The Week Ahead: Rentokil to be scrutinised for signs of break-up

Is the management team at Rentokil Initial considering a break-up of the group? That is the question to which most analysts in the City will want an answer when the group posts its interim results on Thursday.

Is the management team at Rentokil Initial considering a break-up of the group? That is the question to which most analysts in the City will want an answer when the group posts its interim results on Thursday.

Talk of a break-up seems to have been sparked by a note from Deutsche Bank at the start of the month, in which the broker argued that the dissolution of the group might be an answer to its problems.

In the note, Deutsche pointed out that the company could be in a position to return a massive amount of cash to its shareholders if it sold off its non-core assets and focused on its hygiene business. According to Deutsche's calculations, Rentokil could buy back up to 66 per cent of its issued capital if it opted for a major sell-off of assets.

But the latest steer from those who know Rentokil well suggests that the review of the business expected to accompany Thursday's results is unlikely to have much very radical in it. As for the group's financials, they will not make pleasant reading. Profits are tipped to drop to about £180m from £200m as margins continue to deteriorate.

TODAY: Results: Full year - None. Interims - Singer & Friedlander; Keller Group.

TOMORROW: Gerrard expects Hammerson, the property giant, to post a robust set of interim results, particularly given the strength witnessed in both the group's retail and office space markets. As a result, the broker believes that its net asset value estimate of 815p a share may prove to be far too conservative.

Brokers forecast Persimmon will deliver a 25 per cent rise in first-half interim profits to £190m. The house builder is benefiting from its in-depth regional coverage and selective exposure to urban housing markets. Meanwhile, gearing continues to decline from a high of 111 per cent following the 2001 takeover of Beazer to about 24 per cent presently. It has long been said that Persimmon is keen on executing a further acquisition. Westbury has been tipped as a possible target.

Results: Full year - None. Interims - Bodycote International; Claims People; Hammerson; Persimmon.

WEDNESDAY: Rexam shares have dropped 12 per cent since April on worries that costs at the packaging group could rise as a result of the jump in the aluminium price. But Credit Suisse First Boston believes this is not important. It notes that the drinks can giant is 100 per cent hedged against this in the current year and 80 per cent hedged for 2005. The market is expecting Rexam to post a 21 per cent rise in first-half profits to £135m and the Swiss broker predicts that Rexam will achieve an even greater acceleration in earnings during the second half of its year.

Vague talk of a bid for Cattles from HSBC did the rounds of City dealing rooms last week. The logic there is that such a move would complement HSBC's recent purchase of Household which, like Cattles, is a sub-prime lender. Analysts, however, were far from convinced by the story. As for Cattles' interim results, investors can expect the group to boast that it has increased its market share, partly helped by the recent launch of its Welcome Car Credit product. Gerrard forecasts pre-tax profits will jump to about £55m from £49m.

Results: Full year - None. Interims - Autologic; Domnick Hunter; James & Fisher; Johnston Press; Rexam; Weir Group.

THURSDAY: The latest buzz surrounding Hilton Group is that its first-half results are set to impress. Trading at its Labrokes betting shops is said to be booming, thanks partly to the roll-out of its fixed odds betting machines, while business at the group's estate of London hotels continues to recover strongly. According to a recent report from a market research agency, the hotels have experienced a near double-digit room rate increase since March. Last week UBS hiked its pre-tax profit forecast for Hilton's full year to £365m from £340m and told its clients to expect news of a strong performance from the company. At the interim stage, profits should rise to about £170m from £110m previously.

According to Williams de Broe, Invensys' first-quarter results are difficult to predict beyond the fact that they will not be good. The company is engaged in various cost reduction initiatives and continues to sell off assets in an effort to reduce its debt burden. The broker expects Q1 earnings before interest and tax of just £15m from Invensys' continuing operations. Key to the performance of the shares on results day will be the group's outlook statement, according to Williams de Broe. At present, however, it sees little point in buying the shares as Invensys is not expected to become cash generative until 2007.

Results: Full year - None. Cattles; Gowrings; Hilton Group; Hunting; Invensys; Rentokil Initial; Slough Estates; Tomkins.

FRIDAY: Results: Full year - Goodwin. Interims - None.

Economics Diary

TODAY: No events scheduled.

TOMORROW: UK Motor vehicle production (Jul). Germany - GDP (1st revision) Q2.

WEDNESDAY: No events scheduled.

THURSDAY: UK - business investment (prel) Q2, CBI monthly industrial trends survey (Aug). Eurozone - M3 money supply (Jul). Germany - IfO business climate survey (Aug). US - weekly jobless claims.

FRIDAY: UK - GDP (1st revision) Q2, GfK consumer confidence (Aug). Japan - unemployment rate (Jul 4.6%). US - GDP (1st revision) Q2, Michigan consumer sentiment (final) Aug.