City File: Electricity is up in lights

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THE regional electricity companies' annual dividend race got off to a flying start last week. The next few days should see the remaining seven reach the finishing line, with South Western Electricity heading the pack. Despite Stephen Littlechild's distribution review, which promises some additional handicaps, the sector has shown all its usual strengths, including double-digit payouts and healthy dividend cover.

Norweb and Seeboard, both reporting tomorrow, look well placed to cope with any new ground rules Offer imposes. But Eastern Electricity looks more exposed and should be sold.

KARL WATKINS, wunderkind of Crabtree, the packaging equipment maker, is poised to make his first acquisition.

Apparently, he wowed a recent institutional fund managers' meeting with his tale of how he wants to buy a stable of neglected engineering businesses with export potential.

At 339p the shares have slipped since announcing excellent half-year results last month. Even on a yield of 1 per cent, the shares could be about to motor again.

GET OUT of British Gas shares. That's the view of David Stedman at Daiwa Institute of Research, pointing to the company's 'unenviable array of strategic problems'. These include workforce lay-offs, a dwindling market share and the challenge of establishing a global gas presence.

It is hard to knock the Daiwa view that the shares will drift over the next year, from their present suspiciously high yield of 6.9 per cent at 261p.

INTEREST-RATE fears have hit the car trade, and none more than Lex Service. But Harry Phillips of Panmure Gordon is convinced that this presents an excellent buying opportunity. At 437p they are on a 1994 low and only 12 times expected earnings of 36.4p. That would be based on profits of pounds 38.5m, up pounds 10m from 1993.

WAKEBOURNE, the computer services company, was the only unit to survive the break- up of Maddox Group last year. But it has since built up some big clients, including Halifax Building Society, and recently signed up a major US bank and a large French motor group.

New house broker Hoare Govett predicts a return to profits this year to the tune of pounds 2.3m for a prospective earnings multiple of 13 at 92p. Divdends should be restored with 0.5p next year. Buy.

SELL TSB Group, says Kleinwort Benson Research after seeing Thursday's annual results. KBR adds: ''The core bancassurance operation declined in profitability, reflecting net interest margin erosion. Further margin weakness and maturity of the life assurance business will restrict operating profit growth.' It rates Lloyds Bank and Abbey National as more attractive.

THOSE looking for a punt on the firming oil price should take a peek at Clyde Petroleum, the North Sea minnow. The shares are trading at a big discount to asset value after a litany of problems and a huge sell-off by Fidelity, the fund manager, and the food baron, Gary Weston's George Weston Holdings.

With the oil price at more than dollars 17 a barrel and almost 80 per cent of Clyde's assets in production, the company is benefiting from strong cashflow that should help reduce debt and return it to the dividend list this year. At 36p, hovering near a 1994 low of 33p, they are a good bet.

THE leisure team at Smith New Court will be looking anxiously for tomorrow's half-time results from Airtours, the package holiday firm.

SNC is ahead of the pack in going for pounds 75.3m pre-tax profits from Airtours for the year to September, so it will want to see its nap well on the way to that after making only pounds 45.5m in 1992-3. Watch for encouraging remarks from chairman David Crossland - and buy at up to 500p compared with the present 487p.