LADBROKES may have put its entry into the huge American internet gaming market on hold pending regulatory clarity, but it still had plenty of international expansion to trumpet at yesterday’s interim results. On top of recent deals in China and Russia, it unveiled a joint venture in Italy and projects in Turkey and Vietnam.

Such overseas moves are a natural progression for a company with such a strong brand as Ladbrokes. As we have seen with the BetOnSports indictment in the US, international gambling — especially on the internet — attracts some highly dubious operators, so companies with a reputation for playing it straight should find themselves sought after by punters.

There are other factors behind this push, not least of which is the group’s newly won independence from Hilton International. For most of his six years as head of Ladbrokes, Chris Bell could have been forgiven for becoming frustrated at seeing his huge cashflows being invested in hotels rather than in his own business. Now, he can use them to develop Ladbrokes into a global brand.

The expansion programme also allows Mr Bell to pitch Ladbrokes as a company with a growth story at a time when it has attracted a considerable amount of bid speculation. The not-so-subtle underlying message is that an opportunistic private-equity takeover would deprive investors of the huge upside that exists in the business.

The sceptic’s view, however, is that such expansionary activities are actually designed to mask the uncertain prospects for its core betting shop estate. Costs are forecast to rise 4 per cent on a like-for-like basis through to the end of next year, which, considering that the comparable gross win — the amount left behind by the punter — was up just 1 per cent in the first half, looks worrying.

However, Mr Bell insisted that upping spending — including £10 million on new electronic tills and £18 million replacing fixed-odds betting terminals — was the right thing to do and he remained “enthused” by prospects for its shop estate. But given that there will be no World Cup next year, investors may have to wait until 2008 for the fruits. By then, we will also have a better idea of the international potential and the impact of gaming deregulation.

Despite the uncertainty, investors should be comforted by the knowledge that, if Mr Bell stumbles, private equity will step in. A long-term buy.

Rentokil Initial

COME back, Gerry Robinson, all is forgiven.

Sir Gerry, the former Granada boss and latter-day TV pundit, was widely derided last August for his cheeky phantom bid for Rentokil Initial. He wanted a big chunk of free shares and the chairmanship but never got round to tabling a formal offer or fully explaining how he planned to turn around the rat-catching to washroom supplies group.

Exactly a year on, however, the shareholders who rebuffed him might be more prepared to listen. Rentokil has made no share price progress at all and has underperformed the wider market significantly.

Yesterday’s interim numbers have not improved matters. Analysts fractionally downgraded their full-year forecasts after Rentokil warned shareholders that it was grappling with difficult market conditions in the textiles and washroom division. A statement that it expected to return to “modest profit growth in 2007” was not enough to boost sentiment. The shares were marked down 7½p to 152¼p.

Doug Flynn, the chief executive, is making progress in lifting sales, which were up 10.5 per cent in the first half and on an improving trend between the first and second quarters. Organic growth, however, was a more modest

3.5 per cent. Rentokil is getting better at retaining customers, too, which is an encouraging sign. Mr Flynn has also succeeded in hiring some much needed fresh blood to the senior management ranks.

But that is likely to be a long haul. Parts of Rentokil are in a time warp. The group is one of this country’s biggest consumers of carbon paper, which speaks volumes about past investment in computers. It has been a very late convert to the internet, too. It launched Rentokil.com only this year and Initial.com, another of its key brands, is yet to arrive. It has a lot of catching up to do in modernising its systems and inculcating more of a customer-focused culture.

The shares trade on about 15 times expected full-year earnings. The yield is 4.9 per cent but the cover is thin. Unenticing.

Rexam

A DECLINE in profits is not normally a cause for celebration, so investors may have questioned the 7.5 per cent jump in Rexam shares on the back of slightly lower underlying first-half profits. Followers of the maker of cans and bottles will have realised that the jump was because of relief that the outlook was not as bad as feared.

Making drinks cans may seem like a steady business, but with aluminium prices up by 40 per cent in a year and energy up a fifth, it is anything but. Out of first half sales of £1.8 billion, aluminium cost more than £500 million and energy £100 million. Rexam has absorbed the energy hit and is well hedged on aluminium, but the market will be watching to see whether its attempt to pass metal prices on in Europe — as with US contracts — is accepted by customers.

Shares in Rexam, which is making sensible investments in growth markets such as Brazil and Russia, trade on 12.8 times likely earnings, yielding a decent 3.5 per cent. The recent volatility is unlikely to go away, but a whiff of bid speculation makes the shares worth holding.

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