The Week In Review: Loyalty's the word for Lloyds chief

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The Independent Online

For the final time last night, Peter Ellwood, chief executive of Lloyds TSB, turned the lights out at his airy, modern office looking out on to the City, after six years at the helm of the UK's largest retail bank.

Eric Daniels, the man moving into the office, has run Lloyds' core retail banking arm since 2001, but says he has a few new ideas up his sleeve to get Lloyds' black stallion galloping again.

Mr Daniels plans to return to old-fashioned notions such as offering tip-top service as a way of encouraging Lloyds' 15 million customers to buy more financial products through the bank. Stronger service should also improve the loyalty of its customer base in the face of marauding smaller rivals better able to compete on price.

There have long been fears of a dividend cut to help shore up the finances of the Scottish Widows life insurance business Lloyds owns, but with the stock market looking firmer this seems to have diminished. Speculation that the group could sell off its New Zealand assets suggests the bank is willing to choose other ways of raising cash before taking the unpopular step of slashing the dividend. Buy.


Richard Baker, chief executive designate of the chemist chain, does not arrive to complete the management clearout until September, but brokers are already setting out the structural changes he could make. The most likely option is that Boots could take on more debt (it has plenty of headroom to do so) to finance an extra £1bn of buy-backs. The shares are worth a flutter and a dividend yield of close to 5 per cent should help investors sleep at night.

De La Rue

For a company with a licence to print money, De La Rue has been a gallingly poor investment over the past few years. The group, whose main business is the printing of banknotes, has seen its shares more than halve in value. But it has no debt, and shareholders benefit from the strong cashflows through a chunky dividend and the ongoing share buy-back programme. There is value here. It is risky, but investors may want to bet it can be unlocked.


The 370-strong Peacock chain is trying to shed the down-at-heel image that has hampered progress since the company floated in 1999. It is a year into a four-year programme of store refits that will modernise the stores and it has already made sure it is offering the trendiest clothes it can get for sale within its budget prices. he recently-acquired bon marché chain is already benefiting from better application of retail basics such as stock control, minimising the amount of clearance sales needed. The share price has higher to soar.

Macdonald Hotels

One by one, the UK's big hotel chains warn that the number of business travellers is down and Americans are still not willing to cross the Atlantic. This week it was Macdonald Hotels, the UK's eighth biggest operator. It reported another fall in businesses bookings of its hotels as mid-week business conference venues, which has left it chasing less profitable leisure bookings. Hard times notwithstanding, Macdonald is a uniquely well-run company. With £100m of investment planned for its provincial estate, the shares are a hold.


The education funding crisis - which is forcing some schools to lay off teachers - could put a big hole in RM's financial planning. The group sells software, hardware and IT services to schools and needs a load of new orders this term if it is to turn its first-half loss into the full-year profit the City is expecting. But the crisis has clouded the outlook for sales and observers believe IT is suddenly a lot lower on headteachers' priority lists. This comes at a bad time, since RM is just getting itself back on its feet. The share price has run ahead of the recovery and will have to come back down. Sell.


A load of decomposing old rubbish has made a lot of money for Pennon Group, the owner of South-West Water. The methane gas produced at its landfill sites commands a premium price because of the Government's strictures on environmentally friendly energy.But the group is being dragged down by a more modest performance from the core water business, and Pennon has less financial room to manouevre than its peers. Existing holders should stick with it for the dividend, but new investors wanting to dip a toe in the water sector might look elsewhere.

Big Food Group

The key to the future of Big Food Group, which owns the Iceland frozen food chain, is the success or otherwise of its new-style stores, which include a convenience store format. Reformatted shops are seeing increases of 14 per cent in sales, but analysts question whether this is much more than the cost of financing the investment. An additional risk must be that most of Iceland's larger rivals, such as Tesco and J Sainsbury, are also muscling in on the convenience store market. With the Safeway bid battle certain to increase competition regardless of the outcome, this stock is still too risky.


Lonmin is South Africa's third biggest platinum producer and wants to concentrate on that metal. It says demand for platinum is continuing to increase from both the jewellery market and the car manufacturing industry, which uses platinum to clean its petrol emissions. But not everyone is convinced that there is huge growth in platinum for Lonmin now it is already a top producer. Increasing supply too much would be like self-harm, depressing prices. The chances of a takeover seem slim and shareholders cannot expect to gain from the Ashanti disposal until well into 2004. Cash in any profits now.

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