Market Report: Power pair generate a little warmth

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The Independent Online
SHARES of the English electricity generators pierced the deepening stock market gloom yesterday.

As the FT-SE share index fell a further 17.8 points to 2,476.1, National Power rose 7p to 249p and PowerGen 9p to 261p.

Hopes of a deal with British Coal were behind the advance. Some expect a contract to be announced next week, with Nick Hawkins at Hoare Govett looking for the generators agreeing a four year contract 'which will ensure the survival of British Coal' and ease fears of lower generating profits.

He points out that the generators get 80 per cent of their operating profits from their coal-fired power stations and a deal would therefore underwrite a large chunk of their profits.

The present contract for 65 million tonnes a year expires in March. Mr Hawkins, who believes the generators are undervalued, is looking for a new deal covering 40 million tonnes in 1993-94, 35 million tonnes for the following year and then 30 million tonnes for each of the next two years.

'If our analysis proves correct we believe it would be bullish for National Power and beneficial for PowerGen,' he says. 'Fears of the effects of competition expressed by some commentators would be shown to be unduly pessimistic'.

But, although bullish about the two generators, Mr Hawkins is less happy with the electricity distribution groups which 'are very exposed to tougher regulatory intervention'.

The stock market started confidently enough, as if determined to halt the rot which has provoked worries that Footsie could be heading to 2,200.

Inspired by New York and Tokyo, the index was at one time up 12 points. But it was mainly a hopeful mark-up which attracted little investment support. More downgradings, more raffish rumours and a general reluctance to commit new funds soon took their toll and shares were again in ragged retreat.

The long-awaited US interest rate cut had the perverse effect of lowering New York. With the Germans holding their rates it merely underlined the inability of the Government to cut theirs.

Government stocks, as if to emphasise that investment cash is still available, continued to attract support. But among equities many of the dividend safe stocks which have resisted the downward pull gave ground to profit-taking. Internationals, reflecting the weakness of the US dollar, were hit.

Downgradings were again a bearish factor. Bass and Guinness were among those which felt analytical caution, but Hoare nudged up its forecast for Dawson International, the Ballantyne and Pringle knitwear group, by pounds 500,000 to pounds 33.5m and pencilled in pounds 40.5m for next year. The shares eased 1p to 203p.

Barclays de Zoete Wedd lowered its expectations for Yorkshire Chemical, down 12p at 320p, from pounds 12m to pounds 10.5m and from pounds 13m to pounds 12.5m.

Scottish & Newcastle, the brewing and holidays group, improved 6p to 454p ahead of results due on Monday. The market expects pounds 225m against pounds 216.8m.

Morland, the Thames Valley brewer, shaded 2p to 453p. The controversial, bitterly resisted bid from its rival Greene King has edged forward to 46.43 per cent acceptances, a response which Morland described as 'pathetic'. The offer has been extended until a week today.

Asda held at 29p. The supermarket chain collects pounds 73m for its stake in MFI, being floated at 115p a share.

Next, the recovering retailer, rose 3.5p to 89.5p. Expectations are being lifted. One securities house, thought to be S G Warburg, has raised its forecast from pounds 23m to pounds 26m for this year and from pounds 26m to pounds 29m for next.

Arjo Wiggins Appleton, the packaging and packaging group, rose 2p to 228p. Credit Lyonnais Laing said buy. It expects profits of pounds 210m this year and pounds 230m next.

British Gas flared briefly on its Kazakhstan deal, but by the close the gain was cut to 1p at 250p.

Hi-Tec, down 69p to 106p, was hit by a profit warning and Sims Food Group, 25p lower at 250p, responded to a disappointing opening to the current year.

Trafalgar House, the construction and property group, staged a late rally. At one time down to 76p, it closed 1p higher at 85p. The shares have almost halved this year, beset by dividend worries.

Pentland Group held at 127p. There is renewed speculation that it plans to enter the battle for sports gear group Adidas. It has a 20 per cent interest.

James Wilkes held at 137p as Beverley Group (formerly Petrocon) sold its stake, a legacy of its unsuccessful takeover bid.

The stock market had another difficult session yesterday. Although finishing above its low, the FT-SE share index suffered a 17.8-point loss to 2,476.1. The FT 30-share index lost 16.2 points to 1,901.1. Turnover was again light, reaching only 394.5 million shares. Bargains were also unimpressive, just topping 20,000.

The Saudi Arabian Jameel family has increased its shareholding in Trimoco, the loss-making garage group, by almost 4 per cent to 27.4 per cent. It is said that the Jameel investment is not aggressive but the Saudi Arabians have established a reputation for hostile bids - taking over the Hartwells car group after a fierce struggle. Trimoco shares held at 16.5p.

John Tams Group, the coffee mugs to bone china group, expects to lift its institutional fan club from three to 11 following its pounds 1.6m cash-raising exercise at 70p a share. Directors' shareholdings will fall from 79.4 to 72.1 per cent. Tams, which has acquired three china companies, is still seeking deals and another could be imminent. The shares slipped 2p to 75p.

The stock market had another difficult session yesterday. Although finishing above its low, the FT-SE share index suffered a 17.8-point loss to 2,476.1. The FT 30-share index lost 16.2 points to 1,901.1. Turnover was again light, reaching only 394.5 million shares. Bargains were also unimpressive, just topping 20,000.

The Saudi Arabian Jameel family has increased its shareholding in Trimoco, the loss-making garage group, by almost 4 per cent to 27.4 per cent. It is said that the Jameel investment is not aggressive but the Saudi Arabians have established a reputation for hostile bids - taking over the Hartwells car group after a fierce struggle. Trimoco shares held at 16.5p

John Tams Group, the coffee mugs to bone china group, expects to lift its institutional fan club from three to 11 following its pounds 1.6m cash-raising exercise at 70p a share. Directors' shareholdings will fall from 79.4 to 72.1 per cent. Tams, which has acquired three china companies, is still seeking deals and another could be imminent. The shares slipped 2p to 75p.

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