Allied Domecq in cheerless mood

Market Report

ALLIED DOMECQ was the weakest Footsie constituent as worries surfaced that it will roll out a particularly cheerless trading statement along with flat profits next week.

The pubs and spirits group has already signalled that its results to the year ending August will not prompt wild celebrations. The stock market expects around pounds 612m before exceptional charges. Last year's figure was pounds 602m.

The shares fell 34.5p to 468.5p. They have performed relatively well this month and there could be a tendency in some quarters to snatch profits. But some investors are worried about Allied's trading statement. They fear pub sales may have fallen in the past few months and Allied's spirits side could be experiencing a sharp slow down as the world economy comes under pressure. The drinks industry has been a major casualty of the slow down in consumer spending with the World Cup and the wet summer adding to the agony.

With its sprawling pubs' estate Allied is at the sharp end of the pubs' business and if trading has continued to deteriorate since the summer it would be a major casualty. In the past year Allied shares, long-time under-performers, have been as high as 634p. During the worst days of the long bear run they touched 389p.

Footsie rose 23.3 points to 5,229.9 in much more subdued trading than the market has seen recently. At one time it was up 52.8. Hopes of lower interest rates still linger but with New York giving ground during London hours there was precious little incentive for shares to make spectacular headway. Supporting shares settled for sedate progress with the mid cap index up 17.9 to 4,656 and the small cap managing a 2.3 gain to 1,942.6. There are worries the market has seen the best of the post slide bounce and shares will merely mill around for the rest of this year.

The rally in Tokyo, as Japan's banking crisis looks more containable, is helping sentiment; so is the more resilient displays by most world markets.

Reuters, the information group, was the Footsie star, bounding 47.5p to 517.5 in busy trading as the stench of burnt figures wafted around the market. There has been an array of profit downgradings and bearish sentiment as some fretted about the expected cut back in demand for dealing and information screens.

But the downturn in world markets has failed to switch off the group's sales progress, allowing a better-than-expected 7 per cent third-quarter revenue increase.

Halifax was another displaying unexpected exuberance. Boardroom changes, with 42-year-old James Crosby picked to take over as chief executive, excited expectations of bids and deals. It is thought Mr Crosby will be more receptive to the prospect of the mortgage bank hitting the take-over trial than the current incumbent Mike Blackburn.

Imperial Chemical Industries, despite poor quarterly figures, rose 7.5p to 506.5p. Despite the dismal trading performance the group's apparent intention of holding its year's dividend provided some support.

The HSBC investment house had a busy time, promoting banks but hitting builders. Banks had an active session with Barclays up 36p to 1,263p.

Builders, firm on the trend towards lower interest rates, hit a brick wall. Berkeley tumbled 44p to 521p, and Barratt Developments 16.5p to 214p. Redrow lost 8.5p to 155p and Beazer 9p to 172.5p. Berkeley's profit estimates were lowered from pounds 117m to pounds 109m and from pounds 125m to pounds 109m. British Steel also felt the HSBC axe. It smashed its profit forecasts to pounds 123m from pounds 357m and from pounds 395m to pounds 70m. For the year 2000/2001 HSBC has gone from a prediction of pounds 426m to just pounds 36m. The steel shares ignored it all, up 1p to 107p. Allied Zurich, the financial group, firmed 2.5p to 669.5p. Panmure Gordon has put an 800p target on the shares.

There was a heady fermentation the cider pitch as hard-pressed Matthew Clark said bid talks were on. HP Bulmer rose 22.5p to 330p and even little Merrydown managed a 2p gain to 26p.

Regent Inns, the pubs chain that shocked with a profits warning, was in the takeover frame, gaining 11p to 120p in brisk trading.

Racal Electronic is another where hopes of corporate action refuse to die. The group has moved to float off its telecom side. But there is a theory gaining strength that Racal will opt for trade sales or could attract a bid for the whole group. The shares, ruffled by recent profit caution, rose 14.5p to 288p. Finelist, the car accessories group, reversed 37p to 119p, stiff reflecting profit downgradings on Tuesday.

DFS, the furniture retailer, picked up 965,000 shares at 165p after trying a much bigger buy back and Quantica had an even more disappointing time, having to settle for only 2,000 shares at 80p. DFS rose 8.5p to 174p and Quantica, involved in recruitment services, held at 79.5p. BRITISH World Aviation, a modest company with an impressive name, is on the market runway. The group, which provides air services including hiring aircraft to the likes of the England football team and Pavarotti, should make its debut today following the reverse takeover of Castle Mill International, a struggling clothing group which has long been regarded as a possible shell company. BWA shares are expected to trade around 12.5p.

TELEVISION CORPORATION, which produces TV and video programmes as well as providing outside broadcast facilities, added 11p to 185p following director share buying. Chairman Terry Bate, who already has around 23 per cent of the capital, picked up 20,000 shares at 175p, his third purchase in the past few weeks. Director Lady Chalfont also bought 20,000 shares but she paid 185p. The price hit 256p in the summer.

SEAQ VOLUME: 873.7m

SEAQ TRADES: 54,326

GILT INDEX: 109.91 - 0.29