STOCK MARKET WEEK : Three-day event for a champion converted to the demerger school

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The Independent Online
It could be described as "Ernie's week". Sir Ernest Harrison, who embraced the demerger philosophy long before it attracted Lord Hanson, is parading the three companies where he is chairman and, despite his 70 years, still guiding light.

The life-long Arsenal supporter likes to treat the City to a three-day show. So tomorrow he will offer Vodafone's results, on Wednesday it is the turn of Racal Electronics and Chubb Security has its date with the stock market on Thursday. Born in Hackney, the son of a docker, Sir Ernest started as a pounds 650-a-year accountant and company secretary with Racal at the time the business was launched in 1951.

His conversion to the demerger school of thought was almost certainly inspired by hostile takeover bids.

Vodafone was hived off from Racal, partly to thwart the predatory ambitions of Cable and Wireless, which had lost out to Racal in 1983 over a mobile phone network. Then, a few years later, when Williams Holdings launched an attack, the demerger of the Chubb security locks business proved a successful ploy.

Vodafone, by far the biggest of the Harrison creations with a market value of pounds 7.9bn, should indicate that despite increased competition, largely from Cellnet and the emergence of Orange as a serious rival, it has continued to prosper with overseas growth outstripping expectations.

NatWest Securities recently nudged its forecast higher to pounds 465m; last year's figure was pounds 371m.

Chubb should manage a 12 per cent gain to pounds 98m and Racal, now dwarfed by Vodafone, should produce a 21 per cent advance to pounds 69m. Racal has been quite aggressive, buying businesses from Thorn and BTR which should help offset the expected profit decline at some of its more traditional operations and losses in the US.

It should also have reaped rich rewards from Camelot, the money-spinning lottery business. A contribution of around pounds 16m from the 22.5 per cent stake is expected and Racal's income is also swollen by supplying equipment for the national gambling machine.

De La Rue, the banknote and security printer, is another cashing in on the lottery; it also has a 22.5 per cent stake.

But lottery loot will not prevent a profits setback. Louise Barton at Henderson Crosthwaite sees a modest decline from pounds 146.6m to pounds 145m; others are more fearful.

The group has had a poor time, blighted by profit warnings which led to its demotion from the FT-SE blue chip index. Its shares, riding at around 1,000p when Portals, the security paper group was acquired two years ago, have fallen from 948p to a 632p low in the past year; they are now 718p.

De La Rue shares were weak last week, going against the market which, as measured by Footsie, managed to make modest headway. Trading, despite the utilities excitement, was often lacklustre. Not much excitement is expected this week but Richard Jeffrey at Charterhouse Tilney remains confident some heady action looms.

He says: "To renew its upward progress the market requires evidence that the consumer recovery is becoming more broadly based within the economy. We believe such evidence will be forthcoming over the next two months" pushing Footsie towards 4,000 points.

But for every bull it is possible to find a bear. Mark Brown at ABN Amro Hoare Govett believes equities are some 5 to 10 per cent overpriced and retains a 3,500 year-end target.

The flow of water profits continues this week with Thames and Yorkshire offering figures. Thames, like so many privatised utilities, has been forced to admit it should have stuck to its core business and is abandoning diversification. Hence it will take a hit tomorrow with pounds 65m provided for asset write downs and reorganisation costs and goodwill of pounds 30m, previously written off against reserves, will be charged against profits.

The company has said its normalised profit will grow "approximately twice the rate of inflation" which leads to the conclusion it should be pounds 320m, up 5.3 per cent. The dividend should, however, gush, perhaps by 12 per cent to 28.3p.

Yorkshire Water will face the market on Wednesday following a year in which it was held to ridicule as the drought forced it to truck water across the Pennines, resort to standpipes, introduce various bans and even suggest to its customers they should cut down on their washing habits.

As Robert Miller Bakewell at NatWest says: "These results will represent an exercise in exorcising the past even though the dry weather continues to display a Boycottian tenacity."

He believes profits will be a little higher at pounds 195m and the dividend will be lifted 10 per cent to 30.3p a share. More enticing is the prospect Yorkshire will indulge in a share buyback before long.

Boots, the cash rich high street retailer, is likely to manage a respectable 14 per cent advance to around pounds 500m on Thursday. A share buyback or even a more shareholder friendly special dividend must be a possibility as the giant's cash coffers overflow. There is also a chance it will say how it intends to extricate itself from the Do-it-All retail do-it-yourself disaster it suffers with W H Smith.

Pilkington, another Thursday company, should produce a 39 per cent profit advance to pounds 215.5m and even adjusted profits, say pounds 50m, will look good against last year's pounds 248m loss. The glass maker operates in a tough market and there are indications prices are coming under increasing pressure.

Emap, the media group, reports tomorrow with perhaps pounds 85m against pounds 63.9m. It is widely believed it will move to cut its debt mountain by unloading at least some of its regional newspapers, the foundation of the group.

Others due this week include National Grid (pounds 600m against pounds 569.2m); Northern Ireland Electricity (pounds 98.8m from pounds 86.6m) and Siebe, the engineer which recently acquired Unitech, with pounds 327.5m compared with pounds 275.1m.