedly on the brink of collapse.
BP’s pledge to sell 30 billion US dollars worth of assets, which has included sites in the US, Egypt, Venezuela, Vietnam and Colombia, plus the suspension of Gulf of Mexico drilling, has hit production.
Meanwhile, investors will be seeking reassurance from Mr Dudley that the company is starting to see the beginning of the end of the Macondo well crisis.
BP’s most up-to-date estimate of the cost of the disaster stands at $40 billion in order to cover the clean-up, fines and compensation - but analysts have said this could be slashed.
A $4 billion settlement with US petroleum firm Anadarko, which held a 25 per cent stake in the well, and two smaller settlements should help BP end payments into the $20 billion trust by the end of 2012, a year ahead of schedule.
Elsewhere, BP recently secured government approval for a £4.5 billion oil project, in the Clair field, west of the Shetland Islands.
BP is set to pay a dividend of eight US cents, up from seven US cents last year, which will be welcomed by investors, as it accounts for one pound in every six invested by pension schemes.
Royal Dutch Shell is expected to benefit from new exploration projects and rising gas prices when it also reports third-quarter results on Thursday.
UBS will disclose the impact of unauthorised trading on third-quarter results on Tuesday, although the bank has said it still expects a profit despite the $2.3 billion allegedly lost by trader Kweku Adoboli.
The extent to which profits have been damaged by unauthorised trading is still unknown but revenues in its wealth management arm have been at similar levels to the second quarter, UBS said recently, in a sign that investors have not pulled cash out of UBS in the wake of the scandal.
The Zurich-based bank said profit in the period was driven by “credit gains on financial liabilities” worth £1.1 billion - an indication that investors’ confidence in banks is actually falling.
Former UBS trader Adoboli, 31, was last month charged with committing false accounting and fraud during his time at the bank’s London offices. He has yet to enter a plea against the charges.
UBS, which employs 6,000 UK staff, revealed the unauthorised trading incident on September 15, and said at the time it could have tipped it to a third quarter loss.
But the bank said net profit attributable to shareholders - earnings after costs including tax are deducted - in the three months to September would include the £1.5 billion loss.
UBS Europe chief Sergio Ermotti has taken over as interim chief executive after Oswald Gruebel resigned over the incident.
While net money inflows have not fallen in the quarter, the boost from credit gains on financial liabilities shows conditions in financial markets have become more stressed and the price of debt issued by banks has fallen. Banks make a larger profit when the price of debt falls.
However, UBS also warned its cash buffer - the so-called Tier 1 capital ratio in place to protect against future crises - would be dented by the unauthorised trading incident.
Clinton Cards is locked in a trading struggle after being hammered by competition from supermarkets and online retailers as shoppers economise on gifts.
The company’s new boss Darcy Willson-Rymer is expected to report a slump in full-year profits on Thursday amid worsening sales declines.
Clinton’s shares have lost 80 per cent of their value since the start of 2010 as the chain suffered increased competition from rivals such as Moonpig and WH Smith’s Funky Pigeon website, which sell personalised cards.
It has been reported that Clinton recently had to ask its landlords for extra time to pay its rent as it struggles with falling sales.
James Dilks-Hopper, an analyst at Numis Securities, expects Clinton to report an 81 per cent fall in pre-tax profits to £2.5 million in the year to August 1, although he says the figure may be even worse. Sales are expected to drop 8 per cent to £369.2 million, he added.
When Clinton last updated the market, it reported that like-for-like sales fell 3.4 per cent in the 40 weeks, down from a 2.7 per cent drop in the first half-year.
In recent months it has attempted a fight back, having revamped its website and launched a personalised card service to allow it to compete with Moonpig.
It is refitting some of its 800 stores, which also trade under the Birthdays brand, and is selling cards for as little as £1 to help it attract cash-strapped consumers.
Clintons also plans to launch a loyalty card and kiosks to allow customers to print off personalised cards in store by the autumn.
Mr Willson-Rymer, previously managing director of Starbucks UK and Ireland, joined earlier this month after founder, chairman and chief executive Don Lewin stepped down to become non-executive director.
The group’s market value has plunged to about £15 million as its performance has steadily worsened. Shares in the Luton-based firm are currently trading at about 7p, compared with an all-time high of 321p in 2004.
Publisher Bloomsbury is expected to reveal a further boost from electronic readers when it posts half-year figures on Thursday.
Sales of e-books hit £1.5 million in 2010, up from £79,000 the previous year, driven by strong growth in the US and a surge in demand from the UK. The acceleration continued in 2011, when Bloomsbury sold £1.1 million of e-books in the first three months of the year.
At the time the company said the e-book was provoking one of the most profound reassessments of the conventional publishing industry since the development of the printing press.
Bloomsbury, which publishes the Harry Potter books, said the increasing popularity of e-book readers was paving the way for further sales growth.
In its most recent update, Bloomsbury reported significant improvement in sales throughout July and early August, due in part to a strong e-book performance during the holiday season.
Analysts expect the interims to echo these comments, though balanced with caution over the outlook for traditional high street outlets.
Sales will also have been bolstered by the hugely successful film release of Harry Potter and the Deathly Hallows - Part Two.
The final movie instalment of the boy wizard’s adventures resulted in a surge in sales for all seven books in the series.
Registrations will also start soon for Pottermore, the website dedicated to Harry Potter, where Bloomsbury is a partner and will earn revenues from sales of e-books.
Bloomsbury has also started to diversify away from consumer titles into academic and specialist publishing with the acquisition of Continium for £20.1 million in July and a tie-up with online data supplier Practical Law.
Most recently, the publisher announced it would launch an Indian version of cricket bible Wisden to tap into demand from fans in the sport’s fastest-growing market. The pool of writers is expected to include some of the great Indian players as well as respected journalists. The first edition will launch in October 2012.
Consensus forecasts for the full year to the end of February are for profits of £9.2 million, up from £7.7 million a year ago.
Drugs giant and Lucozade owner GlaxoSmithKline is among the few blue-chips to have made significant gains during the recent market turbulence.
Shares in the UK’s largest pharmaceutical firm have climbed by over 20 per cent since the middle of August as investors have warmed to a strategy based around a pipeline of new treatments for ailments such as epilepsy, lupus and rotavirus.
The perceived steady nature of large pharmaceutical companies’ income has also added to Glaxo’s appeal as investors have sought safe havens to escape the market’s volatility.
Wednesday’s third quarter update is expected to emphasise that stability, with consensus forecasts for sales suggesting little change in revenues from a year ago at £6.94 billion and underlying profits up by 2 per cent to £2 billion.
There may also be an update on plans to dispose of some of the group’s consumer brands. The group is restructuring its consumer division, which includes plans to sell off some of its lesser known consumer brands to concentrate on names such as Lucozade, Sensodyne, Horlicks and Panadol.
What growth there is will come from vaccines and also asthma and smokers’ cough treatment Advair, where higher prices in the US will offset a squeeze in Europe and other markets, say analysts.
In the first half of the year sales fell by 7 per cent to £13.3 billion, with a 4 per cent decline in the second quarter, though underlying sales rose by 5 per cent with strong pharmaceuticals and vaccines sales growth in emerging countries and Japan.
Carpetright has already warned it expects the current tough conditions to continue for some time, with recent housing and retail sales figures giving little reason to change that view.
The carpet, flooring and beds retailer has been spending heavily on promotions to get sales moving, which could see low single digit growth in like-for-like sales in Tuesday’s second quarter trading update, suggest analysts.
The first quarter saw a recovery over the previous three months from a decline of 6 per cent to a decline of 0.2 per cent, with bed sales and promotions aiding the improvement, but Carpetright has already indicated there will an impact on margins because of the heavy promotions.
Cost cutting will offset some of this, with more store closures likely over the rest of this trading year. The group had 514 stores in the UK in July.
Lord Harris, Carpetright’s chairman and a veteran of the retail sector with more than 50 years experience, said first quarter sales represented an improved trend on the previous quarter, helped by “strong promotional activity”.
He added: “Looking forward, I see no respite from the challenging environment over the next year but remain confident the group will emerge in a strong position to deliver future growth once consumer demand improves.”
Broker Numis said it expects to lower its profit forecast for the full year to April to below £15 million as it remains concerned that tough trading conditions are likely to persist for longer than previously expected.
