The Week Ahead: City wonders if Rentokil can get radical and stop the rot

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The Independent Online

It may be summer, but don't make the mistake of thinking the newsflow has dried up. Blue-chip announcements aren't abundant but there are still some key updates for investors to get their teeth into.

It may be summer, but don't make the mistake of thinking the newsflow has dried up. Blue-chip announcements aren't abundant but there are still some key updates for investors to get their teeth into.

One of the most interesting will be from Rentokil Initial. The services group - which ousted its chief executive and chairman, Sir Clive "20 per cent" Thompson, earlier this year - will announce the results of a strategic review alongside its interim numbers.

The City had been hoping that the review, carried out by newly installed chairman Brian McGowan and prompted by a slide in earnings, would recommend breaking up the business. However, concerns are now growing that Mr McGowan has decided against such a radical plan.

Most analysts are expecting a rise in the dividend and some form of modest share buyback, to get shareholders on board, but believe a big programme of disposals remains essential.

Another group that is attempting to reinvent itself is the engineer Invensys, which reports first-quarter numbers on Thursday. Over the past few years, hit by a slump in demand and stiff competition, it has taken out costs and sold off companies as it struggles to carry out an overhaul.

Profits are expected to be flat but few are predicting a stellar set of figures, with analysts acknowledging that the group still has much to do before it turns the corner. Said one: "We know the numbers aren't going to be particularly brilliant."

One of the bigger names reporting is Hilton, the hotel chain and owner of the bookmaker Ladbrokes. The leisure industry has taken a battering over the past few years, and that has been reflected at Hilton by falling occupancy and reduced rates in its hotels business.

Yet even in a downturn, rarely do punters stop gambling, and Ladbrokes has provided support for the wider group during the tough times.

This latest set of interim figures is expected to show another strong performance from Ladbrokes, helped largely by the popularity of in-shop gambling machines, known as fixed-odds betting terminals.

However, the hotels arm is also expected to have performed better as the industry's recovery finally gets under way, despite continuing geopolitical tensions. Pre-tax profits are expected to rise to around £170m, against last year's £110m.

Contributing to the rise in profits will be strong comparisons to a weak first half in 2003 - when the start of the war in Iraq and the Sars crisis battered profits and sales - and a good performance in crucial centres such as London, although some areas remain tough, notably Paris.

The high point for investors will be an expected 8 per cent rise in the dividend; Hilton has held the payout steady for the last three years.

Also looking for recovery is the media sector. Regional newspaper group Johnston Press is reporting this week, and the City will be looking for a continuation of the upbeat note recorded in a trading statement earlier this summer. Then, the group said an increase in recruitment advertising had boosted first-half underlying sales by 5.8 per cent.

Elsewhere, and one of the Square Mile's newest members, Pinewood Shepperton, is also reporting. The studios, home to the James Bond films, floated on the London market earlier this year and this will be its maiden set of interim numbers. The news is expected to be positive, with continued strong demand for services such as its film stages.

The housebuilding sector will also be in the news. Numbers are due from Persimmon, where investors will want to hear about the impact of recent rate rises, while Berkeley holds its annual general meeting. The company is planning to restructure and return £1.4bn to shareholders - and potentially £100m to senior management.

Berkeley could send out the proposals as early as this week, which will be put to the vote at an extraordinary general meeting next month. But founder Tony Pidgley will not take questions on the restructuring at the AGM.

Overseas, and the newsflow drops off. Few big companies are reporting in mainland Europe, while only a handful of household names will update US shareholders. These include toy retailer Toys R Us (which recently said it was considering selling off its core business), foods giant HJ Heinz and Jack Daniels distiller Brown-Forman.

Domestic economic updates are also thin on the ground, although the first revision to second-quarter GDP will be of interest. Most economists do not believe there will be a substantial difference to the first estimate of 0.9 per cent, but will monitor changes to household expenditure. Whether consumer spending is slowing down or not is still a moot argument.

CALENDAR

Tomorrow 23

UK: Results: (interim) Keller, Singer & Friedlander.

US: Results: (second quarter) Toys R Us.

Tuesday 24

UK: Results: (I) Bodycote International, Claims People, Generics, Hammerson, Imprint Search and Selection, Persimmon.

US: Results: (Q1) HJ Heinz.

Wednesday 25

UK: Results: (I) Autological Holdings, Domnick Hunter, Gibbs & Dandy, James Fisher & Sons, Johnston Press, Lambert Howarth, Pinewood Shepperton, Rexam, Weir.

US: Results: (Q1) Brown-Forman.

Thursday 26

UK: Results: (I) Cattles, Genemedix, Gowrings, Hilton Group, Hunting, Michelmersh Brick Holdings, Rentokil Initial, Slough Estates; (Q1) Invensys; (Q2) Tomkins.

Friday 27

UK: Results: (final) Goodwin.

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