The Week Ahead: Analysts split on whether to raise a glass to Diageo

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The Independent Online

The outlook will be among the key talking points on Thursday when Diageo, the drinks giant whose roster of brands includes Baileys liqueur, Smirnoff vodka and Johnnie Walker whisky, issues its full-year figures.

The City is divided. JP Morgan Cazenove, for instance, warns that the company may end up guiding towards "low single-digit" growth in organic earnings before interest and tax (Ebit) for 2011, but Evolution Securities has been telling clients that, in the absence of a "major macro double dip", such an outlook would be overly cautious.

"Making the uncontroversial assumption of double-digit Ebit growth across the group's emerging market footprint in 2011 will deliver 3 to 4 per cent of group growth. Add to this the 1.5 percentage points of growth to come from the absence of £45m of [one- off costs] in the first half of the year, and you already have mid-single-digit growth before even entering a discussion as to the heath and outlook for the US and European consumer," Evolution said, countering JP Morgan's caution.

Elsewhere, Collins Stewart also sided with the bears, noting that, like JP Morgan, it would be surprised if guidance pointed to anything more than mid- single-digit Ebit growth at Diageo. Then again, investors may not get such pointers, with UBS saying that it did not expect Diageo to publish guidance for 2011 so early in the fiscal year. "We could expect broad comments that the growth rate should be better than in 2010," UBS added. It anticipated confirmation of a slow recovery in the US, strength in emerging markets and challenges in Western Europe.

the lloyd's of London insurer Amlin is due to issue half-year numbers this morning and, given recent market chatter suggesting that it has been guiding down ahead of the results, Numis reckons the figures will probably "end up beating expectations". "Investment gains should have benefited from an above-average duration bond portfolio, albeit partially offset by losses on equities since an increase in weighting from 4 per cent to 8 per cent in the first quarter," the broker said. "Foreign exchange items are likely to be a mixture of US dollar gains and euro losses."

Panmure Gordon is looking forward to a "strong" update from the oil services group Petrofac, which is due to publish its half-year results. The broker is forecasting $192m in underlying net income, up from $170.7m last year, while the interim dividend is expected to swell by 12 per cent to 12 cents. And though the order book is forecast to stand at $6.1bn, down from $8.1bn at the end of last year, Panmure points out that this should have risen on the back of orders since the half-year stage.

Also today, the housebuilder Bovis Homes is due to post interim figures. Taking note of the recent raft of negative newsflow on the macroeconomic front, UBS expects the market to focus on trading over the past two months, in particular on "whether sales rates and prices have held up". In terms of headline figures, the broker anticipates £127m in sales for the first half, with operating profit of £7.7m and £6.4m in pre-tax profit.

Results/Updates: Kingspan, Petrofac, Lombard Medical Technologies, Bovis Homes and Amlin.


Results/Updates: Antofagasta, Cairn Energy, Corin, CRH, Spectris, Development Securities, Persimmon, Spirax-Sarco Engineering, Wood Group.


UBS expects to hear of £560m in revenues, with £122m in pre-tax profits, when the temporary power provider Aggreko issues half-yearly numbers. "The key focus will be on the level of order intake in Aggreko's international power projects arm, which we expect to have remained strong," the broker said in a note last week.

"In the local businesses, we expect the US to have showed sequential recovery with pricing and volume improvements, although Europe is likely to be quite stable."

Results/Updates: Admiral, Aggreko, BHP Billiton, Chime Communications, Costain, Johnston Press, SIG, Serco and Tullow Oil.


Numis is anticipating upbeat half-year results from the engineering group IMI, which issued what the broker termed "a very positive" interim management statement in April. Numis expects the group margin to expand by about 200 basis points to roughly around 15 per cent, with further expansion likely over the second half of the year.

Results/Updates: Amec, Bloomsbury Publishing, G4S, Hikma Pharmaceuticals, Huntsworth, IMI, Robert Waters, William Hill and Diageo.


Results/Updates: Aegis, Aga Rangemaster, Computacenter, Davis Service Group and Rightmove.

Today: Eurozone PMI data; Germany PMI data.

Thursday: Eurozone M3 money supply data.

Friday: UK second-quarter GDP data; Germany CPI data.