Week Ahead: Old Mutual investors hoping for sale update

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The Independent Online

The dust may have settled since HSBC decided last month to pull out of a £4.5bn deal to buy Nedbank, but for Old Mutual – the majority owner of the fourth-largest South African bank – the pressure is on to show that its other major sale will not be heading down the same direction when it publishes its third-quarter results on Thursday.

The news was a hit to Old Mutual, with Deutsche Bank noting that it slowed the momentum of the insurer's price "as investor sentiment appeared positive on the expectation of streamlining and simplifying the group". In light of recent events, the broker now says it is looking for news of how the sale of US Life is progressing, with a $350m (£218m) sale to Harbinger Capital Partners previously expected to be completed by the end of the year.

There is also expected to be an update of how Old Mutual will meet its debt repayment target of £1.5bn, especially now using the proceeds from Nedbank is not an option. The aim was announced back in March, with the company planning for it to be achieved in five years.

Deutsche Bank say that it maintains its view "that under our current earnings assumptions, the group will generate sufficient cash from its adjusted operating earnings to pay ordinary dividends". The broker also estimates that Old Mutual will reveal lower sales levels than in the previous quarter, but an improvement on the same period in 2009, and gave it a "buy" recommendation with a 160p price target.



Today

Telecity Group enjoyed a sharp rise in its price near the beginning of last week after US peer Equinix – which is often mentioned as a potential bidder for the UK data-centres group – posted solid figures for the third quarter, with a slight improvement for the full year on its previous guidance.

With Equinix enjoying strong revenues in Europe, Bank of America Merrill Lynch said that this was a good sign in the short term for Telecity, which will issue its third-quarter update. The broker said the results are "consistent with messages from Telecity that near-term demand remains strong and the pricing comments are in line with our expectations of flat pricing this year". However, it did point to longer-term worries on the issue of pricing.

Results/Updates: Telecity Group, Weir.



Tomorrow

Investors in Lloyds Banking Group will be hoping for more good news when it issues its interim management statement, after posting strong half-year figures in August. Then, it revealed a £1.6bn profit, and chief executive Eric Daniels – who called the first six months of 2006 a "significant milestone" for the bank – would love to see another profit increase.

Results/Updates: BG Group, Lloyds Banking Group, Imperial Tobacco, Reckitt Benckiser, BP, Aviva.



Wednesday

Next will release its third-quarter results, and Panmure continues to be a fan of the clothing retailer, forecasting that its like-for-like sales may dip during the period but its Next Directory sales will rise by close to 10 per cent. "We think that Next's combination of solid underlying growth bolstered by internet sales and expansion into the Home category, and its policy of returning cash to shareholders via share buybacks makes the shares an attractive investment proposition," said the broker, which reiterated its "buy" recommendation.

Results/Updates: Next, Alterian, Standard Life, Cobham, Logica.



Thursday

RBS is expecting solid figures from Morrisons' third-quarter update, with a 1.5 per cent like-for-like increase in sales, and has given the supermarket chain a "buy" recommendation. However, that figure does not include fuel, and given that this has gone up by 10 per cent year on year, the broker believes it "should add around 2 per cent to its overall like-for-like sales growth". The engineer Invensys is also releasing results on Thursday, and although it may have been kept as a "buy" recommendation by Singer Capital Markets, that hasn't stopped its analyst Tintin Stormont wanting reassurance on estimates "given the fragile recovery in some of its markets". Mr Stormont is expecting "continued growth in its emerging-markets exposure, both in terms of revenue and pipeline", but has warned of a fall in its rail margins.

Fahad Changazi from UBS is expecting good book value as RSA reveals its third-quarter results and keeps it as a "buy", predicting earnings growth despite "despite headwinds from lower investment income".

Results/Updates: Morrisons, Invensys, RSA, Man Group, Unilever, Tate and Lyle, Wolfson Microelectronics, BTG, Spirent, Synergy, Millennium and Copthorne, Charter International, Old Mutual, Cable & Wireless Communications.



Friday

Results/Updates: Royal Bank of Scotland, HSBC, Smith and Nephew, Rentokil Initial, Carphone Warehouse.

Economic diary

* Today: Purchasing Managers Index

(Manufacturing).



* Tomorrow: Federal Reserve meeting begins; US midterm elections; Purchasing Managers Index (Construction).



* Wednesday: Purchasing Managers Index (Service Sector); Bank of England's Monetary Policy Committee begins.



* Thursday: Bank of England's Monetary Policy Committee announces interest-rate decision; Bank of Japan's policy meeting begins; European Central Bank Governing Council meeting.



* Friday: Producer Price Index.

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