LONDON Week Ahead: BoE minutes, Reckitt Benckiser, Tesco

In a week shortened by the Easter break, the big event is likely to be the release on Wednesday of the minutes of the March meeting of the Monetary Policy Committee(MPC), the team that determines the Bank of England’s interest rate policy. 

The inflation trend finally headed down in March, a development of which the MPC would have been aware at the time it made its decision. As such, it is probable that the committee felt under less pressure to lift rates in order to rein in rising prices, so the expectation is that the voting was the same as in February, with two members voting for a quarter point hike and one for a half point increase, while the rest voted for the status quo.

On the company front, Cillit Bang maker Reckitt Benckiser gives a third quarter update at noon on Wednesday which shareholders hope will be a catalyst for the shares to recover some of the losses seen this week in the aftermath of the decision by chief executive Bart Becht to retire.

Panmure Gordon thinks there is little cause for optimism, however. “We believe the picture will remain one of low, or no, category growth in developed markets, continued high levels of promotional activity and only modest price inflation despite seemingly ever increasing commodity costs. These factors, we believe, will continue be the drivers of investor sentiment, rather than the first full quarter of SSL, continued good growth in developing markets and another quarter with no generic entry for Suboxone.”

Specifically, the broker forecasts first quarter sales growth of 12.5% to £2,253m, versus a consensus of £2,279m, made up of 4.0% like for like growth (3.6% excluding Pharma), 9.7% from the acquisition of SSL and -1.1% currency.

“We forecast 0% growth in Europe, 2% growth in North America & Australia and 13% growth in Developing markets. We expect the modest growth achieved in developed markets to represent market share growth by Reckitt. For Pharma, we pencil in 10% growth in Q1, with the switch to lower price Suboxone Film continuing to dilute growth, but creating a more defensible business in a post generic world,” Panmure Gordon said.

Royal Bank of Scotland, meanwhile, expects the overall trends to be similar to those seen in 2010, “given the continued high promotional intensity in Europe and depressed developed markets growth.”

It forecasts underlying sales growth of 4.6% and a one-tenth of a percentage point improvement in operating margin, driving net income up 10% and earnings per share (EPS) up 9%, with currency headwinds trimming a couple of percentage points off EPS growth.

“We expect a continuation of the trading trends seen in 2010, with base business growth depressed by weak demand in developed markets. Uncertainty surrounding the timing and impact of generic Suboxone competition looks set to continue to weigh on the shares,” RBS said.

Supermarket giant Tesco brings out results for the year to 27 February on Tuesday, the first set of results delivered by new boss Philip Clarke.

Sam Hart, of broker Charles Stanley, thinks the company will make a profit before tax of £3.5bn, up from £3.18bn the year before, on sales of £62.5bn, up from £56.9bn.

Earnings per share are tipped to grow to 32.5p from 29.2p while the broker thinks the full year dividend will be hiked to 14.5p from 13.1p. 

“We very much regard Clarke as a ‘continuity’ appointment and, therefore, anticipate no radical changes to current group strategy,” Hart says.

“Tesco Bank is forecast to report a 12% rise in operating profit to £280m. An update on the launch schedule for mortgage and current account products is expected to be provided," Hart added.