Market Report: BA loses altitude as profit forecast is cut

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BRITISH AIRWAYS lost altitude as investment house CSFB sharply reduced its profit forecasts ahead of next week's interim figures. The shares dived 29p to 413p in heavy trading. At one time they were down 38p. On Wednesday the price slipped 15p.

Passenger data, showing a decline in the number of customers flying at premium rates, seems to be partly responsible for BA's fall from grace.

CSFB slashed its profit estimates from pounds 515m to pounds 450m and from pounds 675m to pounds 615m. It maintained its hold advice but warned that it expected the shares to fall further in the short term. There were suggestions in some quarters the shares could be vulnerable to a further 100p fall.

BA drew attention to the slide in demand for higher-priced seats with its passenger figures. The world's favourite airline, which has put its alliance with American Airlines on the back-burner, topped 700p in the summer; last year it climbed to 760p.

The stock market, as if to illustrate its perversity, greeted the half- a-percentage point cut in base rates with a wholesale sell-off.

Footsie crashed 143.1 points (after 155) to 5,479.8 and the mid and small cap indices retreated. It could be argued that the half-a-point cut had already been discounted by the market's performance in recent days. Trading, as profits were snatched, was heavy with volume topping 1 billion shares.

A speech due to be made last night by Alan Greenspan, the US banking chief, was cited as one of the influences unsettling the market. Some suggested Mr Greenspan was cooling towards further US rate cuts but economic data suggests another reduction could be due.

Bob Semple and David McBain at BT Alex.Brown also ruffled feathers. The arch bulls, still looking for Footsie to end the year at 5,500, described the recent heady run as a "suckers' rally". Cautioning that a spate of profit warnings is likely, they suggest selling into strength. Poor trading displays - Shell and Royal & Sun Alliance - were other inhibiting factors.

Boots was easily the best performing Footsie constituent as the retailer checked in with rather better-than-expected figures; the shares jumped 82p to 948. Railtrack's results prompted a 29p advance to 1,620p.

In a strong banking sector, buoyed by the interest rate cut, Halifax attracted attention as speculation about corporate action resurfaced. The shares rose 23p to 847p with a merger with a leading insurer, possibly Prudential Corporation, the most compelling suggestion. Pru did not, however, join in the game, falling 19.5p to 822p.

Micro Focus, the computer group, suffered the day's biggest setback - 43 per cent to 133.5p. A profits warning did the damage. The group said third-quarter revenue would be around $87m, some $20m below market hopes. The rollercoaster shares were 718p earlier this year.

Pig genetics company PIC International was another under the whip of a profits warning, squealing 8.5p to 67.5p. Other profit warnings emerged from Macfarlane, a packaging group off 19p at 50.5p, and Pilat Technologies International, 1.5p easier at 12.5p.

Associated British Ports edged ahead 1.5p to 286.5p after analysts visited two of its ports, Hull and Immingham. Engineer IMI retreated 16p to 277p in response to a Credit Lyonnais downgrade and Schroders caution hit Siebe 31.75p to 213p.

The Micro Focus comments unsettled other computer shares. But Logica, with its one-for-four share split due today, put on a further 30p to 2,010p.

Delphi also bucked the trend, gaining 31p to 286p following encouraging figures and comments and the arrival of Lord Sheppard, former chief of Grand Metropolitan, as chairman.

Meristem firmed 2.5p to 47.5p as James Leek, chairman of 27.71 per cent shareholder Torday & Carlisle, became chief executive of the chemical group.

Newcomer MSW Technology, the second new issue to brave the market in two days, traded near to its 97p placing. On Wednesday pubs chain Honeycombe Leisure, now 62.5p, arrived. Philippine Gold, suspended at 13.5p, returned at 15p.

Crest Packaging jumped 15.5p to 35.5p after disclosing it was in bid talks with its management. The price of 41p a share is likely.

Hamleys, the toys retailer, marched 5p higher to 176.5p. There is talk of a bid. Some suggest a high- profile entrepreneur could be interested in adding the toys shop to his collection of "trophy" assets. The shares were 99p last month. They have, of course, been much higher - 340p a year ago - but suffered in the much tougher retail environment.



GILT INDEX: 110.93 -1.01

ANOTHER POOR session for furniture retailer MFI.

The shares, in heavy trading, fell 1.75p to 33.5p, a new low. SG Securities is one bearish investment house.

The shares yield 18 per cent but SG Securities think the dividend will be cut - from 4.9p to 2.7p.

It expects profits of only pounds 23m - last year the group made pounds 60.4m - and feels there is little prospect of a takeover bid.

DEAN CORPORATION, firmer at 13p, is planning a two-way split. It is demerging its housebuilding and pub refurbishing businesses into a new AIM-traded company to be called Artisan.

The Dean rump, a property services operation, will become Environmental Property Services.

It is buying IPM Engineering, a maintenance business, for pounds 2.75m in cash and shares.