Market Report: GKN takes off in wake of Westland acquisition

THE CAR components group GKN, which earlier this year took over the Westland helicopter operation, is suddenly flying high.

In one of those changes of mood that often catch even hardened stock market professionals on the wrong foot, the shares are enjoying the warm glow of stockbroker support.

NatWest Securities has made encouraging noises and SG Warburg suggest it is the surest way to reap rewards from the indicated growth of the car market.

The Westland deal has also been good for sentiment. GKN's successful pounds 577m offer represented a bargain capture with the value of the deal enhanced by the pounds 115m windfall from long-running Westland litigation.

Despite the defence cutbacks there are hopes that GKN will win substantial new orders in tomorrow's Government defence review.

Profits this year are expected to emerge at pounds 162m with perhaps pounds 220m next year. The shares failed to hold their best level, settling at 612p, up 7p on the day and 55p since the start of the account.

The rest of the market gave up most of Monday's advance with the FT-SE 100 index seemingly intent on decoupling the bonds link. As government stocks climbed by almost a point, with fund managers chasing 9 per cent yields, equities failed to hold early gains and Footsie was lowered 19.9 points to 2,963.9.

A weak dollar, trading at new lows against the yen and mark, damaged New York and encouraged the London retreat.

Nicholas Knight, the Nomura strategist, also made a contribution. It was reported that, in a note circulating in the Hong Kong market, he apparently says Footsie may not regain 3,000 until 1996.

He is looking for the index to go below 2,800 and says the dollar collapse and the weakness of US bonds point to an 'emerging sterling crisis'.

But there was a raft of special features. Oils were mostly firm as the crude price strengthened on fears that a widening strike by Nigerian oil workers will cause supply disruptions. British Petroleum rose 4.5p to 384.5p but Shell lost 3.5p to 694.5p.

British Steel jumped 3.5p to 151.5p. It became known that NatWest planned a 'substantial' profit upgrading from its current pounds 270m, although the uplift had not been quantified when the market closed. Currency movements, it is thought, are the prime reason for the revision.

Retailers were hit by subdued comments from UBS, and Societe Generale Strauss Turnbull was negative on supermarkets.

Some large lines of stock sought destinations with Asda, Boots, Kingfisher and Rolls- Royce feeling the strain. Busy trading in food group Albert Fisher, including a 3.5 million agency cross at 45.5p, attracted attention.

SmithKline Beecham lost 12p to 388p with the rump of Monday's placing still hovering. Glaxo remained under the weather following its apparent miss in buying McKesson's management drugs side. The shares fell 13.5p to 549.5p.

Thorn EMI continued to draw support from talk of the music and rental split. There are hopes of an announcement at Friday's shareholders' meeting. The shares rose 9p to 1,062p.

Christian Salvesen, the distribution group, improved 9p to 286p following meetings with analysts.

Healthcall fell 9p to 97p on the Office of Fair Trading's preliminary inquiries into charges of anti-competitive practices and Drew Scientific, which announced a near-pounds 1.5m loss on Monday, tumbled 12p to 28p. The shares were placed at 105p last year. Trevor Barker is stepping down as chairman but remains a director.

Acatos & Hutcheson, an edible oils group, jumped 14p to 279p on vague takeover talk. A 100,000-cross took place at 269p.

Mid-States, a US car parts distributor, reversed 5p to 88p as it postponed its ADR programme and placing, which were expected to raise up to dollars 25m. It plans to go ahead when market conditions improve.

But one cash call expected is the rescue rights issue from Hartstone, the leather group. Details are likely tomorrow. The shares held at 34p.

A sharp profit advance by Real Time Control lifted the shares 21p to 140p.

Hobson, the food group, held at 20.5p. It was not clear whether the sudden departure of two directors related to market talk of an approach from Yorkshire Food.

The FT-SE 100 index fell 19.9 points to 2,963.9 and the supporting FT-SE 250 index eight points to 3,465.9. Turnover edged towards 600 million shares with 22,441 bargains registered. The account ends on Friday with settlement on 25 July.

Coda, the financial software group, has the distinction of being the flop of the recent new issue crop. Floated at 235p in February the shares finished at 104p, down 17p. They have crashed since a pounds 2.5m interim loss was announced last week. A much heavier-than-expected loss so soon after the share sale has infuriated the market. There is also talk of technical problems.

Graystone, transformed from a sleepy conglomerate into a 'focused engineering group', has attracted the attention of Henry Cooke Lumsden. It forecasts profits in the year just ended of pounds 3.5m, with pounds 5.8m pencilled in for the current year. No dividend was paid for 1993 but Cooke forecasts 0.22p and then 0.44p for this year. The shares held at 12.5p.

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