The Week Ahead: Rank investors pin hopes on Deluxe treatment

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The Independent Online

Key to the performance of Rank shares in the wake Friday's interim results will be what it has to say about the future of Deluxe, its film processing and DVD distribution business. It has been more than a year since Rank first said it was exploring all options for the division, which is in slow decline, and shareholders are reported to be getting increasingly impatient over the lack of progress on this front.

How Deluxe is to be hived off has been much debated in the investment community. The betting is on Rank demerging the business, although given the length of time it has taken to make a decision this route must be fraught with difficulties. However, one thing is for sure: there is little industrial logic to Deluxe being part of a gambling and restaurants company.

The issue of the media division aside, Rank's first-half results statement will be a rather sedate affair. Pre-tax profits are likely to be little changed from the £63m achieved last year. Rank's statement at its annual meeting in April revealed the group's overall performance was in line with City forecasts, with good results from Hard Rock offset by a muted performance from the gaming business.

TODAY: Results: Full year - Murgitroyd Group. Interims - Bunzl; CRC Group; Hammerson; Mears Group; Metal Bulletin.

TOMORROW: Serco's first-half results will show that the support services group continues to deliver strong and predictable profits growth. Analysts forecast Serco to deliver an interim pre-tax profit of £39m, up from £34m previously, driven by the recent contract wins and the acquisition of ITNet and RCI. A contract from Northern Rail alone should contribute about £3m to profits. Serco's total forward order book is estimated to stand at a whopping £12bn.

Meanwhile, Signet is expected to show that strong sales in the US have helped support its interim profits in the face of a sharp slowdown on the UK high street. Brokers expect the jewellery retailer's profits to be little changed on the £54m it achieved in the first half of 2004. In May, Signet complained of a deterioration in UK trading. However, growth in the US is definitely robust. In its August update to the market, Signet boasted of a 7.9 per cent rise in like-for-like sales across the Atlantic.

Results: Full year - Dicom. Interims - Ark Therapeutics; Churchill China; Clarkson; Costain; Johnson Press; LogicaCMG; Serco; Signet.

THURSDAY: Dresdner Kleinwort Wasserstein believes investors would do well to pick up Diageo stock before its full-year results because it believes there is a chance the drinks giant might upgrade its forecasts for 2006. Although it may be modest, it would be the first upgrade this decade, according to the German broker. DKW said: "We believe the US, Latin America and most of Pacific Asia continue to grow." As for Europe and the UK, it expects these markets to be less of a drag on profits compared with previous years.

There is also likely to be guidance on higher cost savings from Diageo, the broker suggests, which will give profit margins a further boost.

On the much-talked-of issue of the group's stake in General Mills, DKW expects it to be turned to cash in November and hopes to see the money used to finance share buy-backs and further acquisitions of wine companies.

The City expects Diageo to deliver a pre-tax profit for the year just gone of about £1.9bn, down from £2bn last year.

Results: Full year - Diageo. Interims - Amec; Avis Europe; Axis Shield; BBA Group; Delta; Melrose Resources; Tarsus.

FRIDAY: Williams de Bröe predicts annual results from JD Wetherspoon to show that the decline of the pubs group continues. It forecasts a drop in pre-tax profits to £44m from £54m and expects Wetherspoon to say that its like-for-like sales are still in retreat.

Meanwhile, the slowdown in the rate of new pub openings also continues. In the year to July 2005, Wetherspoon opened just 13 new outlets compared with 101 in 2000. In the words of Williams de Bröe: "This decline in pub openings is symptomatic of many factors including increased competition, high rent demands, a lack of suitable sites and less confidence about the future." Given these circumstances, it is no surprise to see the group's management using any excess cash the company has for share buy-backs.

Williams de Bröe argues that these share buy-backs, and the hope that a bidder might emerge for the group, keep Wetherspoon's shares at current levels. On fundamentals, it views the stock as being expensive and fears this will become increasingly obvious as the figures deteriorate.

Results: Full year - JD Wetherspoon. Interims - Molins; Rank.

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