The Week Ahead: InterContinental Hotels has room to return cash

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The Independent Online

The travel industry has had a tough time of it over the past couple of weeks, but the word in the market is that the first-half results from InterContinental Hotels, due tomorrow, should beat market forecasts.

The company has almost 540,000 hotel rooms, 300,000 in the US, managed through its InterContinental, Holiday Inn and Crowne Plaza franchises. The recent terror alert in the UK could also prove to be a bonus for hotel operators as stranded passengers require overnight accommodation while waiting for delayed flights.

Some analysts believe InterContinental, demerged from Six Continents in 2003, could also add to the £2.7bn it has returned to investors since then as it converts itself from an owner to a franchise operator. Investors could be in line for a return of capital of up to £800m this time around.

The broker Exane BNP Paribas initiated coverage of the stock on Friday with an "outperform" rating and a 1,235p target price, 40 per cent higher than the 895p at which the shares closed on Friday. With hardly any broker publishing a bad word about the company, expect to see the consensus forecast of £104m of first half pre-tax profits exceeded.

TODAY: Raymarine, the manufacturer of recreational sailing accessories, has been a big success since coming to the market in December 2004. Anyone lucky enough to have tucked a few shares away at the placing has made a return of about 125 per cent, even taking into account a recent slide that has seen the shares fall from a high of 410p in early July to Friday's close of 363p. Broker Panmure Gordon is looking for first half pre-tax earnings of £17.2m-£18.5m.

Results: First half - Keller Group; Raymarine. First quarter - Workspace Group

TOMORROW: Panmure Gordon moves on from talking about other companies to talking about itself as the broker unveils maiden first-half numbers since the reverse into Durlacher. The group was rumoured to have suffered from a drop in initial public offering fees but a positive pre-close trading statement in July should have eased any nerves. Rival broker Altium Securities is looking for £17.3m in first-half revenue.

Talk of consolidation is never far away in the housing sector, and Persimmon, the only sector representative in the FTSE 100, could be on the lookout for further acquisitions now that Westbury is fully integrated into the business. A pre-close trading statement in July indicated that the group is on track to hit market expectations. Total revenues for the first six months of the year should hit £2.4bn, a rise of almost 35 per cent on the same period in 2005 as house sales rose to more than 8,000 units.

Results: Full year - Brambles Industries. First half - Bodycote International; InterContinental Hotels; Michelmersh Brick Holdings; Office2Office; Panmure Gordon; Persimmon.

WEDNESDAY: The closure of the Escondida mine in Chile on Friday due to industrial action should not have any impact on BHP Billiton's profits, despite its 57 per cent stake in the world's largest copper mine. Analysts believe that, even if the mine is shut down for a fortnight, BHP's profits will take only a 1 per cent hit - such is the size and scope of BHP's activities. Not surprisingly the City is looking for record results from BHP, with consensus forecasts for pre-tax profits of $7.9bn (£4.2bn) for the full year.

Results: Full year - BHP Billiton. First half - Eurocastle Investments; Gibbs & Dandy; Inmedia Broadcasting; Robinson; Slough Estates.

THURSDAY: Ladbrokes has escaped pretty much unharmed from the fallout created by the arrest of David Carruthers, the former chief executive of BetonSports, and Europe's largest operator of betting shops appears to be in rude health. With its strong balance sheet and cash generation, the company is always top of the suspect list whenever sector consolidation is rumoured.

Ladbrokes does not have any US customers, but is mulling opening its books to American punters, although in the current circumstances most traders expect those plans to stay on the back burner. Barclays Stockbrokers expects operating profits of £160m.

A market rumour that Fayrewood, the wholesale computer products seller, is struggling to rebuild margins and was poised to warn on profits was firmly denied by the company. Results are expected to be below 2005 levels, as hinted in the AGM statement in May. The company operates in a tough market, and, with up to 40 per cent of group profits weighted to the fourth quarter, traders will be hoping for an improved outlook for the second half of the year.

Results: First half - Anglo Asian Minerals; Fayrewood; John Laing; Ladbrokes; Playtech; Rentokil Initial; Rexam.

FRIDAY: Results: First half - Advent Capital; Henderson Group.

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