The Week Ahead: Compass can't point the way out of UN contracts scandal

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The Independent Online

Embattled catering giant Compass takes centre stage this week, with management confronting the market to present the group's full-year results - an underwhelming sideshow to the bevy of issues surrounding the company.

Compass is facing an independent investigation into the activities of its subsidiary Eurest Support Services (ESS) and the procurement of UN contracts. At the same time, it is hunting for a new chief executive, selling its travel concessions business Select Service Partner and being accused of making ex-gratia payments. Last week the UK's Serious Fraud Office joined the fun, deciding to instigate its own review into the alleged UN corruption.

Market consensus for Compass's full-year pre-tax result is now around £580m - significantly lower than the 2004 equivalent, £645m. This is largely due to a collapse in UK profitability and a slowdown in European operations. The weakness in Compass's share price, down 40 per cent, and lack of a chief executive has led to takeover speculation.

Drinks group Britvic sends out its prospectus to analysts and potential investors tomorrow. The group is owned by InterContinental Hotels, Whitbread, Pernod Ricard and PepsiCo, and is likely to be worth around £800m when it floats in mid-December.

Once listed, chief executive Paul Moody says the group will continue with its strategy of organic growth: new products due in 2006 include Drench water, while the Robinson squash range will be expanded into Scandinavia. But he has confirmed that bolt-on acquisitions could feature further down the line. The market debut will also see Britvic's all-important bottling and distribution contract with PepsiCo extended from 15 to 20 years. PepsiCo's brands account for 40 per cent of Britvic's volume sales.

The bank sector swings into action with the start of its pre-close trading updates. Analysts at Lehman Brothers feel that recent buoyancy in the sector has presented an opportunity to take profits. "Although pre-close statements are likely to be supportive to short-term earnings estimates, this looks largely discounted. The longer-term negatives remain," they said.

The first bank to face the market is Barclays. Its share price has risen by 14 per cent since mid-October, driven by strong results from European investment banks and expectations of an upbeat statement. While Bob Diamond has masterminded exponential growth in Barclays Capital, analysts are keen to see evidence of a deal pipeline for next year and an update on UK credit quality.

Far less detail is expected from banking giant HSBC's pre-close update. Barrington Pitt-Miller, an analyst at ABN Amro, is expecting an upbeat announcement. "A robust corporate credit-risk environment globally, strong wholesale banking volumes and targeted expansion in higher margin growth markets should all be underpinning a sound second-half performance," he said.

Pub and restaurant owners Wolverhampton & Dudley Breweries (W&D) and Mitchells & Butlers (M&B) are expected to continue the recent strong showing of the pub sector. According to James Ainley, an analyst at Dresdner Kleinwort Wasserstein, the sector was heavily oversold in the summer due to misplaced concerns about the impact of falling discretionary spend. He is forecasting a pre-tax profit of £88.4m for W&D, a 14 per cent increase on last year. "I don't expect any surprises from management - just that things are going steadily, they are continuing to look for acquisitions and they may return capital to shareholders," Mr Ainley said. It's a similarly positive story at M&B, with the market looking for an 8 per cent rise in pre-tax profit to around £187m.

Returning cash to shareholders may also be a theme in the utilities sector. Water companies AWG and Kelda are tipped to announce the continuation of their buy-back programmes. The proceeds from business disposals in 2006 - its support services division in the case of AWG, and its US business in the case of Kelda - may also be returned to shareholders. United Utilities is expected to post an interim pre-tax profit of around £230m, driven by new price controls in the regulated businesses.

And finally, betting specialist Sportingbet reports its first quarter this week, a result which is expected to alleviate some of the gloom of gambling stocks.

CALENDAR

Tomorrow 28

UK RESULTS: (final) Cambridge Anitbody Technology, Dawson; (interim) Blavod Extreme Spirits, BSS, Caldwell Investments, Cybit, Detica, Domestic & General, Eckoh Technologies, Homeserve, Hyder Consulting, Insight Foundation Property, Mitie Group, Symphony Telecom, Torotrak, UBC Media

Tuesday 29

UK RESULTS: (F)Cardpoint, Compass, Future, Richmond Foods, Topps Tiles; (I) Artisan Holdings, ASOS, Atkins WS, Computer Software, Debt Matters, De La Rue, Genus, Inflexion, JZ Equity, Kingston Communications, Redstone, Tangent Communications

Wednesday 30

UK RESULTS: (F) Arla Foods UK, Daily Mail and General Trust, De Vere, Jessops, Mitchells & Butlers, Sage, Sarantel; (I) Focus Solutions, GB, IFX, Jarvis, Kelda, London Merchant Securities, ReNeuron, RPC; (1Q) Sportingbet

Thursday 1

UK RESULTS: (F) Avon Rubber, Holidaybreak; (I) AWG, Datong Electronics, Dyson, E2V Technologies, Findel, Oasis Healthcare, Plasmon, United Utilities, Vp, Wagon, Xansa

Friday 2

UK RESULTS: (F) Wolverhampton & Dudley Breweries

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