Market Report: All eyes are on Forte's payout as cut expected

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The Independent Online
THE stockbroker Panmure Gordon believes the Forte catering and hotel group will be forced to cut its dividend.

Yesterday, as Forte shares reacted with a 5p fall to 154p, the broker warned that the final payment could be slashed to 3.25p a share, leaving the year's total down to 6p against 9.9p last time.

Forte's profits have been devastated by the recession and its shares have collapsed from a 360p peak. The group held its dividend last year and, with the interim unchanged, there had been high hopes it would do so in the current year, ending January.

But PG think the strain will be too much. Profits, it expects, will emerge little changed at pounds 75m with a recovery to only pounds 95m next year.

Forte should be a significant beneficiary of any move out of recession and the floating pound should encourage overseas visitors who have been cold-shouldering the UK this year.

The big recovery potential has led to hopes next year's figure would show a dramatic increase. Some are looking for pounds 120m.

Even so such a performance would pale against Forte's more glamorous days when profits almost reached pounds 300m.

The hotel group is, however, still thought to be trying to sell its contract catering business, Gardner Merchant.

A deal with the Compass Group, the contract caterer, which could have pulled in about pounds 500m, was abandoned earlier this year. Since then there have been indications that the Granada Group and at least one Continental operation have taken up the running.

Granada, which is keen to spread into new areas, is run by Gerry Robinson, who led the management buyout of Compass from Grand Metropolitan.

But although PG expect a Forte dividend cut it has high hopes the P&O property and shipping group will hold its year's payout at 30.5p a share. Profits are forecast at pounds 238m for this year and pounds 295m for next. The shares, with a 10.3 per cent dividend yield, are regarded as an income and recovery buy. The price was little changed at 392p.

The rest of the stock market suffered its own bout of 'Majorism'. Ahead of the Prime Minister's Brighton speech shares moved ahead with hopes running high that interest rates would be cut, providing some consolation for the Tory delegates.

But enthusiasm waned and with interest expectations again dashed shares drifted lower with a 28-point gain reduced to a mere 2.4 at the close. A fragile New York opening and unchanged inflation figures were other inhibiting influences.

Takeover tales left their mark. Owners Abroad was at one time at 82p as a German group was said to be about to bid 95p a share. Denials left the shares 3.5p higher at 73p in heavy trading with Seaq putting volume at 7.1 million.

Standard Chartered, the banking group, was another in a speculative whirl, almost hitting 500p before closing up 12p at 493p. The Development Bank of Singapore was the name in the frame.

TSB Group added 2p to 130p with Lloyds Bank again said to be interested.

Bowater, the packaging group strong this week as analysts viewed its French operations, came down to earth, falling 20p to 820p as some took profits.

Reuters, the information group, was at one time up 18p. Analysts are due to visit Chicago to study its Globex trading system and there was talk of a share split being announced soon. But by the close the gain had been wiped out and the shares were unchanged at 1,264p.

Inchcape, the international trader, rose 7p to 488p with Smith New Court declaring that 'the buy case remains undimmed'. Profits of pounds 246m are forecast for this year, up from pounds 185.2m, and pounds 282.2m next year.

Harrisons & Crosfield, the chemicals to timber group, eased 5p to 125p following a County NatWest sell suggestion. The investment house has chopped this year's forecast by 6 per cent to pounds 85m and next year's by 15 per cent to pounds 100m. County frets about whether the dividend will be held at 9p a share.

Lonrho, after Thursday's Barclays de Zoete Wedd downgrade, recovered 3p to 62p.

BAA, the airports group, rose 11p to 721p as Kleinwort Benson made postive noises.

Ramus Holdings, the tiles and furniture group, returned to market at 48p, down 3p from last month's suspension level. Trading was halted while an unidentified overseas investor injected pounds 3.25m into the group in exchange for new shares.

Lamont Holdings, the clothing group, was the day's most spectacular casualty, tumbling 65p to 238p following a sharp profits downturn.

Early gains almost evaporated. The FT-SE share index ended 2.4 points higher at 2,541.2 after at one time scoring a 28 gain. The FT 30-share index ended 5.2 down at 1,865.2. Turnover was unimpressive, reaching 484.5 million shares with 20,660 bargains. Government stocks were firm

Clyde Petroleum flared 5.5p to 38p yesterday following the move to develop its Gryphon Field in the North Sea. The oil field is likely to come into production within a year. It has been estimated that the development is worth 20p a share to Clyde, which has a 35 per cent interest. Aran Energy, with a 14 per cent stake, was also firm, gaining 1p to 15.5p.

There are indications that Aberdeen Petroleum is about to enjoy another speculative run. Some suggest that Pittencrieff, which failed to win Ambrit International earlier this year, has been picking up shares. Aberdeen, which in the past has been rumoured as a target for United Energy, is known to be looking for acquisitions. The shares held at 8.5p.