Market report: Centrica hits new high after Warburg tip

CENTRICA, ONCE regarded as the burnt out embers of the old British Gas, flared to a new peak as investment house Warburg Dillon Read produced an effusive buy recommendation.

The shares topped the Footsie leader board with an 11p gain to 160.75p in busy trading. Shortly after the demerger from BG in early 1997 they were bumping along as low as 56.25p.

The group, which recently paid its first dividend, underlined its ambitions to become a broadly based service provider by bidding pounds 1.1bn for the Automobile Association and, to encourage members to accept, spending heavily on a "yes vote" campaign.

WDR put a 200p target price on the shares. Its analyst Simon Hawkins said: "It reflects the change in the company's focus from a stable gas utility to one that's growing new businesses and becoming more customer oriented".

Before descending on the AA, the gas distributor had already expanded its customer base to embrace plumbing, air conditioning and home security. The AA deal could add as many as 9.5 million customers to its existing 18 million.

Just to add spice to the Centrica story, there were also rumours of a predatory strike. A Continental group was said to be hovering. In contrast to Centrica's bright display, its old cohort, BG, lost 6.5p to 378.5p.

Centrica was not the only utility to hit the high spots. Deutsche Bank and Commerzbank advocated the water companies pointing out that they had suffered severely from the attentions of the water regulator.

Severn Trent, nudging 1,000p last month, rose 27p to 882.5p; Thames Water, riding at nearly 1,100p, recovered 24p to 868p. The two water utilities are in danger of dropping out of Footsie when its constitution is reviewed next month.

Others which seemed to have lost their appeal put on sturdy displays. Whitbread managed a 17p gain to 876p; Granada 11p to 586p; even Marks & Spencer achieved a 4.5p gain to 386.5p. Allied Domecq, reflecting the completion of its pub sale, put on 8p to 566p.

The stock market spent the session pondering the US interest-rate decision. Footsie narrowed a 35.6 points fall to close 7 down at 6,315.1, but the small cappers again made significant progress.

P&O, the shipping group, was among the Footsie constituents pushed lower - off 17p at 1,044p. The mystery deepened whether it had received a bid from the American group Carnival Corporation, owner of the Cunard cruising fleet and a near 30 per cent stake in the Airtours package holidays group. Carnival says it had talks; P&O, which is probably protected by Royal Charter, claims no bid was made.

Associated British Ports improved 2.5p to 388.5p; there are rumours P&O is planning to strike.

Hilton, the hotels chain, checked in with a further gain, 6.75p to 240.5p, as WDR put a 270p price tag on the shares.

Safeway, the supermarket chain, rose 11.5p to 245.5p in busy trading with takeover rumours resurfacing.

Health and beauty product price cuts and a move into TV retailing had little impression on the shares. JJB Sports, still reflecting Dresdner Kleinwort Benson support, continued to run ahead, putting on 36p to 353.5p.

British Biotech, once a giddy 326.5p, firmed 7.25p to 29.75p after saying its Marimastat drug did have cancer benefits; it was felt the group could attract partners.

Some technical movements, probably stock borrowing, prompted some to ponder the possibility of Great Universal Stores getting together with Next. GUS, in strong volume, fell 8p to 631.5p with Next, also busily traded, up 22p at 712p.

Rumours of a GUS bid have often gone the rounds. Lord Wolfson of Sunningdale is chairman of GUS; his son is heir apparent at Next.

Arena Leisure's move into Internet horse racing lifted the shares a further 3p (after 8.75p) to 44.25p and Kingfisher's link with America On Line was good enough for a 7p rise to 723p.

Takeover bids, real and rumoured, had an influence. Old favourite Greenalls, the hotels and pubs group, added 7,5p in late trading to 369.5p, and high flyer BATM Advanced Communications firmed 17.5p to 1,717.5p on talk of a US strike; the shares were 155.5p in October.

Wyko, the engineer and industrial distributor, added 11p to 122p as a management buy out loomed. On Ofex, the up-market K Bar chain held at 11p after takeover talks were called off.

Magnum Power, the chip maker, firmed 2.25p to 16.75p on hopes its link with Far Eastern group Ion Networks will be rewarding and Lambert Howarth, the Marks & Spencer shoe supplier, jumped 41.5p to 315p on interim results.

But disappointing interim figures lowered steel fabricator Severfield- Rowen 67.5p to 310p although smaller rival Wescol firmed 2.5p to a 55p year's high.

Housebuilders were weak, reflecting worries about the US interest rate decision.

Lady in Leisure, the girls only fitness club chain, slumped to a new 55p low, off 10p, as the boardroom unrest produced another casualty, managing director Graham Forrest; he said he would quit when his six- month notice period expired. In the past year the shares have fallen from 216.5p. The company is struggling to put through a pounds 1.6m cash call.

SEAQ VOLUME: 935.9m

SEAQ TRADES: 68,925

GILTS INDEX: 105.97 +0.07

ALFRED MCALPINE, the building group, held at 223.5p as a company called Brunswick Developments (Management) declared a 3 per cent stake.

Behind Brunswick is Andrew Goodall, who made what was described as an "indicative" approach to McAlpine in April. He suggested a 215.2p price. Nothing came of it and Mr Goodall, who bought Brighton Marina from Brent Walker, seemed to walk away. His stake suggests he has not lost interest.

STEPHEN DEAN's latest vehicle, Voyager IT.Com, made a bright debut, closing at 7.5p against a 5p issue price. It is a shell, with a pounds 1.75m cash hoard, looking for a reverse takeover.

Mr Dean, who spent much of his life in the building industry, floated another shell earlier this year.

His Voyager 2,000 is suspended at 9.5p, against a 5p issue price, while it achieves a medical take over.