Newspaper article The Evening Standard (London, England)

Goldman Sell Note Rains on United Utilities Parade

Newspaper article The Evening Standard (London, England)

Goldman Sell Note Rains on United Utilities Parade

Article excerpt


UNITED UTILITIES lost 20p to 616p today after falling out of favour with City big-hitter Goldman Sachs, much to the dismay of some of our biggest pension funds which rely on its generous dividend policy.

The moneybags broker has cut its rating from neutral to sell and slashed its target from 674p to 555p. It says there is a real fear the water industry regulator Ofwat will put the squeeze on the company's profits and the cost of borrowing this year.

There is also a threat to profits from a deflationary environment in 2009 which is being forecast by Goldman's economists. UU shares currently yield almost 7%, but the prices they charge consumers, and subsequent profits, are strictly controlled by the regulator.

Goldman has also cut rival Pennon, 5'p better at 543'p, from 543p to 473p while repeating its sell rating. It has also lowered Northumbrian Water's target from 299p to 244p and that of Severn Trent, 12p dearer at 1229p, from 1391p to 1262p. Both are rated at neutral.

Northumbrian firmed 6-p to 2683/4p.

Shares generally rallied from a slow start with prices squeezed higher in thin trading. The FTSE 100 index climbed 63.9 to 4643.6.

Stock market bears have shut down their positions in Next, 150p higher at 1241p, and Debenhams, up 7'p at 36p, following their Christmas trading updates.

Tomorrow it's the turn of Marks & Spencer, up 83/4p at 2383/4p. Shore Capital says M& S had a gloomy Christmas and could report a 10% decline in like-for-like sales of general merchandise with food sales down 7%.

It continues to rate the shares a hold and expects them to outperform with the help of some sector rotation by investors. But Pali International has repeated its sell rating and warns it will be "par for the course" if Christmas sales turn out to be as bad as feared even if the stores group succeeds in limiting bottom-line damage.

J Sainsbury put on 5'p to 3273/4p. It kicks off the Christmas trading update for the UK's big three grocers on Thursday.

Comments from the likes of Waitrose and Asda suggest that Christmas trading was respectable, thanks to a late rush. …

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