Direct Line shares to be year's biggest listing

Monday 8 October 2012

THE launch of shares in insurer Direct Line Group and updates from WH Smith, Greggs and Burberry should be highlights for investors this week.

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The flotation of Royal Bank of Scotland's Direct Line Group insurance arm will offer retail investors the chance to buy shares in what is set to be London's biggest stock market listing of the year.

Direct Line shares will begin trading on Thursday, priced at between 160p and 195p, according to RBS.This would give the Churchill and Direct Line firm a mid-point valuation of £2.66 billion, which came in at the lower end of City estimates in what was seen as an attempt to woo investors.Blockbuster erotic novel Fifty Shades of Grey is expected to have helped retail chain WH Smith deliver a rise in full-year profits when it reports results on Thursday.Phenomenal demand for author EL James's racy book – the biggest seller in Britain since records began – and other copycat "passion" books have helped buoy sales for the group's 600 high street stores.Analysts are expecting profits to rise nearly 8% to £100 million in the year to August 31 from £93m a year earlier.Bakery chain Greggs suffered in a rain-soaked first half of the year, but it may serve up an improved performance in Thursday's third-quarter update.The group, which has 1600 shops in the UK, saw sales fall 3.5% in the three months to June 30 after record rainfall meant shoppers stayed away from the high street.Shore Capital retail experts forecast overall second-half like-for-like sales to improve to a 1.5% fall, but returning to growth next year if the wider economy also recovers.Luxury-goods group Burberry has received a battering on the stock market since news of falling sales last month sparked fears of a slowdown in its key Chinese market.The fashion firm – whose luxury bags and coats have proved a hit in emerging markets such as China over recent years – saw more than £1bn wiped off its market value in one day after it warned over profits and said sales had started to fall since early September.Thursday's trading update will be pored over for further news on the second-quarter sales trend, which suggested Burberry's rampant growth was coming to an end as China's powerhouse economy slows. Burberry warned full-year profits would be at the bottom end of expectations – previously for between £407m and £455m.It has shrugged off the economic downturn in the past with stellar sales, but Burberry admitted its trading conditions were "becoming more challenging".Hays and Michael Page will report back from an embattled UK recruitment sector that has been hit hard by swingeing job cuts across the banking sector.Michael Page International, which offers a third-quarter update today, revealed a 50% slide in banking business in the six months to June 30 after groups such as Lloyds, HSBC, Barclays and Royal Bank of Scotland have slashed their workforces in recent years.The UK, which represents more than one-fifth of Michael Page's total profits, saw revenues drop 10% to £146m, while gross profits fell 7% to £61.7m.Oriel Securities analysts expect the UK to have come under further pressure in the third quarter, pencilling in a 9% slide in gross profits.Hays is also likely to highlight the woes in the jobs market when it gives its first quarter update tomorrow. It worried the City when it said in August that trading had become more challenging in the final three months of its financial year to June 3.Bank of America analysts expect no let-up for the UK arm, forecasting net fees to be down 3% overall since the year-end, with declines in the UK accelerating to between 10% and 12%.

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Direct Line shares to be year's biggest listing

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