STOCK MARKET WEEK : BG might turn on the tap to give something back to shareholders

Well, will BG, the old British Gas, join the fashionable stock market movement and return value to shareholders?

Speculation that it will indulge in buying in its shares or even think in terms of a special dividend has produced a dramatic share display, with the price touching 273.5p recently against 119.5p last year.

As British Gas it became something of a comedy of errors with such diversions as the take-or-pay gas contracts, the unfortunate uproar over Cedric Brown and over-zealous cost-cutting which led to an alarming fall in customer service standards. Its rumbustious relationship with its industry regulator was another source of fascination.

Early this year British Gas, in one swoop, put past misdemeanours behind it, as far as the market was concerned, by climbing on the demerger bandwagon. It split into Centrica, the gas supply arm, and BG, looking after gas transportation and international oil and gas exploration.

After initial uncertainty the gas implosion captivated the market and shares of Centrica, as well as BG, gathered strength.

Last week Centrica, which inherited the notorious take-or-pay contracts, suggested the problem would be manageable by the end of the year.

BG, on Wednesday, should mark its maiden profits announcement with underlying interim figures of around pounds 482m. But the windfall tax of pounds 514m and around pounds 100m of restructuring costs will leave it in the red.

Still an annual dividend of 8p a share is likely to be signalled with, say, a 3.2p interim. And then there is the possibility of turning on the tap to give back value to shareholders.

Such a scheme, after so much poverty pleading, would seem to be exceedingly cheeky, even brazen. But Simon Flowers at NatWest Securities is one who thinks it is a distinct possibility. The idea is BG would take on extra debt, say up to pounds 3bn. Gearing would jump to some 150 per cent, but that would not be exceptional for a utility with long-life assets.

On such calculations up to pounds 2bn could be available for distribution; a bonus the Sids who have stuck with the company through thick and thin since the 1986 privatisation would no doubt like to see in the shape of special dividends rather than the company merely buying in shares from institutions.

BG's first interims occur in another week heavily laden with results. Last week's deluge, although largely encouraging, failed to inspire the market with Footsie faltering 146 points to 4,848.2. It is doubtful if this week's figures will have much impact, with New York and Far Eastern markets likely to dominate sentiment.

Tesco, which seems to be challenging for the bidder-for-all-seasons mantle, has interim results tomorrow, with a 9 per cent gain to around pounds 350m looking likely. In the past few months the superstores chain, which has always been acquisitive, has been linked with struggling WH Smith and Save, the petrol retailer which used to be called Frost Group.

A case can be made for both acquisitions. Tesco could roll out its Metro concept much more quickly if it could cherry pick among Smith's retail spread and Save would give it even more muscle in the petrol market place.

But it already has a lot on its plate, which is holding back profits. Its Irish supermarket excursion will weigh on the interim figures through higher interest charges and integration costs, and the French Catteau chain is finding the going tough.

Then there is its central and eastern Europe ambitions. Start-up and increased administration costs and sterling's strength will take their toll; there is not much likelihood of profits percolating through for some time from its venture behind the old iron curtain. Further overseas expansion is expected, with Tesco thought to be looking at Hong Kong and other Asian markets.

Two other blue chip retailers, Kingfisher and Next, are on Wednesday's reporting schedule. Both should have scored from the building society conversions although the market will be anxious to hear more about the recent retail slow-down which has become apparent.

With the B&Q do-it-yourself chain making further headway and the Comet electrical retailing spread back in profit, Kingfisher should continue to push away from the dark days of 1995.

With only Darty, its French operation, expected to disappoint, interim figures should be up 22 per cent to pounds 135m.

Next's remarkable recovery from near-extinction at Christmas seven years ago is even more breathtaking. A 21 per cent interim profits advance to pounds 68m is the popular guess.

Kingfisher's shares in 1995 touched 389p; they closed last week at 759.5p. Next, in 1990, traded down to single figures although the recorded closing low is 13.5p. On Friday they were 731.5p.

Insurer Sun Life and Provincial is unlikely to celebrate its Footsie inclusion with interim higher profits on Thursday. The market is looking for around pounds 90m compared with pounds 92.5m.

Other Footsie constituents reporting are Hays, the business support group which is in line for finals of pounds 153.5m (pounds 132m), and RMC, the building materials supplier, thought to be on target for pounds 110m against pounds 95.8m at its half-way stage.

Another Footsie member, the P&O property and shipping group, is expected to accompany its interim figures with details of the return to market of its Bovis house-building business. Such a move would be good for sentiment although the ongoing Monopolies and Mergers Commission probe into its proposed merger with Stena Line continues to cast a shadow. Profits are likely to be a shade lower at pounds 130m

Others with figures include Dalgety, the struggling pet food group where year's profits could be down from pounds 101.9m to pounds 61m. Disposals could help cushion the fall. Interims are also due from international trader Inchcape (pounds 74m against pounds 82.8m) and Mirror Group (pounds 43.5m against pounds 39m).

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