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City Site - High hopes for the results season

FINANCE

THE FULL-YEAR financial results season gets under way this week amid high hopes in the City that both contractors and house builders will produce good results and positive comments on the year ahead.

These days any bad news is usually released long before the actual results and the detailed guidance which analysts receive, together with the January trading updates, limit the scope for nasty surprises.

But, after the recent rises in share prices across the sector ? which is up 9 per cent so far this year ? some companies may struggle to meet expectations.

Last week, Skanska UK set a demanding standard for the contractors to match when it unveiled figures showing it had reached its target with a 3.2 per cent margin for 2005. Like many of the larger contractors, Skanska seems to have become more selective, with turnover dipping last year. But its £1 billion order intake is healthy enough, helped by a strong position in PFI.

Perhaps more than the results, the City will be interested in the major contractors' attitude towards further takeovers and disposals. Amec should give an update on its planned restructuring and the sale of its French arm, Spie. Having considered an offer for Mowlem, there will also be questions on whether Balfour Beatty has further short-term ambitions on the corporate front. There may also be interest in how MJ Gleeson and Laing ? which both recently received approaches ? view any potential deals.

News on current trading news will be more keenly sought from the house builders. This week's comments from George Wimpey suggest a promising start, with volumes up by 30 per cent in the first seven weeks of this year and the firm says it is able to start reducing some incentives. Yet, in common with all the house builders, Wimpey's bigger challenge will be how to reverse the slide in the group's UK margin, which fell from 18 per cent to 12.9 per cent last year.