Market Report: Drug group float may put shares back on course

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The Independent Online
THE STOCK market, at long last, is showing faint signs of confidence. The FT-SE share index yesterday recovered from a 13.8- point fall to close 11.6 up at 2,399.5 and turnover topped the break-even 500 million shares for the first time for a week.

Wellcome Trust's declaration that it will not sell shares below 800p, seen as a bullish signal for the drug group's secondary share offer, and position squaring before the end of what has been a depressing account prompted the revival.

The Wellcome flotation and the Barclays de Zoete Wedd offer to take up unwanted shares have created some technical positions which are distorting the market. As they are run down there are hopes that shares will continue to improve.

The prospect of a successful Wellcome float and the anticipated equity investment by the Wellcome Trust could, some believe, provide the platform which will at least halt Footsie's seemingly remorseless decline.

The trust hopes to sell 330 million shares, although there are indications that the issue may be scaled down. Wellcome shares were little changed at 830p.

Some chunky lines of stock were absorbed, although often at a hefty discount. SG Warburg placed 5.6 million British Aerospace at 185p, initially sending the price diving from 213p to 191p. It closed at 199p.

Worries are building about the group. Huge write-offs, perhaps more than pounds 1bn, are feared when the interims are announced in September. There are also suggestions that the new chairman, former BTR man John Cahill, will not pay a dividend.

HSBC, the banking group, was also ruffled by a placing. Stockbroker Cazenove sold 10 million 75p shares at 330p. The price ended 2.5p lower at 335p, with the gap with the Hong Kong dollar shares yawning to 25p.

Spring Ram, subject of a one million share placing on Wednesday, had to contend with a four million sale at 122p, handled by Panmure Gordon. The shares ended 7p down at 126p.

But perhaps more interesting were the placings that were not accomplished. Amstrad, where chairman Alan Sugar has warned that losses will be bigger than expected, Bowater, BTR, Ranks Hovis McDougall and Reuters were said to be among those experiencing stock overhangs.

Reuters had the added disadvantage of poorly received interim figures. The shares crashed 60p to 1,030p. They have fallen 121p since the results were announced on Tuesday.

A New York investment presentation was said to have gone well - but not, apparently, well enough. Much of the selling has come from the US.

Still, the Americans played their part in the market rally with British Petroleum, up 5p at 207p, one of the beneficiaries.

Boots also contributed. Chairman Sir Christopher Benson enjoyed the distinction of a retailer producing a cheerful statement. Group sales were running 10.8 per cent higher and the group was bucking the high street recession. The shares jumped 19p to 447p.

Sir Christopher's comments helped bring relief to suffering Lloyds Chemists. Chairman Allen Lloyd issued a confident trading statement ahead of today's investment presentation at Panmure Gordon. With County NatWest saying buy, the shares jumped 36p to 235p in busy trading.

The day's newcomers did well. Despite being a new-issue flop Taunton Cider enjoyed a 14p premium over the 140p flotation price. Quality Care Homes, placed at 136p, reached 150p.

Imperial Chemical Industries, interims next week, missed the fun, ending 1p lower at 1,116p. Hoare Govett expect pounds 437m ( pounds 507m) and an unchanged 21p dividend.

Ladbroke Group recovered from Wednesday's trauma. With a quartet of securities firms - Carr Kitcat & Aitken, County, Hoare and Warburg - making positive noises and drawing attention to the 8.5 per cent dividend yield, the shares rose 17p to 175p.

British Steel felt the blast of County caution. The shares fell 1.5p to 54.5p as the securities house suggested they were a sell down to 45p.

Lucas Industries fell 7p to 102p. Stockbroker Albert E Sharp cut its proift forecast by pounds 10m to pounds 15m. General Electric Co put on 4p to 233.5p following successful investment meetings.

Holiday firms perked up as demand forced a quick and peaceful conclusion to the short-lived price war. Airtours climbed 15p to 222p.

Mirror Group Newspapers advanced another 3.75p to 69p, with the administrator Arthur Andersen letting it be known it is looking for a three-figure price before it sells its 54.8 per cent holding.

Shares perked up yesterday, with the FT-SE share index swinging from a 13.8-point fall to an 11.6 gain and closing at 2,399.5. The FT 30-share index rose 5.1 to 1,808.1. Turnover improved a little from the recent depressed level. Volume was 512.9 million with 19,583 bargains. Government stocks were little changed

London & Associated Investment Trust is one of the few small property companies still pushing profits higher. Paribas Capital Markets forecasts profits this year will climb from pounds 1.03m to pounds 1.2m and are likely to hit pounds 1.32m next year. It also suggests the dividend will be increased to 0.58p and then 0.64p. Lait specialises in owning shops. Its shares held at 18.5p.

FMR Corporation, the Fidelity investment group and the biggest WPP shareholder, is thought to have rejected the proposed dollars 422m refinancing. It has moved to increase its negotiating muscle to 8.74 per cent by buying 3 million preference shares. There are signs the advertising group is under increasing pressure from discontented shareholders. Its shares held at 37p.