Market Report: BA dives under hail of downgrades

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The Independent Online
BRITISH AIRWAYS lost altitude as a veritable squadron of City analysts lowered profit forecasts and said the shares were too high. The price dived 23.5p to 388.5p, with at least one estimate cut to pounds 220m. Last year the world's favourite airline produced pounds 580m.

BA's discomfort occurred as the rest of the market suffered something of a hangover after the exuberant party which drove Footsie to within sight of its all-time high. The index ended 47.6 points down at 6,101.2, with a weak New York display having far more influence than another base- rate cut and any Euroland contribution.

Turnover was again high: according to Seaq, more than 1.25 billion shares were traded, with Telewest Communications leading the list with turnover of almost 48 million. The 253.76 million shares placed by Dresdner Kleinwort Benson, after a bought deal, seemed to be lost on the overnight ticker: Telewest held at 205p. Other telecoms lost their zest, with Colt Telecom falling 61p to 1,063.5p on Henderson Crosthwaite caution.

BA suffered from weaker-than-expected traffic figures, with its high margin business under pressure, and a warning that the stronger Japanese yen would add around pounds 117m to its net interest charge in its third quarter. CSFB slashed its year's forecast from pounds 325m to pounds 220m; Warburg Dillon Read went from pounds 300m to pounds 270m, and HSBC from pounds 500m to pounds 350m. Commerzbank lowered its estimate to pounds 225m and to pounds 400m from pounds 635m for the following year.

It's been a downbeat year for BA. After tortuous negotiations it was forced by the Eurocrats of Brussels effectively to shelve its alliance with American Airways, and it ran into criticism about the high-handed approach it seemed to adopt towards the perhaps over-sensitive souls in Brussels. The shares - 760p a few years ago - were flying above 700p in the summer when hopes of an AA clearance were high.

The debt repayment problems in Brazil and yet more tension over Iraq tended to erode market confidence. Old fashioned, uncomplicated profit taking was another influence. Supporting shares made modest headway: the mid cap index rose 2.3 points to 4,946.7 and the small cap 9.6 points to 2,110.6.

United Biscuits, one of the market's most bewhiskered take over candidates, crumbled 27p to 210p following a round of investment briefings. It seems the message from the company was that it would have to deal with higher exceptional charges than suspected.

P&O, the shipping fleet, fell 38.5p to 635p. WestLB Panmure, the group's stockbroker, did the damage, lowering its profit estimates and its year- end share target.

The more negative approach stemmed from worries about the group's cruise business. The stockbroker lowered to pounds 396m from pounds 413m and to pounds 450m from pounds 480m. The year-end share target was sliced from 1,000p to 900p.

Tesco, encouraged by Morgan Stanley support, added 5.5p to 169.75p and JD Wetherspoon, the pubs chain, frothed up 20.5p to 197.5p in a belated response to the encouraging trading statement.

There was excitement among the major brewers, with Bass up 18.5p to 861p, with a 20 million trade going through at 860p. ABN Amro came away unimpressed from a meeting with the brewing group. Whitbread ignored institutional selling, rising 23.5p to 774.5p.

The interest-rate cut helped some retailers, with Boots up 20.5p to 1,003.5p and Dixons recovering some of Wednesday's fall with a 28.5p advance to 826p. But mortgage banks were unsettled, with Halifax down 33.5p to 818p.

Liberty, famed for its flagship store in London's Regent Street, jumped 22.5p to 155p on takeover speculation. SG Securities was probably behind the gain: it was the investment house's first day as a market maker and it would be strange indeed if it did not attempt to put some stock on its books.

House of Fraser firmed to 58p, with some suggesting that high street entrepreneur Philip Green had switched his attentions from Sears to the department stores chain. Takeover action occurred at Wembley, up 55p to 367.5p. Aspen, the media group where bid interest has been generated by the company putting itself up for sale, jumped 13p to 42p as the market got wind of a possible strike.

Lady in Leisure, the keep-fit group, fell 20p to 160p after calling off bid talks with South Country Homes, the Sandy Anderson vehicle. MMT Computing's cautious trading comments continued to take their toll: the shares fell 60p to 780p for a two-day fall of 112.5p.

Telspec, the struggling telecom company hit by a series of profit warnings, gained 5p to 39p on talk of a cost-cutting restructuring. Albright & Wilson retreated a further 3.5p to 59.5p on its profits warning: talk of a bid, possibly a management buyout, restricted the fall.

SEAQ VOLUME: 1.25 billion


GILTS INDEX: 116.37 +0.22

ACORN rose 8p to 103.5p as the market got wind of a possible bid. The computer group could, it is believed, be in line for a 150p share exchange offer from the high-flying chip manufacturer, Arm.

Such a deal, with the Acorn rump going private, could remove the tax liability which would occur if Acorn sold or even distributed its Arm stake to its shareholders.

Arm shares rose 82.5p to 1,432.5p, a peak.

EXCITEMENT continues to build at Greycoat, the property group. The shares rose 4.5p to 185p. Delancey Estates, backed by speculator George Soros, has a 7.1 per cent stake and is thought to be seeking to increase its influence.

Wates City of London Properties has held unsuccessful takeover talks and has around 3 per cent of the company. A bid from one, even both, of the circling parties is expected.