Market Report: BSkyB suffers as forecasts are cut
Friday 18 December 1998
As Goldman offered just under 1 per cent of BSkyB's capital to institutional investors, the downgradings made the American investment house's task particularly difficult, and the shares headed the list of Footsie fallers, off 21p to 480.5p. Goldman paid, it is thought, 478p for its shares and tried to sell them on at 482p.
When the stock market closed it looked as though the US house had been left with shares on its books, which could indicate further weakness for the Murdoch television operation.
Goldman picked up its stake from BSB Holdings, owned by Granada, Pearson and the French Pathe group, which is under pressure to make its assets sweat. BSB still has 11.8 per cent of Sky.
With Granada - and Carlton Communications - behind the ONdigital challenge to Sky, the sale came as no surprise. Granada sold its direct Sky stake earlier this year and the leisure group's chairman, Gerry Robinson, indicated last month that more sales were likely as BSB would be wound up once certain tax considerations were resolved.
A number of analysts cut their forecasts, with some thought to have lopped pounds 40m from their estimates. Mathew Horsman at Henderson Crosthwaite went from pounds 178m to pounds 153m. Lower than expected returns from the cable operation was one factor; another was the likelihood that Sky's magazine would lose its VAT-free status.
Sky's problems are underlined by the demanding profit estimates prevailing before the latest round of downgrades. The consensus profit figure was pounds 223m and some seemed to be looking for something above pounds 300m. Mr Horsman, however, still regards Sky as a long-time investment and remains a buyer of the shares.
In an unrelated deal, Cazenove placed a line of 5 million Pearson shares with institutions at 1,190p; the price rose 31p to 1,162p.
Footsie continued to make headway, with the index up a further 54.8 points to 5,685.2 in busy trading. Technical influences, ahead of today's futures and options expiry, could have prompted some of the trading. Supporting shares were much more subdued with the mid cap index up just 6.3 at 4,695.9 and the small cap 2 at 2,012.1.
The latest Gulf tension was largely ignored. Oils were given a boost, with British Petroleum up 12p to 888.5p, although the stock market seems to be coming round to the view that its giant merger with American group Amoco will not be completed until next year. Shell improved 9.25p to 358.25p and Lasmo 2p to 103.5p.
Rolls-Royce suddenly encountered a higher altitude as the aero-engine group was touted as a major player in the foreshadowed reshaping of the European defence industry.
British Aerospace merging with the German DaimlerChrysler has been the most popular forecast although General Electric Co seemed to plead at the weekend to be included in any alliance.
Rolls, hitherto largely ignored in speculation about the European reshaping, is now seen as the partner the Germans would favour. It was enough to send its shares flying 12.75p higher to 244p; BAe ended 4.75p up at 504.75p and GEC 7.5p at 520p.
BTR slipped 1.5p to 117.25p. Stories surfaced that bidder Siebe may want to renegotiate its bid terms because trading at its target continues to deteriorate. Siebe was also 1.5p lower - at 215.5p.
Reuters, the information group, jumped 35.5p to 613p on Morgan Stanley support, but drinks group Allied Domecq, which has held investment meetings, fell 21p to 540.25p as CSFB repeated its sell advice. SG Securities added to the Allied discomfort by suggesting a switch into Diageo, up 23.5p to 673.5p.
Newcastle United, as unquoted media group NTL picked up 6.3 per cent and held out the prospect of a bid, fell 3.5p to 98.5p.
Asda, where hopes of a strike by the American Wal-Mart group linger, rose 6.5p to 154p after results slightly below best expectations.
Halifax, continuing its buy-back programme with another 115,000 shares at 858p, weakened 13.5p to 861.5p as the prospect of more mortgage competition loomed with the arrival of Standard Life, the insurance group, in the housing market,
Newcomer Bioglan Pharma made a winning debut, closing at 262.5p against a 245p placing. Stanford Rook jumped 15p to 121.5p after signing a licensing deal for some of its developments.
Universal Salvage was top of the flops, off 11.5p to 43p as another profit warning appeared. The shares were 286p two years ago.
SEAQ VOLUME: 974.4 million
SEAQ TRADES: 57,780
GILT INDEX: n/a
SILVERMINES, one of the companies in the Bob Morton stable, rose 4p to 39.5p on stories that it planned to do the splits, breaking itself into two stand-alone operations, telecommunications and security. Aggressive TT, which increased its stake to 5.79 per cent, must be putting pressure on the company, which has a progressive profits record and made pounds 4.8m last year. The shares, 59p earlier this year, have been as high as 92p.
EURO.NM, the fledgling European share market specialising in hi- tech shares, should attract another four Stock Exchange members next year, which would, in effect, double its size. The existing exchange members are Amsterdam, Brussels, Frankfurt and Paris; they expect to be joined by Copenhagen, Milan, Stockholm and Zurich. Euro.NM currently makes markets in the shares of around 160 companies.
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