The Week Ahead: Profits flow down the pub but smoking ban clouds the air

Emerging through a cloud of (soon to be illegal) smoke, a gaggle of the UK's leading pub companies announce results this week. While most have had strong summer sales, their figures will be overshadowed by the Government's recent White Paper calling for a smoking ban in pubs serving food. After some initial knee-jerk reactions, analysts will be seeking more measured responses on how this will affect profitability.

Emerging through a cloud of (soon to be illegal) smoke, a gaggle of the UK's leading pub companies announce results this week. While most have had strong summer sales, their figures will be overshadowed by the Government's recent White Paper calling for a smoking ban in pubs serving food. After some initial knee-jerk reactions, analysts will be seeking more measured responses on how this will affect profitability.

Enterprise Inns, which operates over 5,000 pubs, is expected to deliver good news when it reports full-year results on Tuesday. Analysts say the integration of its acquisitions, the Laurel and Unique pub groups, is proceeding well and forecast pre-tax profits to rise from £176m to £221m.

Mitchells & Butlers also had a good summer, but it may be more vulnerable to the legislative proposals. Some of its key brands, such as Harvester and All Bar One, are "food led".

In Scotland, pubs and brewing group Belhaven will need to address the issue earlier as the Scottish Parliament's ban starts in 2006; the legislation for in England and Wales is to be introduced by 2009.

Wolverhampton & Dudley reports on Friday. A promising trading statement has already been released, but investors await details of how rising pub costs - for example, higher energy and Sky TV charges - are affecting the bottom line.

Catering giant Compass warned in September that this year's profits would be similar to last year's at £655m, rather than almost £700m as had been expected. This shattered investor sentiment, cutting the share price by a quarter. Analysts say Wednesday's full-year results represent an opportunity to begin to rebuild confidence in management.

Daily Mail & General Trust, which has outperformed both the FTSE 100 and the media sector over the past 12 months, announces full-year figures on Thursday. Pre-tax profits are expected to be a healthy £230m (compared with £185.5m for 2003), on the back of improving newspaper advertising revenue.

These are uncertain times for engineering group FKI. A restructuring last year cost £55m, and sales were hit by the weaker dollar. Earlier this month the company also chose to pull out of DeWind, the loss-making German wind-turbine manufacturer. Investors hope these changes will allow the firm to focus on its core hardware and lifting-product divisions, and growth areas like making turbo-generators. There have been persistent rumours of a private equity bid and assurances will be sought that the current management are the right people to be running the company.

Hotel group De Vere, the owner of the Belfry golf course and the Grand Hotel in Brigh- ton, is finding life tough after fending off advances from activist investor group GPG. Chief executive Karl Lever now has to focus on offloading the group's poorly performing hotels fast enough to fund the opening of a new range, say analysts.

Severn Trent continues the reporting round for water companies tomorrow and will face some tough questioning. The market has been alarmed by allegations that the utility misled water regulator Ofwat about a £75m discrepancy in its accounts. Interim pre-tax profits are expected to be £144m, against £151m last year.

Also tomorrow, Ofwat will publish details on how much water firms can charge custo- mers for the next five years. Similarly, energy regulator Ofgem will announce on Thursday how much companies can charge to send electricity down the wires for the next five years.

Software group Sage, which helps firms keep count of their profits (and losses), releases its own full-year figures this week. Analysts are concerned that it may soon find itself coming up against Microsoft, which is planning to include a number of accounting functions in future small-business versions of Microsoft Office.

On Tuesday, pest control group Rentokil will announce the results of a strategic review when it issues its trading statement. The company will hold a special briefing for analysts, which is expected to detail the £110m sale of its linen business, seen as non-core.

In the UK, the economic calendar is likely to be eclipsed by the Chancellor's pre-Budget report on Thursday. Before that, on Tuesday, mortgage lender Nationwide publishes house-price figures for November, as well as its housing market forecast for 2005.

The European Central Bank is largely expected to leave interest rates unchanged on Thursday, despite the strengthening euro. And in the US, the markets will be paying close attention to the American em- ployment report, which is released on Friday. The US employment rate is predicted to fall from 5.5 to 5.4 per cent.

CALENDAR

Tomorrow 29

UK: Results: (interim) Belhaven Group, Mitie Group, Severn Trent.

Germany: Results: (third quarter) Hochtief AG.

Tuesday 30

UK: Results: (final) Compass Group, Connaught, Enterprise Inns, Richmond Foods; (I) Homeserve, Kingston Comm.

Wednesday 1

UK: Results: (F) De Vere Group, Mitchells & Butlers, Sage Group, Shaftesbury; (I) WS Atkins, Expro International, Oasis Healthcare.

Germany: Results: (F) ThyssenKrupp AG.

Thursday 2

UK: Results: (F) Daily Mail & General Trust; (I) De La Rue, FKI, Reliance Security, Xansa.

US: Results: (second quarter) Del Monte.

Friday 3

UK: Results: (F) Wolverhampton & Dudley.