Market Report: BA loses height as forecasts are downgraded

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The Independent Online
IN HEAVY trading, shares of British Airways dived 20p to 288p yesterday as stock market profit forecasts were lowered following disappointing passenger figures.

Kleinwort Benson is thought to have cut its current year's estimate from pounds 265m to pounds 220m. Next year's expectation is down from pounds 310m to pounds 270m. SG Warburg reduced its current-year figure from pounds 260m to pounds 210m.

The figures, for December, illustrated the tough conditions airlines are facing with BA talking gloomily about 'greater pressure from aggressive market pricing'. In the last quarter of last year BA's lucrative 'premium' traffic was 3 per cent below the previous year's corresponding level.

BA's plunge helped drag the FT-SE 100 index down 7.6 points to 2,826. But once again second liners, as represented by the FT- SE 250 index, and the tiddlers of the third and fourth divisions romped ahead. The FT-SE 250 index, the subject of a futures contract launched by Smith New Court, stretched to a new 2,919.3 peak.

BAT Industries and Grand Metropolitan were among other blue chips easier, hit by worries of new or higher US taxes under the incoming Clinton administration. The BAT price fell 13p to 978p and Grand Met 11p to 447p.

US selling unhinged drug shares, with Glaxo Holdings down 19p to 745p. SmithKline Beecham was cut 16p to 471p.

But Imperial Chemical Industries, ahead of the expected drugs demerger, bucked the trend. The shares rose 24p to 1,109p. They have been strong lately as the market seemed to warm to the proposed Zeneca hive-off.

Zeneca has already displayed its independence by applying for Italian approval of its antibiotic drug Merrem. If the Italians give the all-clear the drug could be sold throughout the EC. Zeneca is due to hold an investment presentation on Monday.

British Aerospace was also on form, up 10p at 188p. The projected increase in spending by the Saudia Arabian government is seen as strengthening BAe's chances of clinching the pounds 2bn Al- Yamamah defence contract. The Taiwan regional aircraft deal is also showing signs of reaching fruition and there are hopes Rover will retain its lead in the car sales stakes when December's figures are announced.

Vickers climbed 10p to 120 as Barclays de Zoete Wedd made positive noises about sales of Rolls-Royce cars.

Food retailers were strong as Tesco reported a 9.5 per cent sales advance over the Christmas period and Kwik Save described trading as 'up to expectations'. Tesco rose 13.5p to 271.5p and Kwik Save 17p to 803p.

BZW has lifted its current year Tesco profit forecast by pounds 10m to pounds 580m and next year's by the same amount to pounds 630m.

BZW, however, took the axe to its Prudential Corporation figures following the Norwich Union bonus cuts. It has lowered last year's estimate from pounds 469m to pounds 440m and this year's from pounds 525m to pounds 510m. The shares - unchanged at 297p - it believes should be sold.

Rank Organisation ended 2p higher at 706p as Kleinwort Benson suggested profits last year, due to be announced next week, fell from pounds 254m to pounds 232m. But it expects to increase this year's forecast, now pounds 287m, following the results and regards the shares as a buy.

Owners Abroad improved 11p to 120p as Airtours, down 19p at 301p, emerged as the bidder. Eurocamp jumped 21p to 350p and National Express 6p to 191p in response to the takeover action. The travel group Hogg Robinson was another to benefit, up 7p to 220p.

But Laporte, threatening to barge into the battle for Evode, gave up 16p to 613p. Babcock International, the engineering group, edged ahead 1p to 38.5p on hopes that it was about to win a big contract.

Also up was Chesterfield Properties, 32p to 230p. A 60 per cent offshoot has sold a property in Oxford Street, London, for pounds 85m. The Chesterfield share, about pounds 26m, will go towards reducing debts.

Fun and games developed in the shares of International Food Machinery, which arrived last month at 51p. A faxed circular, seemingly from the company, talked about a share price of 100p later this year and suggested profits of pounds 3m by the end of the year.

But after the market closed IFM disowned the circular - too late, however, to prevent a 7p jump in the shares to 68p.

Metro Radio rose 8p to 158p. TV-am, suspended and running down following the loss of its TV franchise, has sold its 16.3 per cent interest to institutions.

Oriel, Nigel Cayzer's insurance group, has appointed Carr Kitcat & Aitken as its broker in place of Panmure Gordon. Oriel's shares, 1p better at 95p, headed south for much of last year. Panmure had become unclear on Oriel's strategy - it recently sold its original core business, Allied Insurance Brokers. Carr's Vernon Partridge brought AIB to the market.

Youghal, the carpet group, is likely to be the subject of what the Americans call a 'takedown', a bid below the stock market price. Yesterday it became known that Coats Viyella, with 72 per cent of Youghal, may make a cut-price offer for the group, which has suffered losses and faces deteriorating trading conditions. The Youghal share spread is 1p to 12p.