Carlton in the spotlight as media companies move ahead

Market report

It has not been a good year for the media sector, and while at certain points Carlton Communications has managed to outperform its peers, it has failed to keep pace with the FTSE All Share index.

So it was hardly surprising yesterday that, at long last, market-makers began to think the stock was looking cheap. Merrill Lynch was one broker making positive noises, and suggesting it was at least 15 per cent undervalued when it was languishing around the 450p mark. Carlton closed up 20p at 478p, and more than 4.23 million shares changed hands.

There may be another reason for Carlton's renaissance. Analysts are suggesting that the company may be prepared to announce a share buyback when it unveils results shortly.

As one City watcher pointed out yesterday, announcing such a move is bound to hit bullseye, as even if it was abandoned at a later stage, in the short-term it would do wonders for Carlton's share price.

Another observer was less receptive to the idea, saying that there were far more creative uses of cash, especially with the onset of digital television next year. Carlton owns half of British Digital Broadcasting, which won the licences to broadcast digital terrestrial television earlier this year. Granada Group owns the other half.

Granada has for a long time been lukewarm on the prospects for BDB, but at Thursday's results presentation the media and leisure group was remarkably bullish. That may have helped Carlton along the way yesterday.

Carlton was not the only Footsie media company to move on up yesterday. United News & Media closed up 21p at 755p; BSkyB jumped 14p to 425p; Pearson notched up 24p to 830p and EMI leapt 11p to 505p.

Analysts suggested that, as the year draws to a close, fund managers are reassessing the sector, and may be switching out of over-performers like banks, and into underperformers like media.

Financials were nevertheless in the money yesterday. Stocks with Far Eastern influences saw a fair share of activity after the Nikkei's gains on Thursday night. HSBC responded to Hong Kong's 5 per cent surge overnight and added 67p to close at pounds 15.67.

Meanwhile Standard Chartered, one of the best Footsie performers, ended 36p better off at 728p, encouraged by add advice from SBC Warburg.

Things were not looking so rosy for Allied Colloids, the speciality chemicals group which on Thursday confirmed market rumours that it had had a bid approach. However, Allied issued a statement just minutes before close of trading last night saying the talks had been terminated and the matter was now closed. The company topped the Footsie 250 fallers, down 13.5p at 126p. Dealers are expecting the shares to fall again when trading resumes on Monday.

RJB was another second-line casualty, after reported warnings from the Department of Trade and Industry that there would be cutbacks in the coal industry. It dropped 7.5p to 150p. Stagecoach could not get into gear either, after a Kleinwort Benson sell note. It closed down 23.5p at 817.5p.

Utility stocks were feeling flush, ahead of a stream of results next week. Thames Water jumped 40p to 935p; Wessex Water added 17.5p to 507p; Yorkshire Water surged 14.5p to 484.5p, and United Utilities ticked up 24p to 765p. Analysts pointed out that defensive, non-overseas stocks such as utilities continued to be attractive as long as the pound remained strong.

Colt Telecom - in the doldrums on Thursday after Ionica's fall from favour - rallied after announcing plans to raise pounds 98.3m through a share offer at 585p. The group ended up 13.5p at 598.5p.

Glaxo Wellcome improved by 39p to pounds 13.56 on the back of positive noises from brokers, in particular Goldman Sachs. Glaxo said yesterday that the EU had moved to approve Combivir, its anti-HIV drug.

Ladbroke was another wanted stock, up 4p to 293p after presentations to analysts and institutions this week on its hotel business.

Footsie was not only supported by the Asian markets overnight on Thursday, but also by a strong opening yesterday afternoon on Wall Street. The index appears to be heading for the 5,000 mark again. It closed up 77.4 points at a day-high of 4,985.8.