Friday preview: Berkeley's reports and Sainsbury's hits Argos deadline

As well as the deadline for Sainsbury's to make a further bid to acquire Argos owner Home Retail, Friday also sees housebuilder Berkeley Group’s full year interims amid the slowdown in the prime central London property market.

The City expects the Berkeley to report a drop in earnings per share to 231.2p from 263.6p the previous year.

Berkeley’s share price has come under pressure since the start of the year on growing concerns about the sustainability of demand for London’s prime real estate and political uncertainty surrounding Britain’s 23 June referendum on its membership in the European Union. There are also fears that higher stamp duty for second home owners may also impact the market.

“Whilst we believe the market for high end London properties has slowed quite sharply, with little recovery expected in the near term, we think that Berkeley has more resilience than the market is giving it credit for,” said Numis analyst Chris Millington.

Berkeley reported in its last update that it held £4.1bn of forward sales due for delivery over the next three years and against this it has £1.1bn of cash deposits on account, about 25% of value.

Millington said he believes many of the forward sales relate to the group’s high-end units, which could lead to the record levels last reported, taking into account the large amount of more affordable developments also held by the company.

“This alongside the strength of the balance sheet (£260m of cash at the end of H1) and Berkeley prudence in recognising profits means that its target of £2bn of pre-tax profits between 2016 and 2018 and an annual dividend of 200p should be well underpinned,” Millington said.

“Following the sell-off in the shares Berkeley is trading on 1.9x P/NTAV, 7x PE and a yield of 6.8% which we feel is a highly attractive entry point for company with such a strong asset base and track record.”

As for Sainsbury's, following the 175p-a-share cash counterbid from Frankfurt-listed Steinhoff International on 19 February, Sainsbury must either enhance its offer or walk away.

Home Retail's directors have already recommended Sainsbury's offer of 55p plus 0.321 of its shares, which equated to 161p at the time of the offer.

It has since improved, but with Home Retail's announcement that it has around £100m more cash that it expected, the grocer is expected to sweeten its bid to circa 200p - perhaps even with a £900m rights issue so it can offer ‘all cash’ as Steinhoff.

At £5.3bn market cap the UK supermarket group is dwarfed by £14bn-plus Steinhoff, which owns around 450 UK furniture stores under the Bensons for Beds and Harveys brands as well as circa 50 Pep & Co clothing outlets, and is majority owned by Christo Wiese, the South African retail billionaire whose UK interests also include Iceland and New Look.

Friday 18 March

INTERIMS
Volution Group (WI)

INTERIM DIVIDEND PAYMENT DATE
Best of the Best, Ingenious Entertainment VCT 1 E Shares, Ingenious Entertainment VCT 1 F Shares, Ingenious Entertainment VCT 1 G Shs, Ingenious Entertainment VCT 1 H Shs, Ingenious Entertainment VCT 2 E Shares, Ingenious Entertainment VCT 2 F Shares, Ingenious Entertainment VCT 2 G Shs, Ingenious Entertainment Vct 2 H Shs, Mobeus Income & Growth 2 Vct, SSE

FINALS
M&C Saatchi, Robinson

ANNUAL REPORT
Norsk Hydro ASA

EGMS
Altin AG (Reg S)

AGMS
Octopus Titan VCT , Toro Limited