Chubb suffers from lack of demand for security

Keep a hold of Thistle with care; Incisive Media worth a punt

It has been a frustrating year for investors in Chubb, the security services group which was demerged from the old Williams conglomerate nearly two years ago. The shares soared in May when the company revealed merger talks with Securitas, the Swedish security company. But no sooner had the news leaked than the talks were called off after Securitas shares fell heavily on the possibility of the tie-up.

Another frustration is that the hoped-for benefit from increased security fears after the 11 September attacks have so far failed to materialise. There was an initial boost to the security personal division though this is low-margin stuff and the bubble has already burst. The more lucrative work such as the development of state-of-the-art electronic security systems never really came through.

Even so, Chubb has plodded along. It has improved management and invested more in IT systems to improve customer service. Yesterday's 14 per cent rise in half-year operating profits to £49m were in line with expectations and the company made all the right noises about making no acquisitions for 12 months as it concentrates on delivering organic sales growth. Organic growth was 4 per cent in the first half and the aim is to increase this to 5 per cent by the year end and to 6 per cent next year.

This is all worthy stuff, though the bottom line still leaves room for improvement. Though operating profits were up strongly, the interest charge on debts of £488m swallows up half of it. Take off the tax and the dividend you are left with a retained loss of £5.5m. So while top-line growth is welcome, some margin improvement and debt reduction would help too.

Assuming full-year profits of £121m the shares, down 0.75p at 135p, trade on a forward price-earnings ratio of 14. That looks about right for a defensive stock that has yet to prove itself to the City. Hold.

Keep a hold of Thistle with care

As conundrums go, how to spend a spare £365m knocking around in your bank account isn't a bad one. But unless Thistle Hotels solves this particular puzzle – soon – its already weary investors are going to lose what little patience they still have with the stock.

Not that Ian Burke, the chief executive of London's largest hotelier, was shedding any light on the subject yesterday. But after raising the funds five months ago via a sale-and-management deal involving 37 properties, he has numerous options. He could return the cash to shareholders, spearhead a drive into Europe or buy a second UK brand. He could even have raised the interim dividend. That he did nothing rekindled speculation that something was afoot. Like a management buyout.

The issue with Thistle is that there is always something afoot. Will its largest shareholders, BIL International and the Singapore government tire of their underperforming investment and sell up? Will it ever realise the underlying value of its estate, worth £1bn but down to just 18 owned properties from 56 after the March deal? And will it ever venture further afield than the British Isles? Nobody knows.

Shareholders should hang on – for an upturn in its London market if nothing else. Trading improved in July and August and sound management skills kept the decline in the half-year to 14 July in line. Pre-tax profits were £57.9m, boosted by £42.3m of exceptionals from profit on disposals, against £29.4m last time. At 127.5p the shares are expensive, but worth holding.

Incisive Media worth a punt

Incisive Media is an ambitious little publishing company, focusing on the financial sector, mostly in the business-to-business arena. Titles include Bloomberg Money, its main consumer magazine, and Investment Week, for independent financial advisors. Earlier this year the business made an aborted £70m bid to buy Pearson's business magazines, which included Investors Chronicle.

However, yesterday's interim results showed that the bid cost the company £600,000 in lawyers and accountants fees. Along with other one-offs, the pre-tax result was a loss of £141,000, for the six months to 30 June, though operating profit was up a creditable 36 per cent at £2.1m.

Undeterred, Incisive is looking at other possible acquisitions, including some sizeable ones. Incisive has been punished by the stock market for being reliant on financial advertising. However, its narrowly targeted publications have seen advertising sales deteriorate by much less than the market as a whole. It also makes money through conferences and other related events.

Management owns 35 per cent of the company and, while this causes some liquidity problems, their interests are at least firmly with outside shareholders. The stock was floated at 143p in late 2000 and closed unchanged yesterday at 59p, which, on a forward multiple of 10, is not expensive.Worth a punt.