Market Report: Mystery buyer and price threat leave Dixons in a spin

Cathy Newman
Wednesday 30 July 1997 23:02

Investors in Dixons could be forgiven if they did not know if they were coming or going yesterday. First there was the excitement of overnight news of a mystery buyer snapping up a huge line of 6 million shares; then came the potential financial threat of the Government's ban of recommended retail prices in the electrical goods market. In the end, investors took a favourable view and drove the shares up by 24.5p yesterday to an all-time high of 595.5p.

The institutional buyer which paid a handsome premium at 600p for each of the 6 million shares - capitivated the minds of market-makers more than the Government's plans to increase competition among electrical retailers, which took neither Dixons nor investors by surprise.

Mercury Asset Management sold the shares - 1.4 per cent of Dixon's capital - but the identity of the buyer remained a mystery at the close of play yesterday.

Dixons was just one of many Blue Chips to put in a sprint, resulting in Footsie comfortably reclaiming the 4,900 mark - eventually finishing 51 points higher at 4927.3, and its highest for almost a fortnight.

A steady performance in morning trading was bolstered in the afternoon by a strong opening on Wall Street and sterling's rebound towards the DM3 level.

For food retailers, it was a case of follow your leader, with companies like Asda and Safeway imitating the pound's upward trajectory. Asda finished up 3p at 143.5p, and Safeway added 2.5p to close at 382.5p.

The pound's renewed strength did not seem to have sunk in for manufacturing stocks and exporters, which continued to soar, despite having climbed in response to a sliding pound the day before. TI Group jumped another 22.5p to close at 569p; Smiths Industries leapt 26.5p to 811.5p; and British Steel firmed 4p to 169p.

Exporters like EMI and Reuters also remained in the ascendant. EMI notched up another 18.5p to end at 583.5p; while Reuters closed up a more modest 7p at 664.5p.

Shares in utilities, however, took a bit of a battering, in part reflecting a delayed reaction to Tuesday's fall in the pound, as well as other reasons. Electricity stocks suffered from power failure after reports of a row with the regulator, Professor Stephen Littlechild, over proposed price controls.

PowerGen in particular, which is reported to have written to Professor Littlechild expressing disappointment with his plans, was one of the biggest Footsie fallers of the day, shedding 22.5p to close at 747p. National Power dropped 11.5p to 559.5p; and National Grid also had a tough time, losing 5p to 255.5p.

Meanwhile, several water companies were also having problems. Analysts said the sector was suffering from a bout of jitters after the publication of a consultation paper about the industry's price review in 1999. Thames Water, which disclosed yesterday that the windfall tax would lead to slightly lower profits, sank 7p to 802p, and Severn Water ended 10p down at 862.5p.

Elsewhere, Pearson powered ahead 24.5p to finish at 694.5p, in advance of its interim results on Monday. Analysts are expecting virtually flat pre-tax profits of pounds 41.4m, after the cost of the Channel 5 launch this year, and an exceptional credit last year.

Granada Group jumped 23.5p to 824.5p after a recommendation from NatWest, and United News & Media's acceptance of Granada's pounds 11.75-a share-offer for Yorkshire-Tyne Tees Television.

Other media stocks to see some action included Emap, which shed a penny for every business title it sold to Quantum Publishing. The publisher closed down 14p at 774p after selling Quantum14 titles, including Media Week.

Banks continued to recover, with Lloyds TSB, which reports tomorrow, one of the highest climbers - adding 26.5p to 686p - and Barclays not far behind, up 48p to pounds 12.86p.

Cable & Wireless Communications lost as much as 17p during morning trading, after The Independent reported that the cable television and telephones group had been forced to cut its investment plans after failing to meet profit targets set by Cable & Wireless, its parent. CWC finished 12p poorer at 295p, while Cable & Wireless nudged up 5p to 613p.

Another casualty yesterday was BAT Industries, which lost 20.5p, and ended the day at 519.5p, after it disappointed by holding the interim dividend.

The company said it had decided not to raise the dividend after uncertainties over US tobacco litigation.

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