As prices sits near record highs, oil's big two are set to sparkle

THE interim reporting season heats up this week when a raft of heavyweights from the banking, oil and pharmaceutical sectors are due to unveil figures.

BP and Royal Dutch Shell report first-half profits figures after facing different challenges in an eventful quarter for the oil majors.

The two firms report as the price of oil hovers around $78 a barrel - near last August's record high.

Analysts' consensus forecasts for Royal Dutch Shell are expecting the firm to post underlying earnings of $6.76 billion (£3.3bn) for the second quarter - 7 per cent higher than the $6.31bn reported last year.

The profits are expected to be higher despite continued security problems for Shell in Nigeria, where the company is losing around 180,000 barrels of oil a day in the Western Delta due to attacks from militants.

Meanwhile, BP prepares to post its first set of figures without Lord Browne, who was forced to resign in May after lying to a court over his relationship with former partner Jeff Chevalier.

But analysts expect new chief executive Tony Hayward's inaugural results day tomorrow will see the company's second quarter underlying profits fall to around $5.05bn, down from $6.12bn last time.

Production difficulties at its US refineries are behind the expected profits fall, according to Evolution Securities analyst Richard Griffiths.

But there has been some good news for BP over the period. In May the firm announced a return to Libya after more than 30 years under a £900 million exploration deal.

The five interest rate rises since last August may have been hitting consumers hard in the pocket, but it seems they have also been playing havoc with mortgage lender margins.

While lenders have tended to waste no time in passing on the interest rate hikes, they still have a number of borrowers on fixed-rate deals that are yet to come to an end.

Add to this the worries over default rates sparked off by the sub-prime crisis in the US and the sector has had its share of troubles of late. With interims due next week from a number of major players, the sector is set to be watched closely.

First up is Northern Rock on Wednesday. The group highlighted the issue of falling fixed-rate margins last month when it issued what was effectively a profits warning. The group said it would suffer a drop in net interest income of around £180m to £200m as it waited for customers to come off cheap mortgages fixed two or three years ago. Arrears levels had also increased slightly due to the rate hikes.

Analysts have since revised expectations for full-year underlying profits, from £430m to £421m, but, given the further rate rise since Northern Rock's last update, there may be worse to come if rates do increase as predicted to 6 per cent.

Bradford & Bingley, which follows on Thursday, is forecast to report only a modest narrowing of margins and its mortgage book is thought to have stayed strong in the first half, with analysts at Hitchens Harrison & Co predicting a doubling in volume on the same time last year. The consensus is for a 11 per cent rise in pre-tax profits to £182.4m.

However, the figures could overshadow hidden risks, according to Hitchens Harrison. B&B specialises in buy-to-let and self-certification mortgages, which are two high-risk areas and particularly vulnerable to housing market movements, say the analysts, who will be looking closely at the lender's outlook on the sector for any signs of trouble.

On Friday, Alliance & Leicester, which last month announced that finance director David Bennett is to become the new chief executive, is set to deliver a 9 per cent rise in operating profits to £293m, according to analysts. The figures are due to confirm the group's recent upbeat trading statement, which said full-year trading would at the top end of expectations after strong performances across the business.

But it has easy comparatives, having posted lower half-year profits last year - at £268m, down £4m on 2005 - amid a slowdown in unsecured loans.

Pharmaceuticals giants GlaxoSmithKline and AstraZeneca are also due with interim figures after a tough six months for the two businesses.

In a period where the wider FTSE 100 index has added more than 7 per cent, GlaxoSmithKline has seen its value fall 7 per cent, with Astra suffering a near-5 per cent decline.

The main culprit behind Glaxo's woes has been the scare over the company's diabetes treatment, Avandia, following claims in May that it increased the risk of heart attacks.

Glaxo has vigorously disputed the study, reported in the New England Journal of Medicine, and countered with its own research and an expensive advertising campaign - but the damage to its share price was done.

Analysts are expecting interim profits of £1.85bn, compared with £1.89bn last time.

The continued strength of the pound against the dollar has also worked against Glaxo - knocking the firm's sales by 4 per cent to £5.59bn for the first quarter - as the company struggles with a more competitive environment its anti-nausea drug Zofran, antidepressant Wellbutrin and allergy treatment Flonase.

While AstraZeneca's woes have not been as dramatic as its peer, its move into the vaccines market in April after paying $15.2bn for its US rival MedImmune underwhelmed the City.

Analysts believed that AstraZeneca had overpaid for the firm, which owns and manufactures Synagis, a leading treatment for respiratory tract infections in babies and children.

Transport and coach group National Express managed to limit reputational damage earlier this month, with a well-timed upbeat trading statement, given that it coincided with news it had lost a major rail franchise to rival Stagecoach.

But just weeks after it missed out on the expanded East Midlands rail franchise, the group suffered a further blow with the announcement it had lost the competition to run the new, expanded long-distance Cross Country rail franchise to Arriva.

Even sparkling interims on Thursday are unlikely to detract from the disappointment. The consensus figures for the past six months expect around £77.1m in pre-tax profits.

The group said recently its trains division had seen passenger numbers rise 6 per cent in the first six months of the year with 2 per cent growth for its coach business

and all eyes will now be on the results of the Intercity East Coast franchise, due later this summer.

Retailer Sport Direct International - owner of the Sports World chain - has had a torrid time on the stock market since flotation at the end of February.

While the results for the year to the end of April are set to be in line with the £180m to £185m expected in underlying earnings, next year is thought to show a marked drop on the analyst consensus of £220m to £230m expected.

Pizza delivery firm Domino's Pizza is expected to deliver appetising half-year results today after an excellent start to the year.

Launches of new pizzas such as the Meateor, Hot Stuff and Pepperoni Passion have helped it enjoy a strong first half, which has already seen like-for-like sales jump by more than 14 per cent in the 16 weeks to 26 April.

Domino's posted full-year pre-tax profits of £14.2m in 2006, although analysts are expecting this to rise to around £17m this year.
HANGING ON THE IPHONE

WOLFSON Microelectronics will unveil its first-half profits on Wednesday but all eyes will be looking ahead for guidance on whether the slowdown which has hit the semiconductor industry has been cleared.

Shares in Wolfson almost halved in value last year as the Edinburgh-based technology firm, which supplies chips for well known consumer gadgets, warned the market was not growing as quickly as had been expected last October.

However analyst forecasts have improved recently, with shares rising on hopes of an impact from sales of the Apple iPhone. Within hours of going on sale, technology buffs had pulled the new iPhone apart, quickly reporting that Wolfson was supplying the phone's audio chip.

Earlier this week Wolfson shares hit a near five-month high of 323.25p. Analysts have forecast sales in the second quarter, traditionally the strongest for Wolfson, to come in at around $48.1 million, with first half profits of around $11.6m, but the most attention will be placed on the outlook forecast.

Although first-half results are not expected to have been impacted by sales of the latest must-have gadget, Wolfson, already a major supplier to Apple, is expected to receive a substantial boost, improving its outlook, with Apple aiming to sell ten million of the phones in its first year.