Market Report: Investors pull the plug on utilities

UTILITIES were deserted yesterday as investors, encouraged by the improving economic outlook, cashed in and went in search of recovery shares.

Electricity and water shares have been outstanding performers since last year's Conservative election victory. They have become the 'safe havens' of the stock market, with buyers mesmerised by yields and the safety of dividend payments.

Last week many utilities were riding at record levels but their very strength has prompted many to query their short-term appeal. Yields have shrunk, and with an interest rate cut looking increasingly unlikely the temptation to snatch at least some of the profits on offer has proved irresistible.

This week's evidence that the economy is at last emerging from recession strengthened the argument for realising cash to plug into the recovery beneficiaries.

Waters took a deep bath. Anglian lost 12p to 515p; Welsh 23p to 576p and Thames 15p to 526p. A week ago Anglian was 546p; Welsh 607p and Thames 556p.

The electricity distributors were also demoralised. Eastern lost 14p to 471p and Yorkshire blew a 15p fuse to 524p.

The switching, in fairly subdued trading, left the FT-SE 100 index down 2.4 points at 2,839.7. A weak New York opening extinguished the remnants of early enthusiasm.

However, the day's two newcomers underlined the market's firm undertone.

In busy trading the engineer David Brown reached 207p against a 170p issue price. Westminster Health Care, issued at 260p, closed at 287p.

British Steel, with SG Warburg remaining positive, climbed 5p to 91p. US buyers are still chasing the shares. The market was impressed by the group's audacity in bringing in its second price increase this year. But option activity suggests that many expect the shares to weaken.

ASW Holdings, the steel stockholder, was dragged higher by BS, improving 8p to 167p.

BT fell 6p to 420.5p as AT&T urged the US authorities to refuse BT a licence until US groups can enjoy a UK presence.

Bespak, the medical equipment group, had another difficult session, falling 66p to 561p. The shares have collapsed 117p in the three days since an American group, US Surgical, issued a profit warning. More than 10 per cent of Bespak's turnover is through the US group and there was talk that the transatlantic difficulties had prompted downgradings. But James Capel is holding its profit forecasts at pounds 11.5m and pounds 14m.

Rights anxiety over Medeva evaporated and the shares improved 9.5p to 211p. The nil paid rights gained 8.5p to 30p.

Imperial Chemical Industries again drew strength from the support of PaineWebber, the US investment house. One of its analysts, Andrew Cash, has enhanced his recommendation from attractive to buy. He is also thought to have raised his profit estimates. The shares rose 34p to 1,201p, a 58p improvement since the new Cash views became known.

Ladbroke Group fell 4p to 169p. It has the highest dividend yield (8.1 per cent) of any Footsie stock. Forte rose 6.5p to 188.5p, reflecting relief that its poor results were not accompanied by a rights issue.

Ingham, Jim Slater's tip, rose 5p to 114p with the nil paid up 3p at 9p. Castle Mill International, the giftware group, held at 9p. Brian Roussell, the property man, now speaks for 24.96 per cent.

The FT-SE 100 index, at one time up 12 points, ended 2.4 down at 2,839.7. Turnover was a subdued 584.3 million shares with 30,372 bargains. The three-week accounts ends today with settlement on 26 April. Unusually, the next account also covers three weeks. Gilts gave ground.

Brierley Investments, which last year made an unsuccessful 200p-a- share offer for Gibbs Mew, the family-controlled Salisbury brewer, has sold its 18 per cent interest. Carr Kitcat & Aitken paid 210p a share, placing them with institutions at 213p. This week Gibbs shares have been strong, with Panmure Gordon pointing to a strong profits recovery. They fell 15p to 223p yesterday.

Stratagem, the investment group, has attracted a buy recommendation from Henderson Crosthwaite. It expects profits to jump from pounds 390,000 to pounds 800,000 this year. After turning round the Touchstone computer business, Stratagem has descended on the door maker Harrison Industries, where it has built a significant stake. It has cash and near cash worth 52p a share against a market price of 135p.

Aspen Communications, the marketing, media services and specialist print group, has sold to institutions its 13 per cent stake in the GWR radio group, which has a significant interest in the successful Classic FM radio station. GWR shares held at 515p. Aspen, which raised pounds 1.9m, is selling off minority stakes. Its shares held at 190p. Henry Meakin is chairman of the three companies.

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