Market Report: Insurer sparks a retreat to dividend safety

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The Independent Online
AFTER three days of what some regarded as reckless progress the stock market experienced a 'flight to safety' retreat yesterday.

Once again the hunt was on for dividend-safe companies as Sedgwick Group underlined the fragility of many dividend payments.

Britain's second-largest insurance broker cut its interim dividend and warned that the year's total could be halved.

Like so many City stalwarts, Sedgwick had for long been perceived as one of the safer dividend plays. But then rumours started to circulate that the payment might not after all be secure. The shares fell 18p last week and slumped 34p to 110p after the figures.

Willis Corroon, the biggest broker, reports tomorrow. A profit fall is expected but it should indicate a maintained payment. Even so, its shares fell 14p to 177p. Others down included Hogg Group, 8p to 118p, and CE Heath, 24p to 268p.

Dividend cuts will continue to haunt the insurance sector. Only last week the once impregnable Royal Insurance slashed its interim from 11.25p to 2p.

The Sedgwick cut redirected thoughts towards the utilities, where dividends are seen as recession-proof. Electricity and water shares edged ahead although best levels were not always held. Among those higher were Thames Water, 4p at 420p, and Midland Electric, 8p at 320p.

Shares opened on an uncertain note, perplexed by the latest Tokyo slump and what was seen as a rather crude attempt by the Japanese Finance Minister to talk up the wilting market. The FT-SE share index ended 21.4 points lower at 2,354.7.

Futures conduct again blighted the cash market. Nomura was detected as an early seller. Then Barclays de Zoete Wedd ruffled sentiment when it appeared to be selling during the afternoon.

Once again trading volume was disappointing. Investment activity was largely absent with technical influences creating many of the moves.

Food manufacturers remained out of favour. Hillsdown Holdings fell 13p to 105p. The group is in its close season and therefore unable to comment on the array of profit downgradings that have appeared in the past week.

Whitbread 'A' fell 12p to 396p. An agency trade at 404p did not help. County Natwest believes the group will eventually pool its brewing operations with Scottish & Newcastle. 'Such a merger', County said, 'would provide a means for Whitbread to remain in brewing, to meet the requirements of its partner (the Dutch Heineken group) and to increase the cash flow from brewing that is so vital to its retailing operations.'

County adds that any such Whitbread deal with Scottish 'would be seen as a token of its management's determination to redress the group's current strategic weakness'. Scottish finished 6p lower at 438p.

HP Bulmer, the cider maker, remained in demand, up another 8p to 338p. Forte resumed its decline, down 6p at 128p, and Queens Moat Houses fell 4p to 48p on fears that Germany is moving into recession.

Blue Circle Industries was weak as rumours of a downgrading went the rounds. The shares fell 8p to 179p. British Gas tumbled 6.5p to 235p as Smith New Court was said to have striven unsuccessfully to place 2.5 million shares.

Reed International weakened 10p to 468p. James Capel suggested a switch into Pearson, up 10p at 341p. Pearson's BSkyB involvement was one influence prompting the advice.

Boots shaded 1p to 441p although Hoare Govett nudged up its forecast for next year by pounds 10m to pounds 413m.

Micro Focus, rose 98p to 1,545p on its results. Another computer group, Hoskyns, firmed 1p to 439p as Cap Gemini Sogeti, the French group, reaffirmed its intention to mop up the minority at not less than 469p by next year.

Hartstone Group, the hosiery and leather business, responded to the Wise Speke circular and bullish comments from Carr Kitcat & Aitken with a 2p advance to 125p.

Brown & Tawse, the industrial materials group, held at 52p as the mini-conglomerate Suter acquired 250,000 shares to take its stake to 5.1 per cent.

CMW, the architectural group, rose 3p to 8p. Some felt they detected a restructuring was near.

Worries over the Dan-Air airline left the Davies & Newman parent 3p lower at 18p.

Provident Financial, the door- to-door credit group, which is regarded as one of the safest shares in the recession, rose 5p to 509p. Results are due next month.

Shares of Standard Platforms Holdings, a document management and optical storage group, held at 65p despite indications that it is achieving a trading breakthrough. Last month's orders topped pounds 500,000 and its order book is more than pounds 1.5m. More orders are expected. The group's shares were floated at 225p nearly two years ago. They were also placed on Nasdaq.

The hard-pressed property group London Securities has sold its shareholding in the fast- growing Regent Inns. The pubs company is traded under the rule 535 facility and it appears LS sold at 65p a share, realising about pounds 460,000. The LS shares have gone to 3i Group and Oliver Vaughan, who developed Juliana's Holdings, now part of Wembley. LS held at 1.5p.

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