Market Report: Kleinwort concern hits London International

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The Independent Online
LONDON International Group, maker of contraceptives and printer of holiday snaps, has incurred the wrath of Kleinwort Benson.

The shares slumped 13p to 151p as the investment house fretted about a possible restructuring and rescue rights issue. The analyst Kevin Scotcher has slashed his profit forecast for this year to pounds 5m and expects the dividend to be nearly halved. Last year the group produced pounds 27.8m.

It has been a difficult year for LIG. Early on it was censured for telling a select band of stockbrokers that profit forecasts were too high. Last month it took the precaution of making a general warning that first-half profits would be 'very substantially lower' and Tony Butterworth quit as chief executive.

The warning prompted analysts to pull back forecasts. Most now hover around pounds 20m.

LIG shares crashed to 140p on the profits warning. They have since staged a hesitant recovery. Mr Scotcher can see little to enthuse over. He draws attention to falling profits in Spain, Italy and Portugal, which made up 42 per cent of last year's profits, an inefficient and high-cost structure and an undercapitalised balance sheet.

At the start of last year the shares topped 300p.

LIG's discomfort occurred as most health-care shares perked up. Drugs were helped by a more positive stance by Goldman Sachs. Glaxo Holdings put on 23p to 683p with talk of an Aids breakthrough by an associate helping sentiment.

Zeneca climbed 12p to 768p after an Italian study pointed to the benefits of its Zestril heart drug.

Food manufacturers and retailers, however, held centre stage. Sainsbury's figures were in line with expectations but confirmation that prices were being cut even more deeply caused widespread indigestion.

Sainsbury was at one time down 25p. The shares closed 15p lower at 385p. The rest of the pack suffered acute embarrassment. Asda lost 2.25p to 50.05p, Argyll 18p to 274p, Kwik Save 18p to 620p and Tesco 4.5p to 195p.

The retreat widened the already yawning gap between the supermarketeers, the worst performing sector this year, and the rest of the market.

The manufacturers, facing pressure from their retail customers to trim their margins, were also hit. Associated British Foods fell 9p to 485p, Dalgety 6p to 451p, Hazlewood 5p to 182p, Unilever 23p to 1,145p and United Biscuits 9p to 352p.

The Marks and Spencer results managed to produce a little cheer, with the group's clothing success encouraging some of its suppliers. M&S rose 7p to 403p.

The rest of the stock market was subdued, with the FT-SE 100 index closing 1.8 points lower at 3,162.3. But a tweaking of German money market rates and the Bank of England's relaxed view on inflation ensured a firm undertone.

BT, figures today, jumped 7p to 476.5p. Cable and Wireless was 2p higher at 493p. Figures are expected from its Hongkong Telecom offshoot today.

British Aerospace was strong on talk of a General Electric Co bid and strengthening hopes that it is at last near to clinching its jets deal with Taiwan. The shares rose 20p to 464p.

There was lumpy trading in British Airways, up 7.5p at 389p, and Hanson, 1.75p better at 275.5p. Higher October traffic figures helped BA and BAA, the airports group, 15p higher at 899p.

Siebe, the engineer, improved 8p to 573p as Barrie Stephens, chairman, duly produced a pounds 184.3m cash call.

Ladbroke, the betting and hotels group, rallied 7p to 179p with NatWest Securities saying buy. The securities house has lifted its profit forecast by pounds 10m to pounds 153m, reflecting the pounds 10m dividend from SIS, the supplier of TV services to betting shops.

Yorkshire TV ended 4p lower at 172p following its loss warning.

Lucas Industries, undertaking investment meetings, shaded to 171p. Barclays de Zoete Wedd has trimmed its profit forecast by pounds 5m to pounds 85m but maintains its buy recommendation. TT, an engineer, gained 10p to 239p ahead of an investment meeting.

Lasmo remained under pressure with talk of more board changes. The shares fell 2.5p to 137.5p.

Pittencrieff was unchanged at 473p. Suspicions that a bid is being prepared for its US telephone offshoot were reinforced by the appointment of a New York bank to advise on its future relationship with the US business.

Farnell Electronics was firm at 507p as Henderson Crosthwaite said buy.

Lincoln House, a furniture maker, gained 7p to 29.5p on a reorganisation and rights issue.

Oriel, an insurance group, held at 118p. Williams de Broe says the acquisition of Warranty, a supplier of car warranties, has proved 'hugely successful'. Profits this year, taking in Warranty for a year, would be pounds 2m. Next year's figure is put at pounds 4.6m.

Shares edged lower. The FT-SE 100 index fell 1.8 points to 3,162.3 and the FT-SE 250 index 5 to 3,517.3. Turnover was 614.3 million shares with 29,510 deals. The account ends on 12 November with settlement on 22 November. Government stocks were firm.

Burndene Investments, the caravan and hosiery group, rose 4p to 53p as overhanging stock held by Bermudan interests was placed. Seaq put volume at 11 million shares. Smaller Companies Investment Trust has emerged with a 3.49 per cent stake. Burndene is thought to be trading well and there is talk of a property revaluation producing a big surplus.

Aminex, the Irish oil group with Russian ambitions, rose 5p to 70p. Brian Hall, chairman, confirmed a stake of below 3 per cent in United Energy but said the interest was 'nothing significant'. The group has also taken positions in Marine & Mercantile and Minmet. Rumours of an Aminex shareholding in UE have flowed for some time. UE held at 17p.