Scott Reid: Busy week in the City as heavyweights set to report

A BATCH of blue-chip heavyweights including Rolls-Royce, spirits giant Diageo and medical devices firm Smith & Nephew will report results this week providing a busy few days for investors.

Hip and knee replacement maker Smith & Nephew, due to report full-year figures on Thursday, has seen its shares jump to all-time highs in recent weeks on rumours of takeover interest. Despite denials by the firm that it is in discussions, shares have remained at record highs as speculation refuses to die down.

Many analysts are unconvinced that a bid will transpire, but are hopeful of trading for the year ahead.

Experts at Evolution Securities said in a recent note: "We continue to value the stock on a standalone basis - we remain positive on improving results for S&N in 2011."

Strong demand in emerging markets is expected to boost full-year results from household goods giant Reckitt Benckiser, which are due out on Wednesday.

The group, whose bulging portfolio includes Cillit Bang and Dettol, said in November that it was targeting annual growth of 6 per cent in revenues and a 16 per cent rise in net income despite a lacklustre performance in Europe.

The company, which recently completed its acquisition of Durex and Scholl owner SSL International, reported a 16 per cent rise in third-quarter profits to 426 million due to strong sales in emerging markets.

Revenues in Europe were flat at 843m in the third quarter as the region - which accounts for 43 per cent of total sales - suffered from increased competition and weak demand for laundry detergent, fabric conditioner and water softeners.

Investec Securities analyst Martin Deboo expects rising input prices to put Reckitt's profit margins under pressure in 2011.

He is forecasting 2010 pre-tax profits to rise by 21 per cent to 2.3 billion, but to remain largely flat in the current financial year in the face of inflation and a cautious consumer environment.

Investors will be looking at package holiday operator Thomas Cook's update, due tomorrow, for guidance on how the unrest in Egypt and Tunisia has affected its business.

Thomson Holidays' owner, TUI Travel, has warned the disruption in the two countries could cost it up to 30m in lost earnings after it cancelled trips.Thomas Cook sells some 900,000 holidays to Egypt a year and about 600,000 to Tunisia and holidays to the two countries make up an estimated 8 per cent of the company's sales, according to Wyn Ellis, an analyst at Numis Securities.

Rolls-Royce is likely to provide more details on the cost of dealing with the aftermath of an engine explosion on a Qantas superjumbo when it reports full-year results on Thursday.

The firm is expected to report a 3 per cent rise in pre-tax profits to 945m in 2010 and an 8 per cent increase in sales to 10.9bn, despite the investigation and remedies required following the incident, according to analysts.

Diageo, owner of Johnnie Walker, Guinness and Smirnoff, is expected to show continued sales and profits growth when it reports its half-year results on Thursday.

The firm should grow sales by 5 per cent to 5.5bn and operating profits by 6 per cent to 1.6bn in the second half of 2010, according to analysts at Royal Bank of Scotland.

Diageo reported in its last trading update, in October, that organic net sales had grown by 5 per cent in its first quarter and reiterated its forecast that organic operating profits growth in the full year will improve on last year.

It said weak consumer markets in Europe have been offset by strong performances in North America and emerging markets such as Russia.

Diageo has launched cans of ready-mixed spirits drinks such as Gordon's gin and tonic and Smirnoff and cola, which it hopes will boost sales of the growing take-home market.

Chief executive Paul Walsh has hinted in recent weeks that he may consider moving the company's head office abroad if the UK government does not lessen the tax burden on Diageo and its employees.