Investment Column: Hold on to dull but worthy United Utilities

Immedia Group; Songbird Estates


Our view: Hold

Share price: 573p (-0.5p)

Investors do not look to water companies for short-term thrills, and the sector does not disappoint. Yesterday's half-year trading update from United Utilities is a case in point. It confirmed that the company is trading in line with forecasts. And the nearest thing to excitement – the five-year regulated pricing settlement imposed by Ofwat last November? Well, it is panning out as anticipated.

United is Britain's largest listed water company, with seven million customers in the North-east of England. In line with the Ofwat settlement, it is being forced to cut prices by 4.3 per cent in the first year, and it is on course to report a lower operating profit this year than last.

But it is working hard to cut costs, improve efficiency and ensure that it returns to growth. In the short term, its chief executive, Philip Green, is selling out of all non-regulated activities. United has disposed of £600m of assets around the world in the past 12 months. With the consistent focus on core activities and the low cost of its debt portfolio, Mr Green said yesterday that United was "well positioned to deliver outperformance over the 2010-15 regulatory period".

Even with this year's lower profit, and the full-year dividend reduced by 12.5 per cent to 30p, United Utilities is an attractive stock.

Jonathan Jackson, the head of equities at Killik & Co, said: "For those investors looking for a degree of protection against inflation over the next five years, United Utilities is a worthwhile investment and currently offers a 5.3 per cent prospective yield."

For investors moving into utilities from elsewhere, there may be better options. But for existing holders of United Utilities, the outlook is reliably stable, so hold.

Immedia Group

Our view: Sell

Share price: 8.5p (-0.5p)

Readers of a certain generation may well remember the vinyl-spinning antics of Bruno Brookes, the former Radio 1 disc jockey. Investors in his Immedia Group, which provides bespoke radio stations for shops, may not be quite so enamoured.

The shares were placed at 113.5p when the company listed on the Alternative Investment Market in 2003, and hit a peak of 121p the following year. But that was as good as it got, because the stock price fell as fast as Chesney Hawkes's singing career, to 24p in 2006. The shares are now sitting at about 9p with little prospect of much upside. And Immedia's results for the first half of the year were hardly music to the ears yesterday.

It is a tough time for the company. The radio industry has been struggling for a while, and the retail environment still bears the scars of recession. Immedia reported yesterday that its first-half operating loss had widened from £40,615 in the first half of 2009 to £100,375 this year. Revenues retreated slightly to £1.71m.

Brookes, who is chief executive of Immedia, said the results reflected the "difficult conditions prevailing in the UK" as well as a change in the mix of business. He said the company had slashed its costs and was looking forward to the launch of a new service before the end of the year. That mystery launch may be Immedia's salvation but we remain sceptical. Sell.

Songbird Estates

Our view: Buy

Share price: 146.5p (-11.5p)

Shares in Songbird Estates fell by about 7 per cent last night following the release of the property company's half-year figures, but the slide had more to do with fresh plans for a cash call.

The group, which owns most of the Canary Wharf complex in London, detailed a fully underwritten open offer to raise net proceeds of £135m. The money will be used to refinance a £135m shareholder loan from the time of the company's fund-raising last year. Importantly, it removes an overhang and allows Songbird to simplify its balance sheet, which is positive news.

In terms of performance, its net asset value of 178p per share at the end of June was lower than some expected. But, as Evolution highlighted, it made sense, given that Songbird took a hit from the lease incentive on the Lehman Brothers building being written off.

We await more detail on JPMorgan's site at Riverside South. Reports that the US investment bank may leave the premises and move into the Lehman building at 25 Bank Street were noted in The Independent earlier this month. But if JPMorgan does change its plans, given the previous writedown on the value of the property and assuming comparable valuations and a lease of 15 to 25 years, Songbird's NAV could rise by about 20p to 25p per share, according to analysts at KBC.

This, coupled with the fact that the shares continue to trade at a chunky discount to NAV, points to a buy.

News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
News
i100
News
people
Sport
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
PROMOTED VIDEO
Sport
Antoine Griezmann has started two of France’s four games so far
sport
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
News
i100
Arts and Entertainment
<p><strong>2008</strong></p>
<p>Troubled actor Robert Downey Jr cements his comeback from drug problems by bagging the lead role in Iron Man. Two further films follow</p>
filmRobert Downey Jr named Hollywood's highest paid actor for second year running
Life and Style
Dale Bolinger arranged to meet the girl via a fetish website
life
Property
Sign here, please: Magna Carta Island
propertyYours for a cool £4m
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Trade Floor Support - Investment Bank - London - £350 per day

£300 - £350 per day: Harrington Starr: Our client a leading investment bank is...

Day In a Page

Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor