Rights rumours spark roller-coaster ride

MARKET REPORT

NICHOLAS SCHOON

Rights rumours spark

roller-coaster ride

The FT-SE 100 index rose 10.8 points to 3,135 and the FT-SE 250 index 15.7 to 3,406.7. Turnover was 922.3 million shares. Government stocks were firm.

Cash call rumours helped to unsettle shares. In a roller-coaster session the FT-SE 100 index swung from a 24.6-point gain to a 0.8 fall before closing 10.8 higher at 3,135.

Trading was the busiest this year with turnover comfortably exceeding 900 million shares and 37,267 bargains.

Tax-effective bed and breakfast deals contributed but there was evidence of big programme trades with one exercise, spread over two days, thought to be the largest for some time.

Rolls-Royce was the main cash call candidate. There was talk it was about to tap the stock market for around £300m to help pay for acquiring the US aero engine maker, Allison.

It has made no secret of its plans to raise cash. Many expected it to make its demands known when it announced its yearly figures earlier this month. The debate has centred on whether it will resort to a straightforward rights issue or go for a share placing.

A placing would be more helpful to Rolls' US investors, which would have difficulty subscribing for rights shares.

Henderson Crosthwaite believes Rolls will offer shares at 145p on a one- for-five ration.

Helped by a $15m Bolivian power station order the shares at one time touched 167p. But talk of the nearness of the cash call restrained enthusiam and the shares closed at 164.5p, up 2.5p, in busy trading.

Another likely to call upon shareholders is Scottish & Newcastle. It is expected to finance its proposed £500m takeover of the Courage brewing group with a rights issue. Scottish shares rose 8p to 506p.

Both have sought cash from shareholders in recent years. Rolls called for £307m in September 1993. In the same month Scottish raised £405m to finance its takeover of the Chef & Brewer pubs chain.

Elsewhere the volatility stemmed partly from the behaviour of the futures market but another strong opening display by New York encouraged the late revival.

Since the bull run started eight trading days ago the index has soared by nearly 150.

Arjo Wiggins Appleton, as expected, missed the latest fun. Saint Louis, the French group, pushed the shares 10p down to 248p with its declaration it intends to stick with its 40 per cent shareholding.

Prudential Corporation fell 10.5p to 322p after results.

Legal & General dipped 5p to 476p on reports of City opposition, led by former cabinet minister Sir John Nott, to its plans to unlock "orphan" funds.

British Steel was another out in the cold. The shares dipped 5p to 159.5p with Seaq putting volume at nearly 26 million. NatWest Securities caution following price cuts by a US producer did the damage.

Among blue chips higher were BAT Industries (following a strong performance by Philip Morris shares), up 15p at 431p; Great Universal (hopes of a share buy-back), 15p to 569p, and Amersham International, 34p to 869p.

Nurdin & Peacock's retreat from discount warehouses lifted the shares 12p to 170p and Airtours, meeting analysts, rose 4p to 419p.

Transport Development Group, a particularly tight market, put on 8p to 215p as several stockbrokers attempted unsuccessfully to pick up stock.

Courtaulds Textiles continued its round of meetings, calling at SG Warburg. The shares rose 4p to 428p.

An upbeat trading statement lifted Hawtin, the mini-conglomerate, 2.5p to 29p. Halkin, the Ronson lighters group, improved 4p to 67p after it announced figures and a £10m package of acquisitions. Its buying spree has netted a sales promotion company, wholesalers of cosmetics and jewellery and a packaging business.

There was busy trading in the shares with Modus Vivendi, its fifth largest shareholder, selling its 7.89 per cent stake.

Signet, the old Ratners jewellery chain, rose 1p to 16.5p as US shareholders led a campaign to call a shareholders meeting. Behind the request is the failure of Signet to sell its US jewellery shops chain.

Guinness, with figures tomorrow, edged ahead 2p to 421p. Around £900m is expected. But there are hopes the brew will be strengthened with news of a share buy-back.

Blenheim, the conference and exhibition group, slipped 4p to 174p. Year's results are expected today. The market is looking for a slump from £42.5m to nearer £30m.

Greycoat, the property group, edged forward 2p to 121p. Smith New Court described the group as a "unique recovery stock". Two rights issues and asset sales helped save Greycoat.

Profits are put at £3.5m this year, £5m next

Haemocell, the medical equipment group, edged ahead 2p to 21p.

The shares have been friendless since bearish stockbroker comments. But some look for favourable developments with trading continuing to improve.

Hampden, the Ulster do-it-yourself group at which J Sainsbury sits on a holding of nearly 30 per cent, was unchanged at 46p. The shares have been strong as losses were turned into profits. Panmure Gordon has raised its profit forecast for this year by £500,000 to £1.5m, with £1.8m pencilled in for next. Assets are a conservative 56p a share, including 7p cash.

Takeover speculation has faded at Wm Morrison, the supermarket chain. The group should reveal tomorrow that it is trading well, with profits likely to emerge at £118m against £97.8m. Store openings should have added 12 per cent to sales growth and up to 10 stores are due to open this year. The shares edged ahead 2p to 144p, just 5p from their 12-month high.