The week ahead: A City diet of cigarettes and alcohol

As September gets under way so too does the City, as traders and fund managers, back from summer breaks, gear up for blue-chip announcements. A broad range of familiar names are reporting, giving investors a chance to see how both the UK and mainland Europe are faring as the global economic recovery continues.

The most significant news comes from the leisure sector, where drinks giant Diageo reports. The owner of Guinness and Smirnoff is expected to report a rise in final pre-tax profits from £2.04bn to £2.12bn, despite tough conditions in some of its global markets. July's trading statement flagged up the effects, for example, of weaker consumer demand in the US and of Sars on duty-free sales in the Far East. But what matters is how Diageo thinks it will do in the new financial year, particularly as the first half includes the pivotal festive season.

Smaller rival Allied Domecq will issue a pre-close trading statement when it briefs the City on its wine strategy. This has split investors: some believe the move into wine is sensible given the dominance of Diageo in the spirits market; others see the sector as vulnerable to oversupply and the elements. Also up for discussion could be the prospect of a takeover. Last week, Allied Domecq shares were boosted by speculation that US rival Brown-Forman, the owner of Jack Daniel's, was interested in acquiring it. The rumour is, however, a familiar one, so whether the group will address it remains to be seen.

Whitbread - the owner of Pizza Hut, Costa Coffee and Travel Inn - will also be issuing a trading update. The news is expected to be good, with the pubs, restaurants and outdoor swimming pools of its David Lloyd Leisure centres all likely to have benefited from the heatwave. The hotels sector remains weak, of course, but the budget end of the market has not suffered in the same way as its more luxurious rivals.

Cheap and cheerful pubs group JD Wetherspoon is posting final results. The group, like most of its peers, suffered earlier in the year as the uncertainty caused by conflict in Iraq deterred people from drinking in city centres. The end of hostilities and a summer to end all summers should have put paid to that, however, and the group is expected to show a strong upswing in sales towards the end of the financial year. The current 12 months is also expected to have got off to a solid start.

Fellow pub operator Regent Inns, the owner of the Aussie-themed Walkabout bars, also reports results but is unlikely to provide as much cheer as JD Wetherspoon. In June, Regent warned in its pre-close update that sales had fallen, hit by fewer sporting events to lure in the drinkers. Pre-tax profits are expected to dip from £16.5m to £14.1m, though an update on the sale of Regent's unbranded pubs will be of particular interest.

And from pubs to smoking: Gallaher, the owner of Benson & Hedges, Silk Cut and Mayfair, reports half-year figures on Wednesday. Pre-tax profits are expected to rise from around £223m to £232m, although one-off restructuring costs of some £40m could weigh on the bottom line. The group is expected to say that sales remain on track, despite the end of advertising in the UK.

Rank, the owner of the Hard Rock restaurant chain and various casinos, also posts figures this week, and profits are expected to be slightly weaker because of a drop in tourist numbers.

Contrary to appearances, it is not only leisure companies with news to impart this week.

On Thursday, travel group Arriva is expected to signal plans to expand further into continental Europe. The bus and train company, which is due to announce pre-tax profits of around £45m, is planning to buy up stakes in companies in Portugal and the Netherlands. This will put more distance between Arriva and other UK transport companies, which have limited overseas exposure. In Portugal it is in talks to buy the 51 per cent it does not already own in Transportes Sul de Tejo, a coach operator. And in the Netherlands it is negotiating to buy the 50 per cent stake it does not already hold in Noordned, a regional train operator.

Staying in Europe, cosmetics giant L'Oréal issues first-half figures, while Dutch retailer Ahold will update shareholders at a meeting on Thursday. There are fears that further job cuts will be announced, although it is also hoped that a new head for the chain's US food service will be announced. Ahold was thrown into turmoil recently after it emerged that profits in the US had been overstated for the past three years.

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