BP investors looking for new signs of recovery

Apr 28 2008 by Iain Laing, The Journal

FIRST-quarter results from oil giants BP and Royal Dutch Shell will drive interest this week, alongside updates from hotel and leisure group Whitbread and Argos owner Home Retail Group.

Shell and BP will go head to head with first quarter figures tomorrow.

Both companies’ upstream business will be helped by record oil prices of more than US$100 a barrel, but investors in BP will be hoping for shoots of recovery after annual profits fell by a fifth last year.

Analysts forecast first quarter profits up 32% to £2.67bn with recent plans to cull 5,000 of its 97,000 employees. Royal Dutch Shell meanwhile prompted calls for a windfall tax after 2007’s record surplus of £13.9bn and is expected to have kept up the profits momentum into the new year. Clean profits are set to be 22% ahead at £3.43bn for the first quarter.

Premier Inn owner Whitbread recently dashed hopes of a £3bn merger with Travelodge after it ended talks last month. But full- year results from the chain today are not expected to disappoint investors.

Premier has become Whitbread’s star performer, with like-for-like sales at the hotel chain increasing at almost double the rate of the rest of the business.

The group’s Costa Coffee operation delivered a like-for-likes sales increase of 5.7% in what was a robust update from Whitbread, suggesting that the full year figures unveiled today will follow suit. Analysts are expecting underlying pre-tax profits of £204.9m, although comparisons with the previous year are meaningless given a raft of sales, including the £925m disposal of David Lloyd Leisure in August last year.

Argos and Homebase owner Home Retail Group will give the latest picture from the beleaguered retail sector with annual profits expected to be up 14% to £430m.

Argos maintained like-for-like sales growth throughout last year while DIY business Homebase saw a 4.1% fall.

Halifax Bank of Scotland is the next of the ‘big five’ banks to face shareholder questions, with the group’s annual general meeting being held tomorrow. The event takes place against a backdrop of increasing anxiety over write-downs and liquidity, following Royal Bank of Scotland’s £12bn cash-call to investors announced last week.

The group, owner of mortgage giant Halifax, recently issued strong denials as false rumours swept the City that it was facing a funding crisis. City watchdogs were forced to step in, as was the Bank of England as the talk failed to die down, at one stage dragging HBOS shares down 17%.

Despite its denials at the time, experts have tipped the group as one of the favourites to follow RBS’s lead and shares have once more come under pressure. The group will be quizzed over its capital funding and the likelihood of it turning to shareholder support.