Why one-time bellwether ICI has become a bit of an old plodder

STOCK MARKET WEEK

Imperial Chemical Industries is not the power it was. At one time it was regarded as the bellwether of British industry and its profits were an important event in the City calendar.

Times change. Even before ICI bowed to Lord Hanson's own brand of persuasiveness and demerged its drugs side it had slipped from its pedestal.

The likes of the General Electric Co were seen as more representative of industry and ICI lost some of its corporate fascination.

Its shares have tended to reflect its changed status. And, as expected, they have been overshadowed by Zeneca, its drugs offspring.

As Zeneca has enjoyed the stock market's addiction to drugs - and experienced pulsating rounds of takeover speculation - its shares have romped ahead. ICI's have plodded along and rest wearily much closer to their 12-month low than high.

Zeneca was floated off on a one-for-one share basis. Ignoring the drug side's cash call at the time of the break-up, its shares are nearly twice the value of ICI. On demerger day three years ago Zeneca was 632p; ICI 608p. The price before the split was 1,244p.

There is not much chance of an upward re-rating on Thursday when ICI produces interim figures. They will be poor.

Two decades ago such a setback would have been taken badly. This time it should not create more than a few ripples, so long as ICI keeps the fall within market expectations.

NatWest Securities is looking for pounds 198m in the second quarter which will leave six-month profits at around pounds 400m, a 22 per cent fall.

The group has already warned of a decline. "With certain important product markets showing a greater than initially expected price and volume weakness, the downturn will inevitably be starker than management had first anticipated," says analyst Lucas Herrmann at NatWest.

Profits for the full year are estimated at pounds 830m (against pounds 951m). For next, a recovery to pounds 1.05bn has been pencilled in.

Thorn EMI is likely to suffer a similar fate when it demerges next month. Once again the idea is to allow the glamorous side of the business - music - to stand alone, free from the encumbrance of a rather staid rentals division.

There has been continuing speculation an overseas bidder will barge into the comfy divorce proceedings. But it now looks as though the split will not suffer outside interference and the rumoured predators seeking the showbiz operation are content to wait until the decree absolute.

The group is due to produce quarterly figures today although with the break-up so close they are likely to be something of a sideshow. The banking profit season starts on Friday. Lloyds has for years had the distinction of kicking off and even with TSB in tow it retains its frontal role. The season is likely to produce another bankers' profits feast with Lloyds TSB offering pounds 1.15bn against pounds 1.01bn.

Many banking forecasts have been upgraded ahead of the results season. Salomon Brothers looks for figures "on the high side of consensus expectations".

SmithKline Beecham, the drugs giant, has quarterly figures due tomorrow; around pounds 325m against pounds 298m is the popular guess. On Wednesday Lloyds Abbey Life, controlled by Lloyds TSB, should produce interims of pounds 215m (pounds 197.1m). Reuters, the information group, contributes to the profits round with year's results. Around pounds 330m against pounds 288m is on the cards.

BT, originally expected last week, is another big gun firing. It, too, has quarterly figures on Thursday and, rather like ICI, is likely to suffer the indignity of a profit fall. The market is looking for a three month out-turn of about pounds 850m against pounds 874m.

Last week, with few major results to occupy them, shares spent the first three days sinking and the last two making up some of the lost ground.

New York provoked turmoil, which encouraged crazy talk of another crash, reminding a few old-stagers of advice from a former Stock Exchange chairman, Lord Ritchie.

After a particularly crunching session, when the FT 30 index, the market measurement at the time, had fallen 30 points and there was emotional talk of looming stock market disaster he was asked what the small investors should do.

"Put your head down and let it all wash over you," he replied. Any private investor who followed such advice last week would have emerged with his portfolio not too badly bruised.

There was without doubt deep concern among some small investors, with unit trust withdrawals prompting some fund managers to seek to unload stock.

Footsie ended 17.8 points down and even the supporting 250 index, hit harder than the blue chip index, looked more confident. But the market remains fragile, Low summer share trading means it is at the mercy of the swings and roundabouts of the futures market as well as icy overseas blasts.

New York is no longer the influence it used to be. Even so, when the world's biggest market sneezes London (and the rest) shiver. Alan Greenspan's hint that US interest rates are unlikely to go up in the near term should be reinforced tomorrow when he addresses the Senate. So there could - just possibly - be more freedom for domestic rates. This week's home- produced statistics include retail sales for June and the preliminary GDP estimate.

They could influence the Chancellor's thinking when he has his monthly chin-wag with the Governor of the Bank of England next week.

There is no doubt the Chancellor still yearns for lower rates and another cut is a distinct possibility. Germany may be obliged to reduce its rates; so even the eventual but seeming inevitable US increase could be accommodated.

Cheaper money would help the market achieve some of the more optimistic forecasts. However there are signs of expectations being reduced. Societe Generale Strauss Turnbull has lowered its year-end Footsie estimate to 3,850 points against 3,900-4,100.

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