The Week Ahead: Boots gets a walk-on part but the Rio is the City's star turn

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The Independent Online

While mining house Rio Tinto is likely to star in what promises be a strong week of profit releases, the Office of Fair Trading is set to announce its much-anticipated decision on Alliance UniChem's £7bn tie-up with Boots.

Most predict the deal will be passed on to the Competition Commission, which means another six-month wait. Both sides have always expected that the authorities will scrutinise the deal, so they're unlikely to be too fussed should it be referred. Not all investors are entirely convinced about the merits of the deal, however, so whether they will be similarly relaxed remains a moot point.

Another milestone for Boots is the Government's White Paper on healthcare, which comes out to tomorrow. Chief executive Richard Baker recently met with Health Secretary Patricia Hewitt to discuss various proposals, including having Boots outlets in GP surgeries, and stores offering increased services such as smoking cessation clinics.

Later in the week, Rio Tinto will reap the full benefit of soaring commodity markets with a bumper full-year result. Jeremy Gray, an analyst at Credit Suisse, is predicting a pre-tax profit of $7.1bn (£4bn) - double that of 2004. In addition to a positive outlook statement, analysts will be looking for clues on what Rio Tinto will do with its growing cash pile. Mr Gray nominates a reinvigoration of the company's copper division as a worthy strategy.

Less is expected from Shell. The Gulf of Mexico's hurricane season and a decline in the price for Brent crude oil is likely to dampen the oil company's fourth-quarter profit. Analysts at Deutsche Bank forecast net income of $5.4bn.

Acquisitions are on the mind of chief executive Jeroen van der Veer. Speaking last week, he said Shell could spend up to $10bn on acquisitions to boost oil reserves. Combined with the previously announced $19bn capital expenditure programme, this may disappoint those expecting large buybacks.

British Airways is back on investors' radars this week, with the airline posting third-quarter results. Heightened expectations - following a good full-year profit from German rival Lufthansa - saw BA's share price jump by 6 per cent to 332p last week. Market consensus is for a pre-tax result of £145m, compared to last year's £151m.

Gerald Khoo of Oriel Securities is upbeat about the result and the airline's momentum: "We're seeing good traffic figures, with first class and business class growing more quickly than economy. BA has positioned itself well to be a natural beneficiary of the global growth in business travel."

But the medium-term outlook is uncertain. In addition to surging fuel costs, the April deadline for BA's pension fund proposal to regulators is looming. It has a pension deficit of around £2bn and industrial relations remain an issue right across the European air sector. Meanwhile, the draft EU/US open skies agreement is expected to be damaging at first to BA's profitability.

Pay-TV broadcaster BSkyB is limbering up for a strong interim profit, having met its target of eight million direct-to-home subscribers in 2005. In its £393m pre-tax profit forecast, up 18 per cent on last year, Barclays Capital predicts a falling churn rate. But the market will have to wait until March for updates on the Easynet acquisition and BSkyB's "triple-play" strategy of telephone, broadband and TV.

An even better result is expected from pharmaceutical group AstraZeneca. New chief executive David Brennan is poised to report pre-tax profit growth of more than 40 per cent to $6.6bn. Earlier this month, however, a US judge unexpectedly ruled that the group's patents on its most profitable drug, the blood-pressure treatment Toprol XL, were invalid. Analysts at Dresdner Kleinwort Wasserstein (DKW) estimate that this decision will cost AstraZeneca $1.2bn in profit. While the company's outlook statement is expected to be relatively upbeat, DKW warns that Mr Brennan may be tempted to lower the market's expectations - making it all the easier to look a star and "outperform" in 2006.

Pub owner Mitchells & Butler (M&B) hosts its AGM on Thursday, with management expected to comment on its fortunes at Christmas. "People are getting used to hearing that trading is challenging in this sector," said James Dawson of Charles Stanley Securities. "There was a general assumption that extended hours would be a positive, but while sales are likely to improve, the pubs have higher labour costs too. If M&B holds margins flat, I think it would be a good result."

CALENDAR

Tomorrow 30

UK RESULTS: (interim) Filtronic; (final) Amino Technologies, First Artist Corp, Georgica, IDN Telecom

US RESULTS: (F) Exxon Mobil, Kraft Foods, Mattel, Nasdaq stock market

Tuesday 31

UK RESULTS: (F) ARM, Kensington; (I) Surfcontrol

US RESULTS: (F) Google, Kellogg, Merck

EUROPEAN RESULTS: (F) Ericsson

Wednesday 1

UK RESULTS: (I) BSkyB, Sirvis IT; (F)Wolfson Microelectronics

US RESULTS: (F) Time Warner; (first quarter) Starbucks

Thursday 2

UK RESULTS: (I) Caffe Nero, NWF; (F) AstraZeneca, Belgravium Technologies, RIO Tinto, Shell

US RESULTS: (F) Amazon; (I) News Corporation

EUROPEAN RESULTS: (F) Deutsche Bank

Friday 3

UK RESULTS: (3Q) British Airways

US RESULTS: (F) Delta Air Lines

EUROPEAN RESULTS: (F) Volvo

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