Market report: Trafalgar sails ahead despite analysts' gloom

Click to follow
The Independent Online
HARD-PRESSED Trafalgar House, the construction, leisure and shipping group, stole a dull stock market show yesterday.

Despite a savage profit downgrading, the shares rose 5.5p to 60.5p as rumours swirled of a big leisure disposal, possibly to the Japanese.

Barclays de Zoete Wedd, until last week Trafalgar's stockbroker, slashed its current year profit forecast from pounds 105m to pounds 60m. Next year it is looking for pounds 105m against earlier hopes of pounds 135m.

Although its profit forecast is well below the pounds 100m suggested by its rival Smith New Court, BZW expects a 6p year's dividend against SNC's 4.5p.

But profit and dividend considerations were ignored as the disposal stories captured the market's imagination. It is widely believed that Trafalgar would be happy to sell most of its leisure operations, including London's Ritz Hotel, if it could attract what it regards as an acceptable price.

The most persistent rumour, however, was that Japanese interests were about to buy the fleet of luxury liners which could be worth pounds 200m.

But hotel sales were also being touted. A Trafalgar spokesman said the group was aware of the rumours. 'They are just pure rumours,' he said.

Elsewhere, it was the turn of the TI aerospace and specialist engineering group to take a hit.

The shares tumbled 20p to 270p as worries surfaced about the provisions it will be forced to make to accommodate the Dowty Group, acquired earlier this year for pounds 520m after a fierce takeover struggle.

TI, due to meet analysts today, had been expected to put aside an pounds 80m provision for Dowty. But some now believe a figure nearer pounds 150m is likely.

The worries about increased Dowty exposure occured as Kleinwort Benson cut its profit forecasts by pounds 10m to pounds 107m and pounds 25m to pounds 140m.

But TI was not the only one to suffer under the analysts' axe. Chemicals group Courtaulds, down 10p on Tuesday, retreated a further 32p to 456p as, for the second time within a month, James Capel downgraded. The stockbroker has cut by pounds 15m to pounds 185m for this year and by the same amount to pounds 205m for next.

Although relatively modest the latest reductions mean that Capel has come down by pounds 30m and pounds 25m in the two revisions.

Grand Metropolitan suffered further humiliating downgrades, with Capel down to pounds 910m for this year and County NatWest on pounds 930m.

Last year Grand Met, at one time expected to be the first drinks group to top pounds 1bn, achieved pounds 950m. With worries surfacing about the value of its sprawling pub estate, the shares dipped below 400p, down 18.5p to 395p.

Analysts kept the likes of Imperial Chemical Industries, down another 14p at 1,115p despite clearance of the Du Pont deal, and Hepworth, 15p lower at 228p, in the melting pot.

The analytical heat also left Kenwood, the kitchen equipment group, a further 19p down at 219p. Since Albert E Sharp cut its forecast on Monday, the shares have slumped from 287p. The group, which came to the market in the summer, has admitted that trading has failed to live up to expectations.

Tarmac, the builder and building materials group, fell 4p to 71p with Smith New Court making negative noises, and an analysts' visit to Scottish & Newcastle's French holiday centres had such a sobering influence the shares fell 14.5p to 427p.

Away from the analytical carnage, the market had to contend with sterling hitting yet another new low, the Maastricht divisions and a seemingly receding possibility of another quick interest rate fix.

There were also some weighty programme trades, conducted by Goldman Sachs, Lehman Brothers and SNC. The activity left the FT-SE index down 12.5 points at 2,553 and share volume at 641.9 million, comfortably above the market's break-even level.

Banks remained subdued, with TSB Group down 4p at 129p. Lloyds Bank edged forward 1p to 432p.

Huntleigh Technology gained 27p to a 740p peak, marking its inclusion in the FT Actuaries index. Pittencrieff rose 19p to 248p for the same reason. Bimec, the environment engineer, fell 1.5p to 5.25p and contractor Birse 2p to 12.5p as they surrendered FT- A spots.

The airports operator BAA added 14p to 736p on a US airport retail development and Avon Rubber bounced 26p to 421p following an anlaysts' visit.

Clarke Foods, the ice cream maker, had another difficult session, melting 3p to 7p. But Hoskins Brewery improved 2p to 43p on expectations of a battle for control.

The FT-SE index fell 12.5 points to 2,553 yesterday after at one time being down 22.1. The FT 30-share index was lowered 16 points to 1,860.6. Turnover was again relatively good, reaching 641.9 million shares with 20,690 bargains. Government stocks were mixed, with inflation stocks making headway.

Tepnel, a start-up business hoping to develop an improved system for detecting HIV, made a remarkable stock market debut yesterday. The shares, placed at 120p, opened at 170p and edged further ahead to 173p. The company is based at the University of Manchester and was sponsored by Allied Provincial, which has launched a number of fledging medical groups.

Do-it-yourself retailers got together to meet institutional investors yesterday. Texas (Ladbroke Group); B&Q (Kingfisher) and then builders' merchant Wickes, took it in turn to entertain fund managers at their centres. Ladbroke, up 1.5p to 172.5p, was the only one to manage a favourable response. Kingfisher ended 9p down at 500p and Wickes 4p at 90p.

(Graph omitted)

Comments