The Week in Review: BT between a rock and hard place

BT is caught between a rock and a hard place. Many analysts accuse it of having become a boring utility with few real growth prospects, yet urge the company not to do anything too radical, like a big acquisition, that might make it a riskier investment proposition.

BT is caught between a rock and a hard place. Many analysts accuse it of having become a boring utility with few real growth prospects, yet urge the company not to do anything too radical, like a big acquisition, that might make it a riskier investment proposition.

They are right to be concerned about growth. BT has already had to abandon the revenue targets it set, only six months after announcing them. The company is facing increasing competition in the domestic fixed-line telecoms from new entrants such as Carphone Warehouse and supermarkets, while consumers are using mobile phones more.

If you believe Ben Verwaayen, chief executive, the company can get decent organic growth from broadband and other offerings. But the financial picture is clouded by a pension fund shortfall. That could see BT have to pay top-up payments of several hundred million pounds a year. Until this issue is out of the way, the current share price seems fair.

British American Tobacco

As the only UK cigarette maker with operations in the US, British American Tobacco is the only tobacco stock with exposure to the potentially deadly outbreak of litigationitus that has left industry giants coughing. BAT is also the only UK tobacco group to have suffered from price competition in the US. But BAT's long-term prospects are healthy, and the shares yield 7 per cent. Buy.

Irish Life & Permanent

Compared with rivals in the UK and on the Continent, Ireland's largest life insurer and mortgage provider has been seen in some corners as a relative safe haven, thanks to its strong capital base and dividend cover. After the company's purchase of a bank, Irish Permanent, in 2001, mortgages have been particularly strong thanks to Ireland's booming housing market. A long-term buy.


Sir Martin Sorrell has been the doctor doom of the media industry for a long time. But the man who came up with the "bath-shaped" advertising recession, now says there is "definitely more stability" in the market. Sir Martin stuck with his forecast that things won't pick up until next year, when the US presidential elections and the Olympic games should mean that ad spend increases. His shares will gain further as more evidence of recovery emerges. Buy.

SSL International

In the short-term, SSL might struggle to achieve a full price from the sale of its hospital gloves and scrubs business. In the long-term, it will be left only with low-margin, low-growth condoms and foot care businesses. A medium-term pick-up is dependent on the success of a mission to cut costs from the flabby European distribution network. Until there are signs of a breakthrough, avoid.


Britain's largest carpet retailer has a solid business with a market-leading position and a well-covered dividend. But the signs are that this is a mature business whose core UK operations have lost a bit of momentum while the higher growth continental European operation struggles to make the headway hoped for. After a strong run it could be worth taking profits.

McCarthy & Stone

McCarthy & Stone is one of those companies on the right side of Britain's demographic timebomb. It is the biggest builder of retirement flats and other sheltered housing, with 65 per cent of the market. The company anticipates some softening of the housing market, however, and notes "build cost pressures", particularly wages and increased regulation such as the aggregates tax and landfill duties. Take profits.


Where David Thomas, the chief executive, saw growth potential from leisure brands with broad consumer appeal, the City saw a hotch-potch of unappetising concepts. Until recently. Fans now applaud Travel Inn, the outperforming budget chain, and the David Lloyd Leisure health clubs, although others think David Lloyd could find it tough to find the right suburban sites for its expansion. After a strong run, the shares are fully valued. Hold for the 4 per cent dividend yield.

Body Shop International

Body Shop has not been the most fragrant investment over the years, what with over-expansion and poor retail disciplines in stores. It is at last moving in the right direction. Product innovation is starting to have an impact, and the restructuring should be complete by the end of the year. An interesting recovery play.


The cash-strapped biotech Vernalis has wrapped up a £14m fundraising but it is not worth shareholders taking part in the seven-for-10 share offer. The company will still lead a hand to mouth existence. Royalties from Frova, its migraine pill, might cover the cost of developing other drugs, but the company is sub-scale. With biotech drugs more likely to fail their trials than pass them, a company with this meagre a pipeline is unattractive in the extreme.


The fear is that Cattles' has suffered unfortunate timing in having moved away from door-to-door lending to those who absolutely need to take on a bit of credit for one-off purchases. Increasingly, it has found itself financing the luxuries of just the sort of people who have a bit of slack in their belts that they can tighten in the current economic downturn. Avoid.

Carlton Communications-Granada

The bounce back by shares in Carlton Communications and Granada, the ITV companies, might be over. The Competition Commission may only allow their merger if both sell their sales houses – so it may not be worth doing the deal. Granada has a sizeable production house, so programme-making provides it with another income stream. Carlton is dependent on ITV advertising revenues, which have been growing only weakly. Both shares are unattractive for now.

The above is a selection of recommendations from this week's daily investment columns

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Life and Style
food + drink
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
peopleAt least it's for a worthwhile cause
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Arts and Entertainment
Ben Affleck stars as prime suspect Nick Dunne in the film adaptation of Gone Girl
filmBen Affleck and Rosamund Pike excel in David Fincher's film, says Geoffrey Macnab
Life and Style
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    Day In a Page

    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments