The Week In Review: Avoid that cash-rich Benfield

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The Independent Online

Benfield, the reinsurance broker, caused great excitement in the City this summer. It was one of the year's biggest floats, raising £157m, and its success injected life back into the stock market.

Benfield, the reinsurance broker, caused great excitement in the City this summer. It was one of the year's biggest floats, raising £157m, and its success injected life back into the stock market.

The company, set up by the late Chelsea Football Club director Matthew Harding, acts as an intermediary to place reinsurance cover for insurers. It has faced large claims and investment losses, and has been keen to pass its risk elsewhere. As a broker, Benfield does not take on risk, but rakes in a percentage of the premiums its customers pay. This makes it very cash-generative and premiums have rocketed in 12 months.

But what with the company warning this week that the weak dollar will impact earnings and reinsurance rates showing signs of topping out, Benfield has again failed to convince this column of its merits.

Investors should turn a blind eye when 40 odd million new shares go on sale next week as part of its flotation conditions. Avoid for now.


If anyone can successfully "manage for growth" (the title of HSBC's new five-year strategy), it is Sir John Bond, the chairman. But HSBC's elevated share price gives him more than the benefit of the doubt. It fails to reflect the dilution of the group's traditional focus on emerging markets. And it fails to reflect the risks of the strategy, which involves a plan to build up the investment banking operations and dramatically expand lending. Avoid.

Greene King

For many people, a pint of ale is top of the drinks menu during a long, hot summer and Greene King says it enjoyed soaring sales of its famous brands, IPA, Abbot Ale and Old Speckled Hen. The 200-year-old brewer is clearly spending its generous advertising budget wisely. It is also clear the management's attention to detail is getting more people into the group's 1,680 pubs. The shares are worth supping.

Johnston Press

Green shoots: This week's trading update from Johnston Press, publisher of 247 local and regional newspapers, described growth in recruitment advertising and showed evidence, too, of renewed advertising spending by the UK's biggest companies. The erosion of the nine-to-five culture means newspaper buying is less of a habit, but papers such as the Blackpool Gazette have shown that snazzy new supplements can attract readers back and Johnston shares are still worth holding.

SCi Entertainment

Investors in SCi Entertainment this year have scored highly. The computer games publisher has beaten original profit forecasts by almost a half, thanks to the soaraway success of its Conflict: Desert Storm, a hi-tech warfare shoot'em-up based on the first Gulf War. It has shifted two million copies and spawned a sequel which hit number one in the games charts. Conflict: Vietnam is out next year and a fourth title is well advanced. The shares have still higher levels to get to.


As well as the prospect of big share buybacks, the assumption that we are heading into an economic upturn has helped Hays shares shrug off the hit to earnings of its giant disposals programme. But while the rising economic tide lifts all boats, recruitment consultants working with high-earning financial personnel are likely to be lifted more dramatically than this mid-market recruitment group. Hold.


People will start calling us "Fidopharm", says Richard Dixey, chief executive of the drug development group otherwise known as Phytopharm. Despite a lot of hype over the years, the company is only now ready to launch its first drugs, and they are both for dogs. An anti-obesity pill developed from a rare African cactus, will also not now be on the market as a drug any time soon. And its new flagship product, a treatment for Alzheimer's and other dementias, is still at a very early stage. Sell.

Numis Corporation

Larger investment banks axed staff, so Numis has picked up high-ranking analysts and bankers who brought clients with them. Michael Spencer, who runs the broker ICAP, has recently become chairman, lending Numis another big-hitting reputation. The group has more than doubled its corporate clients to 60, mainly in the mid-cap arena. Numis shares are not well followed in the City, but they have rightly soared this year. At a time when stock markets are improving, they are still a buy.

Alliance & Leicester

The nation's unrelenting appetite for credit has been good news for A & L. The little high street lender has enjoyed strong growth for mortgages and loans. The recent rise in interest rates - and the looming threat of more to come - has been causing concern. But A&L does not lend to risky individuals and the credit quality of its mortgages looks sound. It is also a good dividend play, yielding more than 5 per cent. Investors can be confident this will not be cut. Still a buy for income-focused investors.


No news is apparently no longer good news as far as IT services companies are concerned. Shares in LogicaCMG wobbled after its in-line trading statement. With the merger of Logica and CMG largely complete, what this business needs is an upturn in customer spending on IT systems, something that, as predicted, looks increasingly likely next year. Until then, the chunky p/e ratio makes the stock a hold.

Regent Inns

You would have thought an England/Australia rugby World Cup final would have been a win-win scenario for a UK-based pub group whose biggest brand is an Australian-themed bar chain called Walkabout. Yet the 6.9 per cent fall in like-for-like sales during the 22 weeks to 6 December suggests rugby fans must have gone elsewhere to celebrate, or drown their sorrows.

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