Market Report: Forte loud in protest as analyst advises selling

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FORTE yesterday hit back angrily at the highly rated analyst Mark Finnie, of NatWest Securities, after he put the catering and hotel group on his sell list.

The Forte complaint related to Mr Finnie's calculations, which it clearly regarded as unrealistic.

It was the second time this week that the hotel group's shares had been put under pressure by a sell recommendation.

Earlier Barclays de Zoete Wedd said the shares should be sold, saying that if the group did not make an overseas acquisition its 'substantial premium rating would be under threat'.

Forte, it would appear, is unruffled by the BZW comments. But it resented the NatWest observations.

Mr Finnie said Forte's failure to depreciate land and buildings was 'looking increasingly uncomfortable' and maintained that 'catch-up' adjustments were unacceptable.

The NatWest analyst, rated the number two hotel researcher in this month's Extel ratings, suggested the group should make an annual 2 per cent straight-line write-off, which would knock pounds 50m off Forte's profits this year.

Mr Finnie said: 'We would contend that the depreciation nettle has to be grasped, with ominous implications for traditional valuation measures.'

Forte took the unusual step of responding to an analyst's comments. It had, it said, no plans to change its depreciation policy, and even if it had 'the figures would not be near those suggested by NatWest'.

Like every other hotel group, Forte, which has slimmed its operations by selling what it regards as fringe businesses, has found the going tough.

But profits are recovering. NatWest expects pounds 125m this year, pounds 149m next and then pounds 179m.

But if the suggested NatWest depreciation hit was taken this year the pounds 125m would melt to pounds 75m.

The shares fell 2.5p to 221.5p. They started the week at 227p.

The rest of the stock market failed to hold on to early gains as US payroll figures created fresh interest rate uncertainty. At one time up 8.4 points, the FT-SE 100 index swung to a 12-point decline before settling two lower at 2,962.4.

Government stocks had a see-saw session, ending with gains of up to three-quarters of a point.

Bullish analyst comments made an impact. Hoare Govett lifted Granada 5p to 507p as it increased its profit estimate and Kingfisher improved 12p to 528p with Cazenove making positive noises. The shares were 778p earlier this year.

Body Shop fell 2.5p to 243p as its founders Gordon (chairman) and Anita (chief executive) Roddick placed shares with institutions. They sold 3.5 million shares at 240p. The Roddicks retain 25.4 per cent.

Thorn EMI put on another 13p to 1,039p on demerger speculation. Cable and Wireless gained 6p to 405p on Kleinwort Benson support.

Building and related shares had another firm session and indications of an advertising revival helped media stocks.

Among properties, Wates City of London Properties held at 71p as its rights issue flopped, with Mercury Asset Management presumably taking up its underwriting obligations and absorbing the unclaimed shares.

A placing of 5 million British Land shares intrigued the market. SG Warburg was said to have completed the business. One suggestion was that the shares came from the international investor George Soros, who reinvested the proceeds in the BL-Quantum Fund joint venture. BL fell 2p to 408p.

Peel Holdings tumbled 31p to 312p as its plan to build a leisure and shopping complex in Manchester was blocked by the Appeal Court.

The newcomer Eurodollar, a car rental group, touched 225p but had to be content with a 2p premium at 222p.

United Biscuits, seeing analysts, slipped 2p to 311p. Cazenove and UBS were negative and NatWest trimmed its forecast pounds 3m to pounds 191m but said hold.

Royal Bank of Scotland fell another 8p to 410p. There were signs that much of the Smith New Court overhang had gone through, with Seaq putting turnover at 26 million. General Accident, where an overhang is suspected, fell 8p to 558p in a generally weak insurance market.

Hartons, a plastics distributor, shaded 0.25p to 5p. Suter, the ambitious conglomerate that has just taken over the James Wilkes engineering group, picked up 750,000 shares and now has 11.47 per cent. It also has 29.89 per cent of the preference shares.

Last month Hartons disclosed that an acquisition, thought to be an pounds 8m buy from Glynwed, had fallen through.

The FT-SE 100 index fell two points to 2,962.4 and the supporting FT-SE 250 index stirred just 0.1 lower to 3,454.6. Turnover was 585.7 million shares with 20.530 bargains. The last trading account ends on Friday with settlement due on 25 July.

Marine & Mercantile, the Irish resources group, plans a pounds 5.8m reverse takeover and is likely to seek a full listing. It is buying Gandalf Explorers International, run by four ex-Ultramar men, which has oil and gas interests in Central and Eastern Europe. Emmett O'Connell, who developed M&M, will stand down as chairman. The shares, traded on the 535 market, climbed 30p to 255p.

Westminster Scaffolding is determined to use its shares to buy the tools of its trade. It has placed another block, raising pounds 170,000 to buy scaffolding. Nearly 10 million were sold at 1.75p. Besides meeting its scaffolding bills the cash will also cover some of the losses suffered when a creditor went into liquidation. The new shares have warrants to buy further shares at 3p. The shares held at 1.75p.

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