The Week Ahead: Not such a Smartie - investors sour over sweet deal at Nestlé

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The Independent Online

Peter Brabeck, chief executive of the confectionery giant Nestlé, could be forced into an embarrassing U-turn in the coming days as a row with shareholders escalates.

Peter Brabeck, chief executive of the confectionery giant Nestlé, could be forced into an embarrassing U-turn in the coming days as a row with shareholders escalates.

The dispute centres on Nestlé's decision to make the highly regarded Mr Brabeck chief executive and chairman, going against best corporate governance practices. A small group of shareholders, dubbed Ethos, are opposed and have proposed changes to Nestlé's by-laws that, if voted in at the annual general meeting next month, would ban such a move.

Mr Brabeck has threatened to resign, along with the rest of the board, should the proposal be passed. But it now appears he will have to back down after an influential investor group, Institutional Shareholder Services, backed Ethos's proposals.

Andrew Wood, a senior research analyst with US firm Sanford C Bernstein, has been tracking the developing situation closely. He says: "My take on this, and the feedback I'm getting from Switzerland, is that he may regret saying this. You just don't issue these sort of threats. You end up threatening and extorting your shareholders, and worse of all, you might actually have to do it."

It is unlikely that the proposal will be carried as, even with the support of ISS, the shareholder base opposing the move remains small. But Mr Wood believes a number of investors are concerned by the row and could well abstain. "There will be eyebrows raised and it certainly ups the pressure to stand down or stand up. I think he will find a way to wriggle himself out of this. Swiss shareholders tend to support the board without question, but how much of a bloody nose will he get if 30 per cent vote for the proposals?"

Nestlé, meanwhile, is standing by Mr Brabeck, arguing that the move will benefit the company and that he will only hold both roles for a few years.

As well as disputes at chocolate giants, there are some updates and companies to look out for when the Easter weekend comes to an end.

Spanish retailer Inditex, the owner of fashion chain Zara, reports full-year results for 2004. Most are expecting these to be strong and on target, with net income surging from £462m to £614m. However, in keeping with the problems facing its British rivals, conditions are likely to be far tougher in 2005.

Inditex has rapidly expanded beyond its Spanish roots in recent years, and the higher costs associated with this aggressive strategy could leave margins under pressure. Competition is also increasingly fierce, while the consumer appears to have fallen out of love with spending. Therefore, analysts and investors alike will be want to hear what management believes lies in store in the coming months.

Staying with retail, Mothercare gives an update on trading ahead of its full-year results. The group said in January that sales of its winter range had slowed as spending eased off, so the City will want to see if this trend has continued into the spring.

Others worth keeping an eye out for as summer officially gets under way include Compass, Tate & Lyle and Emap. The magazine group owns a host of consumer titles - such as Heat, bliss and FHM - and business-to-business brands such as Nursing Times and Drapers. It will provide an update on trading, and the consumer titles are expected to show steady growth. Business-to-business is not expected to have fared as well, but analysts do not believe there will be any changes to full-year forecasts this week.

Sugar and starch group Tate & Lyle is also providing news on trading. It has benefited from increased consumer aware- ness on health, with demand lifting for its Splenda sweetener. The biggest concern facing the group, though, is the surging cost of energy and the impact on future profits. Analysts will be expecting an update.

Shares in Compass, the world's largest caterer, have had a steady run this year on the back of upbeat broker notes. This has helped make up a bit of the ground lost last September when a profit warning, prompted by increasing price pressure, caused shares to dive. Analysts will want to hear the difficulties are behind Compass, and will be looking for a more upbeat mood at this update.

Among smaller companies addressing investors, Bloomsbury Publishing issues full-year numbers. The publisher of the Harry Potter books is, as usual, expected to produce a buoyant set of numbers on the back of the young wizard, although other bestsellers, including a biography of the late actor John Thaw, will also have helped.

As is to be expected in a short week - the London Stock Exchange is closed tomorrow - the economic newsflow is subdued. There will, however, be a key update on the housing market from Nationwide, and the CBI publishes its Distributive Trades Survey.


Tomorrow 28

UK: Results: London Stock Exchange closed.

Tuesday 29

UK: Results: (final) Deal Group Media; (interim) Scott Tod.

Wednesday 30

UK: Results: (F) AG Barr, Bloomsbury Publishing, Civilian Content, Country & Metropolitan, Imagesound, Imprint Search and Selection, Parity Group, Pilat Media Global, Pixology, Teleunit, Watermark Group, Wellington Holdings, WILink, Wireless Group; (I) ADVFN, CamAxys Group, James Halstead.

Thursday 31

UK: Results: (F) Alpha Airports, Ashtenne Holdings, Maiden Group, Melrose Resources, Sportech, UCM Group; (I) On-Line, Sinclair Pharma.

Friday 1

UK: Results: None scheduled.