Market Report: Guinness feels draught of doubts over LVMH

SHARES of Guinness were thrown into a rare old ferment as stories swirled that the drinks giant was examining the possibility of reshaping its relationship with LVMH, the French group.

The shares fell 10p to 407p (after 403p) in busy trading. They are at their lowest for more than 30 months.

Mingling with the LVMH yarn was talk that Guinness had abandoned its high-margin policy and started discounting its leading Scotch whisky brands because of the intense competition in the industry.

But it was LVMH that did the damage. The stock market story suggested Guinness was considering buying LVMH's wine and spirit operation, which embraces a host of famous champagne and cognac brandy names.

As part of the deal the Guinness-LVMH cross-shareholdings would be wiped out. The Guinness interest in the French group would be cancelled and the LVMH stake in Guinness would be placed.

There is a strong suspicion that LVMH's luxury drinks are under intense pressure. Champagne sales are down sharply, while cognac's once heady growth has evaporated.

LVMH, so it is said, would use the Guinness cash to fund a desire to become a media force, an ambition apparently being nursed by Bernard Arnault, the colourful head of the group.

Last month Guinness announced flat interim profits as spirit sales felt the recessionary pinch. Its Spanish brewing operation has failed to perform. Profit forecasts have been pulled back and there was talk of further downgradings going the rounds.

The Guinness discounting story stemmed from interpretations put on remarks at a meeting of Burn Stewart, the small whisky group. Guinness denied it was indulging in price cuts.

The rest of the market paused for breath after its exhilarating run. The FT-SE 100 index fell 8.4 points to 3,092.4. An early gain soon petered out and, with overseas investors seemingly content to sit on the sidelines, trading was subdued.

Four poor trading statements also restrained sentiment, Tiphook, the container group, warned of a first-half loss, sending the shares crashing 70p to 169p. On Wedneday it announced that ADRs accounted for almost 50 per cent of capital.

The leisurewear group Campari slumped 49p to 93p, Martin International, another clothing group, retreated 38p to 49p and Ferranti, the electronics business, eased 0.25p to 9p on warnings of heavier losses.

Micro Focus, the computer group, was another weak performer. A series of investment meetings produced at least one big seller and the shares fell 153p to 1,610p. Drew Scientific gained 5p to 85p.

Insurance brokers were clipped by Barclays de Zoete Wedd caution. It reduced its forecasts for Sedgwick from pounds 70.4m to pounds 68.5m and pounds 100.5m to pounds 89m and Willis Corroon from pounds 71.2m to pounds 70m and pounds 92m to pounds 79m. Sedgwick lost 7p to 168p and Willis 8p to 206p.

SmithKline Beecham rose 6p to 421p and the units, which retained their FT-SE 100 index membership, edged forward 3p to 370p. But Rothmans International, due to be excluded, dropped 21p to 623p.

A presentation by PowerGen lifted the shares 5p to 444p. Other utilities were strong. Waters were helped by a modified pricing formula from Ofwat and an easing of regulatory tension encouraged electricities. Northern Ireland Electricity gained 8p to 200p. The partly-paid shares were sold at 100p in June.

TI Group dropped 11p to 360p, with Hoare Govett recommending a switch into Siebe, down 4p at 535p. Arjo Wiggins Appleton, pushed by UBS, responded with a 5p gain to 229p.

Some drinks shares were encouraged by thoughts that the soon-to-be-reshaped Whitbread will mount a bid. Boddington jumped 14p to 274p and Marston Thompson & Evershed 12p to 278p.

Whitbread 'A' lost 7p to 527p as NatWest Securities said the shares were too dear.

Manchester United's merry run continued, up 38p at 580p. Buying by its vice-chairman, Nick Oppenheim, lifted Whitegate Leisure 1.5p to 45p.

Signet, formerly Ratners, was firm at 29p. The jewellery group is undertaking investment meetings with City analysts.

The FT-SE 100 index shaded 8.4 points to 3,092.4 and the FT-SE 250 index 1.1 to 3,470.5. Turnover slipped to 572.1 million with 30,211 bargains. The account ends on 15 October with settlement on 26 October. Government stocks gave ground.

Excitement at Storm, the animation and licensing group. It has obtained the world rights for a new material - a mixture of latex and fibre - for toys and a new set of toy characters. Already it has fixed up deals with Walt Disney and Commonwealth of New York, a leading US toy maker. Placed at 25p four years ago, the shares touched 37p. They are now 11p.

Duncan Moss has left as finance director of Allied Leisure to set up his own professional practice. He leaves with an as yet undisclosed golden goodbye from the bowling and disco group. His replacement is Damien Harte, recruited from Gateway. Allied also announced a rise in profits from pounds 2.2m to pounds 2.9m for the year to 16 July. Shares fell 1p to 57p.

Lightship, the former pawnbroker, is in talks to sell its financial operation, put through an acquisition and reshape its balance sheet. But time is running out. The Stock Exchange has said it will cancel the share quote, suspended at 12p, unless a deal is completed by 1 November. The planned sale is to the subsidiary of a US investment group, Colony Capital.