Market Report: Rolls-Royce at limit for overseas holdings

FOREIGN investors are in danger of breaking through their shareholding barrier at Rolls-Royce.

Yesterday the aero-engine group revealed that overseas shareholdings, limited by the Government to 29.5 per cent, had risen to 29.3 per cent. If the ceiling is exceeded, Rolls faces the embarrassment of having to turn away shareholders. The restriction stems from privatisation at 170p a share six years ago. Rolls' articles insist it remains under UK control, and at the time of the flotation the overseas limit was fixed at 15 per cent. EC pressure encouraged the increase to 29.5 per cent. On a number of occasions foreign shareholders have exceeded their entitlement and have been forced to reduce their shareholdings. At one time Japanese and US investors were known to have sold at a considerable loss.

Rolls, it appears, has tried to dampen foreign enthusiasm. But the steady build-up has continued.

Its shares, down 1p at 144p as at least two securities houses made negative noises, are one of the few privatisation issues below their flotation price. The shares fell to almost 90p in November. Their best level, 233p, was reached in 1990.

Like other aircraft groups, Rolls has found trading tough. It suffered a pounds 184m loss last year and profits of only pounds 90m are expected this year. About pounds 150m is pencilled in for next year.

Rumours have persisted that it plans a trading link with the US aero-engine group Pratt & Whitney, owned by United Technologies Corporation. Weekend reports indicated Pratt and Rolls might pool their big engine developments.

British Aerospace, another with an overseas shareholding ceiling, was on form following the sale of its business jets business for pounds 250m. The shares rose 16p to 355p.

Westland, the helicopter group, rose 14p to 187p on its better-than-expected results.

The rest of the stock market turned in a lacklustre performance with turnover just topping 400 million. But the FT-SE 100 index, thanks to New York influences, managed to swing from a seven- point loss to an 8.5 gain at 2,849.2.

The elevation of Zeneca from the grey market to full listing with Footsie membership had little impact. But turnover reached 10 million shares, largely as a result of late US interest. The price ended 2p lower at 630p with the nil-paid down 3p at 34p. Imperial Chemical Industries, in its new slim-line form, rose 29p to 636p.

English China Clays, removed from the FT-SE 100 index to accommodate Zeneca, ended 1p lower at 413p. More changes in the composition of the 100 index are likely soon. A popular guess is that Fisons and Lasmo will be removed. The merchant banker SG Warburg, said to be reluctant to become a constituent, is expected to be recruited.

Tiphook, the container leasing group, eased 4p to 309p. Its US shareholding is now 27.49 per cent.

Grand Metropolitan, up 13p at 405p, drew support from Henderson Crosthwaite.

The day's newcomers had mixed fortunes. Phonelink soared from a 155p placing price to 218p. But OGC International, split from Fairhaven, proved that not all flotations are welcomed with rapturous enthusiam. In a disappointing session the shares closed at 127p against a 130p launch. Last week, OGC clinched a pounds 60m contract to build a gas processing terminal in North Wales.

Evered Bardon, the aggregates group where takeover talk has swirled, eased 2.5p to 53.5p as RMC Group denied any bid interest. Shanks & McEwan slipped 7p to 162p on the construction reorganisation.

Siebe, the engineer, was the latest to attract rights issue speculation. Results are due today and pounds 173.5m against pounds 169.6m is expected. The shares fell 5p to 460p.

Suggestions that Forte may make another attempt to get control of the Savoy lifted the 'A' shares 10p to 785p.

Stakis, on hopes of a return to profits today, improved 3p to 55p. But Euro Disney encountered French selling, falling 27p to 803p.

Sea Containers' long suspected bid for Isle of Man Steam Packet may soon be launched. The Bermuda- based group has picked up 146,000 shares, lifting its stake to 41.97 per cent. Sea Containers has for long coveted the Manx ferry business. It bid 115p a share in 1990 but then held back while the island's government considered - and rejected - restricting shareholdings to 15 per cent. IoM held at 180p.

Stirrings at Carlisle Group, the loss-making property services company. Jonathan Harris, chairman, is seeking to expand through takeovers. To help the search Don McCrickard, the former TSB Group chief executive, has joined the board and Peel Hunt has become company broker. Carlisle used to run Oaklands Stockbrokers. It closed the business in 1990. The shares rose 1p to 16.5p.