Market Report: Buoyant Carlton bucks the trend on advertising hopes

John Shepherd
Monday 16 May 1994 23:02

SHARES in Carlton Communications stood out yesterday, rising 9p to 920p on unofficial reports of strong growth in television advertising and a bullish buy circular from Lehman Brothers.

Carlton was one of few FT-SE 100 index constituents to register solid gains on the first day of another three-week account.

Christopher Alexander, analyst at Lehman, has upgraded profit forecasts for this year and next for Carlton by a couple of million pounds to pounds 175m and pounds 232.5m respectively.

However, he said: 'Our estimates of 6.4 per cent growth in advertising revenue for Channel 3 for 1995 may be conservative.'

Unofficial reports in the television industry say advertising revenues have soared 15 per cent this month against a year ago, and that 2.5 per cent price inflation on attained rates has been the highest for five years.

'I find this difficult to believe, but it gives me a degree of comfort and does look encouraging,' Mr Alexander said.

Last week, Carlton, the largest force in commercial terrestrial broadcasting, extracted more costs from its Central Television subsidiary by laying off 50 senior managers.

Lehman believes Carlton should save pounds 6m a year from the cost-cutting so far at Central. 'We would not be surprised to see the shares at pounds 10 or better within the next six months,' Mr Alexander said.

Granada Group, which recently bought LWT, was pulled along in Carlton's wake and closed 6p up at 537p.

Another main mover among the blue chips was RTZ, the mining group which is riding high on the back of soaring commodity prices for base metals - particularly copper, which has climbed 25 per cent since January to almost dollars 2,200 a tonne.

RTZ, as it did on Friday, rose another 9p to 867p. Volume trading was good at 3.6 million. Antofagasta Holdings, which has copper mining interests in South America, leapt 85p to pounds 16.60p.

Bullion prices, though, were softer and South African mining stocks were marked down. Randfontein lost 10p to 566p, Driefontein shed 26p to 738p, and Freegold fell 24p to 706p.

The stock market was otherwise occupied with yesterday's, and pending, company results. Disdain over another long account was also evident; institutions sat on the sidelines, leading to poor volume trading of 548 million shares.

After recording a 14.4 point gain in early trading, the FT-SE drifted slowly, but surely, downwards through the rest of the day, closing 3.6 lower at 3,115.6. Economic data from both sides of the Atlantic was as expected.

Second-liners suffered more than most, and the FT-SE 250 index declined 14.9 to 3,706.9.

Among the pending results National Power, said to be on James Capel's buy list and announcing figures tomorrow, added 15p to 443p.

The regional electricity companies, however, were weaker on concern about hefty write-offs on diversification moves. East Midland dropped 7p to 562p, London Electricity lost 6p to 548p and South West Electricity retreated 9p to 579p.

Among the drinks companies, Whitbread's results matched expectations and the shares fell 9p to 563p. Bass, with results out tomorrow, declined 19p to 440p.

But Allied-Lyons, reporting today, firmed 9p to 590p on speculation it might announce its withdrawal from the Carlsberg- Tetley brewing venture.

Celebrations over Manchester United's double-clinching FA Cup victory were brought down to earth. Shares, strong of late, fell 6p to 629p.

'The Cup is good for glory, but the result makes little difference to its finances. There was profit-taking today, and some dealers are becoming weary of reports that the club will look to buy players this summer,' a dealer said.

In hotels, Forte hardened a penny to 235p on hopes that Gardner Marchant, the contract catering business it sold to management but in which it still has a stake, would soon unveil its formal flotation plans.

The takeover pot was kept boiling by De La Rue, off 21p to 857p, finally confirming it was the mystery suitor for Portals, up 40p to 805p. Speculators are looking for a bid of 900p.

Rising prices for potatoes hit Harry Ramsden's, the fish and chip shop group. Shares fell 6p to 262p.

Bluebird Toys remained a high-flyer ahead of Thursday's annual meeting, and climbed 35p to 843p.

Share prices retreated towards the close, having made a firm start to another long three-week account. The FT-SE 100 index lost 3.6 points to 3,115.6, and the FT-SE 250 lost 14.9 to 3,706.9. Account ends on 3 June, and settlement is on 13 June.

Shares in ISA International, the distributor of branded consumables for information processing equipment, had a lively session on the back of a bullish statement on prospects at the annual meeting. The price, which was 100p last October, initially rose 11p yesterday and closed 4p better at 131p. Observers speculate that the company is lining up more expansion moves in Europe.

Enviromed may soon cast off its shackles as one of the dullest performers among new issues. The shares stand at 126p, against last June's flotation price of 110p. A further tranche, to fund an acquisition, was issued at 125p in March. Watchers of the biotechnology group say it may well announce its maiden dividend with interims next month, and could make another purchase soon.

(Graph omitted)

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