Market Report: Latest humiliation sees Ladbroke take a battering

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The Independent Online
LADBROKE had to endure a bumpy ride on the stock market. The shares fell 2.5p to 145.5p as the betting and hotel group was forced to pull its enhanced scrip dividend.

The latest humiliation was forced by the sharp decline in its shares. When, with its disappointing interim figures in September, Ladbroke opted to save cash by paying at least part of its dividend in shares, the price was 210p.

The scrip cancellation was triggered by the failure of its shares to hold above 151p on Monday.

Ladbroke must, therefore, pay all its interim dividend in cash, costing more than pounds 50m. Such a development must weaken its already suspect ability to hold its year's payment. Most followers believe the group should have cut its dividend last year, or even the year before. But Cyril Stein, its effective founder and chairman for 27 years, was reluctant to take such a drastic step.

Ladbroke's ability to hold its payment has looked more and more questionable as problems have mounted. With the shares yielding more than 12 per cent, the stock market has taken the view that a maintained payment is, at best, highly unlikely.

The announcement that Mr Stein intends to resign was seen as a signal that Ladbroke would bite the bullet and slice its payment.

Rumours about the group have swirled for some time. But it was last week's dramatic slide that finally killed the enhanced scrip.

Surprisingly, Ladbroke let it be known it planned to embrace a Budget concession, foreign income dividends, which in effect cut payments to many institutions. The shares tumbled as the market soared. A change of mind failed to have much impact.

A share sale by Michael Hirst, head of its Hilton hotels division, was another inhibiting influence. Some expect Mr Hirst to quit.

With profit forecasts already downgraded, Ladbroke's dwindling City investment appeal became uncomfortably close to that of a rank outsider, a creature so beloved by the bookies.

Fisons is another dividend play. The yield is an astonishing 13 per cent. There is talk that high- income funds have piled in, and last week one of the top US recovery funds disclosed a 5 per cent- plus stake. Profits are expected to be lower, perhaps pounds 110m against pounds 123.5m. The shares are 142p.

The rest of the market recovered from a futures-led mark- down. At the close the FT-SE 100 index was unchanged. But the FT- SE 350 index, embracing the top 350 shares, edged to a new peak.

Large trades below the then market price unsettled some shares in early trading. Asda, the supermarket group, ended unchanged at 48.75p although 5.5 million shares were dumped at 45p. Courtaulds and Wellcome also encountered discount selling, prompting speculation about bed and breakfast deals.

Bearish comments on the food retailers by Cazenove took their toll, with J Sainsbury and Tesco weaker.

Wellcome, off 22p at 666p, also had to contend with stockbroker caution, from Lehman Brothers.

British Steel moved ahead, up 3p to 128.5p. An aggressive buyer prompted the advance with talk that the steel crisis could be about to ease.

Great Universal Stores, interim figures tomorrow, dipped 14p to 584p as NatWest Securities made negative noises.

The securities house is looking for a 6.7 per cent gain to pounds 205m but wonders whether such a performance will be good enough to hold the rating. It believes break- up value is in the 530p to 570p range and comments: 'The scope for disappointment is becoming significant.'

Signet, until recently known as Ratners, had a difficult session, down 2p to 20p. There were rumours of a profit warning. But with the jewellery group so dependant on Christmas trading any statement before the holiday would seem unlikely.

Siebe, the engineer, fell 20p to 566p on its results but a US deal lifted the printer Bemrose 42p to 427p.

The seemingly inevitable daily profit warning came from Perkins Foods, down 8p at 74p. Profits will be below market estimates, currently pounds 22.5m, and there will be a pounds 4m provision.

Saatchi & Saatchi's discomfort continued, down 11p at 146p.

LWT (Holdings) fell 8p to 578p, reflecting disappointment with the Granada bid terms. Granada fell 12p to 473p. But Carlton Communications and its compliant target, Central Independent Television, moved ahead.

Vibroplant, the plant hire group, held at 86p. Panmure Gordon is keen on the shares, talking about 'unrealised recovery potential'. The stockbroker expects profits this year to climb pounds 900,000 to pounds 2.8m with pounds 5.1m pencilled in for the following year.

Caffyns, the garage group, rose 10p to 388p. Brierley Investments sold its 35 per cent interest on Monday through London Wall Equities, the new stockbroker. Figures are due today.

The FT-SE 100 index achieved the rare feat of ending unchanged. The 250 index rose 2.2 to 3,568, lifting the FT-SE 350 to a peak. Turnover was 689.7 million shares with 31,842 bargains. The account ends on Friday with settlement on 20 December.

Morland is believed to be close to striking a deal that could significantly dilute, and possibly remove, the unwanted name of Greene King from its share register. Greene has a 28.5 per cent stake, a legacy from its failed takeover bid last year. Morland's shares have surged 10 per cent to 578p this week, easing the job, some say, of issuing paper to make a substantial acquisition.

Cathay International came to life, improving 6p to 64p, reflecting the market's growing love affair with China. The company, once a furniture maker called Stonehill, is now controlled from Hong Kong. It has property and hotel interests in Peking and Shenzhen. Earlier this year Cathay raised pounds 28.4m through a rights issue at 62.5p to help finance its Chinese ambitions.