Half-baked holiday prospects put operators in the shade

MARKET REPORT

Fresh concerns about the glut of unsold summer holidays drove share prices in Airtours and First Choice, the second-and third-largest tour operators behind the Canadian-owned Thomson, to fresh lows for the year.

Airtours fell 7p to 395p. There were unconfirmed reports yesterday that Schroder Investment Management was trying to reduce its holding further. Schroder's shareholding was recently reduced from around 15 per cent to less than 12 per cent.

Shares in First Choice fell 2p to 97p, and raised questions in the City over the relationship between the company and 21 per cent shareholder Thomas Cook, the estate agency business controlled by LTU of Germany.

Cook bought most of its shares at 150p each in early 1993, helping First Choice fight-off a pounds 300m takeover bid from Airtours. First Choice, known as Owners Abroad when Airtours made its bid, is valued at just pounds 151m at the current price.

Investors are becoming increasing shy of buying shares in the holiday companies, particularly until a clearer picture emerges about sales of this summer's holidays. One dealer said yesterday that there were no takers for a line of 100,000 shares on offer in Airtours.

A leisure industry observer said yesterday that additional problems lay ahead for the tour operators because resort and hotel operators in the Mediterranean were likely to raise prices next year. Demand for hotel rooms is set to increase as more European countries start to recover from recession.

He added that the good weather in the UK was not helping. People who habitually book late, he said, would now be thinking twice about spending money for a holiday in the sun when they get just as good a tan sitting in their gardens.

The summertime blues for the holiday company shares contrasted sharply with the rest of the market, which advanced for the sixth successive trading session.

Share prices were marked up from the opening bell, largely on the back of a solid overnight performance on Wall Street, where the Dow Jones index advanced 25.72 points to 4,732.77 - within a whisker of its all-time high of 4,736.29.

In London, the FT-SE 100 index climbed 22 points up until Wall Street opened. Softer earlier trading across the Atlantic, however, saw shares finish off their best levels and closing advance in the FT-SE 100 was halved to 10.6 points to 3,468.9.

Trading volumes were reasonable good for a Friday, with more than 601 million shares changing hands. More than 225 million shares were traded across the top 100 stocks.

Gilt-edge stocks shed around half a point in line with US treasury issues.

The leaders were given a good start as interim results from Lloyds Bank, up 13p to 677p, were well received by banking analysts. Barclays also added 13p to 737p, NatWest gained 7p to 597p, Standard Chartered added 10p to 370p and TSB finished 3p better at 249p.

In leisure, Granada improved 5p to 653p as the court dismissed the long- running claim brought by London Merchant Securities, down 6p to 99p, against the original shareholders in British Satellite Broadcasting, which is now part of BSkyB. Shares in BSkyB rose 7p to 335p.

However, the two other defendants fell. They were Reed International, off 3p to 946p, and Pearson, which closed 3p lower at 634p.

Retailers were in demand, following the previous day's encouraging comments made by Boots and yesterday's trading update from Burton, which said everything was going to plan.

Burton added 2p to a year's high of 97p, Kingfisher gained 7p to 466p, and Boots registered a rise of 9p to 548p.

Elsewhere, rumours still remained about a counter bid for First National Finance. Shares held at 111p, against the 110.5p per share bid put on the table recently by Abbey National.

Lloyds Investment Managers yesterday sold 271,000 FNFC at 11p, and still hold almost six million.

The takeover speculation surrounding Smith & Nephew, however, continued to fade. Smith slipped 5.5p to 191p. Zeneca, also linked with recent bid rumours, lost 7p to pounds 11.28.

Utilities were upset on another day of action by regulators for water, gas and electricity.

Hardest hit were British Gas, down 2.5p to 292.5p, South West Water, off 15p to 524p, Yorkshire Water, 5p lower at 608p, and South West Electricity, which fell 8p to 901p.

London International Group firmed 2p to 122p as Powerstock, one of its largest shareholders, sold six million to cut its stake to 19.9 million, equal to 5.89 per cent.

Another high was established by Scottish Radio, up 5p to 329p amid more bid speculation.

TAKING STOCK

o Shareholders who base investment decisions on dealings by directors would have taken note of the large exercise and disposal of options yesterday by Steve Bedford of Storehouse. The retail company, which owns Mothercare and BhS, recently warned that poor weather in May and June had affected sales. Mr Bedford exercised 268,000 options in four price bands, ranging from 99p to 205p, and then sold 233,000 of them at 307p. The profit pocketed on the transaction was pounds 364,800. Storehouse shares rose 4p to 305p - a year's high.

o There was talk that Albert E Sharp, the broking firm, was about to publish a buy research note on the underperforming BI Group. Shares, which trade at 98p, have underperformed the market by almost 4 per cent over a year.