Market Report: Dixons charges market with Net service float talk

DIXONS ELECTRIFIED a sleepy market yesterday as dealers speculated on an imminent flotation of its Internet service.

The TV and stereo retailer surged 52p to 1,189p as buyers moved back in after a period of underperformance. A Merrill Lynch recommendation helped but the story that gripped was that of a separate listing for web provider Freeserve.

Since its launch earlier this year, the free net service has laid plenty of golden eggs for Dixons. Investors' enthusiasm for Freeserve has been single-handedly responsible for a near-doubling in Dixons' share price to its April peak of 1,564p.

The shares have come back since, as copycat services have increased competition, and many experts argue that is the perfect time to realise Freeserve's value by floating a minority stake. A recent analysis by broker Schroders concluded that Dixons' Internet jewel is worth some 1,000p on its own and valuations of the whole of Freeserve range from pounds 1.8bn to pounds 3bn.

Reports of an earlier-than-expected end to analogue TV in favour of digital sets, which would boost Dixons' sales, also helped sentiment.

The rest of the market closed virtually unchanged after the much-awaited US employment numbers turned out to be a huge Atlantic damp squid.

The FTSE 100 ended 12.9 up at 6,361.5 after swinging wildly for much of the session. The contradictory message coming from the US figures caused a bit of chaos in the London dealing rooms. The blue-chip index plunged 74 points straight after the data's release as traders thought that bearish average earnings numbers would trigger a hike in US rates. But after Wall Street opened higher, on the back of benign unemployment figures, London staged a minor rally. The smaller indices followed the leader, with the midcap closing 21.3 higher at 5,740.9 and the Small Cap ending 8.7 better at 2,560.8.

Proposals by index provider FTSE International to bring index weightings in line with companies' free float caused a bit of a scare among blue- chips. Some big hitters with a small portion of shares available to investors could face expulsion from the FTSE 100 if the plans are approved.

BSkyB - with a 35 per cent free float - shed 11.5p to 569.5p. Telewest also suffered, losing 7p to 270.5p. Associated British Foods, where the Weston family has 51 per cent, was down for most of the day before some late trades pushed it 2p higher to 455p. Tightly-held Schroders crashed 41p to 1,370p. Similar proposals on cross-holdings sent Energis - the telecoms group where National Grid has a 48 per cent stake - 24p lower to 1,555p.

Halifax was prominent among the rising blue-chips. The bank jumped 26.5p to 876.5p. There was a whisper of corporate action in the consolidating sector. Another reason for the rise was a series of tiny deals at 875p in the last five minutes of trading, probably the result of some end-of- the-week book squaring.

Rival NatWest banked a a 23p rise to 1,453p after a meeting with Goldman Sachs. Merrill Lynch is also said to be considering an upgrade.

Buyers seemed to like companies due to report results next week. Scottish & Southern Energy, figures on Wednesday, firmed 187.5p to 618.5p, while transport group Stagecoach travelled 6.25p higher to 215p ahead of Tuesday's numbers. Severn Trent, also due on Tuesday, sloshed 28p up to 984p, while GEC, reporting on Thursday, was 16.5p better at 616.5p.

Shell flared 5p higher to 467.75p on talk of a tie-up with BG, up 2.25p to 355.75p, while fellow bid favourite Lloyds TSB fell 10.5p to 843.5p in big volume as hopes of a strike for Legal & General, up 0.75p to 180.25p, receded. Unilever gave up 6.25p to 541.5p following trading problems at rival Procter & Gamble.

The plant hire group Ashtead soared another 21.5p to 199p following Thursday's big rise. A stock overhang has been cleared and there are bid rumours. Developer Great Portland jumped 13p to 26.5p on Credit Lyonnais support and takeover talk.

Restructuring moves helped paper group Arjo Wiggins 16p higher to 193.5p. Pub group Greenalls, up 22.5p to 366.5, was back in the takeover frame, as was United Assurance, up 19.5p to 421.5p.

First Choice continued to go south, shedding 19.5p to 203.5p as the bid from Airtours, down 7p to 512.5p, was mired in competition worries. Express Dairies was milked 3p lower to 124.5p after the UK monopoly regulator sought comments on the purchase of rival Glanbia's UK unit. Textile tiddler Hicking Pentecost knitted a 48p jump to 175.5p after receiving a 175p- per-share offer from US rival Ruddick Corporation. A counterbid is possible.

Computer group Tadpole Technology jumped 3.25p to 21.25p after winning a $1.2m contract from the US government. Lighting company Emess buzzed 3.75p to 27.25p after the pounds 38m sale of its emergency lights division to rival Cooper.

The money could be used to redeem Emess' preferences shares. Engineer Domnick Hunter plunged 49p to 202.5p after a profit warning. Internet name provider Net Benefit debuted on AIM with a 75p rise to 275p, netting a pounds 5.7m paper profit for managing director Jonathan Robinson.

SEAQ VOLUME: 914.8M

SEAQ TRADES: 64,592

GILTS INDEX: N/A

REGALIAN PROPERTIES, the real estate tiddler, moved 3p higher to 26.5p yesterday amid growing optimism on its portfolio.

Market watchers that believe Regalian is set to benefit from an upturn in the London housing market.

The company owns several properties in prime locations in the capital.

A good performance in London could help the shares to move back towards the 33.75p peak reached last summer.

THERE ARE rumours that the TV and leisure group giant Granada is preparing a revamp of its Forte Posthouse hotel chain.

The company is apparently planning to spend pounds 100m on upgrading the chain's 84 properties. The plans could be unveiled at next week's interims. According to Travel Weekly, Granada is banking on the refurbishment to take market share in the three-star hotel market from Stakis, recently bought by Hilton.