Tuesday preview: Xchanging, UBM, Persimmon

Results from troubled business process outsourcing firm Xchanging should be interesting, given its shock profits warning on 9 February which coincided with the abrupt departure of chief executive and founder, David Andrews. In terms of meeting expectations for 2010, everything is fine and dandy, with the company saying revenue and underlying operating profit for 2010 are both expected to be within the current range of analysts' estimates. However, the group warned that while revenue for 2011 is expected to be within the current range of analysts' estimates, underlying operating profit will be below £55.5m, the figure which, at the time of the profits warning, represented the most bearish forecast in the broking community. Though the company's profits warning included a fair amount of detail on what has been going wrong at the company, the market always wants to know more. Panmure Gordon thinks the results "could fuel further share price weakness as analysts gain a more detailed insight into the Cambridge acquisition, contract losses and ongoing margin pressures, all of which have negatively impacted group operations." "The key focus is likely to be on the short term risk from the lack of leadership and the impact this could have on future contract renewals," the broker added. Market consensus is for pre-tax profit in 2010 of £63.1m on turnover of £778.2m. The company has already announced it won't be paying a dividend in respect of 2010. Panmure Gordon, which has a "sell" rating on the shares, is forecasting profit before tax of £66m, towards the top end of the range of forecasts, which spans from £62.3m to £67.7m. "Having already factored into our forecasts some of the expected contract terminations, deterioration in the US claims business, investment in US business development and pricing pressure on the financial services business, we believe there could be further risks from ongoing margin pressures and contract renewals further down the line," the broker warned.Events and publishing group United Business Media (UBM) said revenue for the first nine months of 2010 was up 3.9% to £643m (Sept 2009: £619m), while underlying revenue up 2.1%.Investec thinks the final quarter of 2010 might have seen an acceleration in revenue growth, and is predicting full year revenue of £881m. That puts the broker more than £10m ahead of market consensus of £869.7m. As for profit before tax, the market is expecting £146.7m, but Investec thinks the City will be more interested in the outlook statement; anything other than a forecast of a continuation of an improving trend will be a disappointment. Housebuilders Barratt Developments and Redrow have both recently published results that point to a recovery by the sector, while later on this week Taylor Wimpey will update the market on its trading.Sandwiched in between them is the giant of the sector, Persimmon, which brings out full year figures on Tuesday. The company let most of the cats out of the bag back in January when it said full year underlying profits would be at the top end of the range of market expectations, which, at the time, spanned from £75m to £96m.Given that the market consensus is now £98.8m the market suspects Persimmon might even have been acting coy when it raised guidance last month.Be that as it may, with a detailed trading update fresh in the memory focus tomorrow will be on how well trading has been going in 2011. "Whilst other housebuilders have commented about a good start to the year it remains early days in terms of the spring selling season, and the outlook for 2011 is therefore still uncertain. That said, we believe that Persimmon is a good quality company, which is well placed to cope in a housing market in which we see little improvement over the next 12 months," said Panmure Gordon."During the year [2010], we forecast that Persimmon will have completed 9.384 homes at an average selling price of £167,000. Net margins should have continued to improve to around the 8.0% level. Debt is likely to remain in check, with the group likely to report full-year debt of £51m (3% geared). This is a strong position, and provides the group with sufficient power to make value-added land deals when needed," the broker said.Panmure Gordon is below consensus with its pre-tax profit forecast of £95m. The broker is also conservative on the dividend front, predicting a full year pay-out of 7.0p, versus market consensus of 7.42p.INTERIMS AI Claims Solutions, Dawson International, Eleco, Ricardo INTERIM DIVIDEND PAYMENT DATE DS Smith, IG Group Holdings, Puma High Income VCT QUARTERLY PAYMENT DATE JPMorgan Claverhouse Inv Trust INTERNATIONAL ECONOMIC ANNOUNCEMENTS ISM Prices Paid (US) (15:00) Unemployment Rate (EU) (10:00) Unemployment Rate (GER) (08:55) FINALS Cookson Group, CRH, Development Securities, Elementis, Fresnillo, GKN, Hydro International, IP Group, Jardine Lloyd Thompson Group, Lavendon Group, Meggitt, Molins, Moneysupermarket.com Group, Persimmon, Promethean World, Provident Financial, Rotork, Share Plc, United Business Media Ltd., Xchanging AGMS Artemis VCT, Driver Group, Servoca FINAL DIVIDEND PAYMENT DATE British Portfolio Trust, OMG, TUI Travel, Wichford Persimmon