Market Report: Holiday sector in demand as Footsie feels the pressure

AS BOOKIE William Hill canters along towards its market flotation, shares of the last big "popular" stock sale came to life as takeover rumours swirled around.

Thomson Travel, Britain's biggest holidays group, has been a major disappointment to its army of small shareholders. The shares briefly flirted with 200p but were down to 105.5 in October and bumping along at 138p before they were engulfed in bid excitement. Talk of a German bid lifted them 17.5p to 155.5 - still below the offer price - in frenetic trading.

The Thomson float, accompanied by the perk of cut-price holidays for subscribing shareholders, was marred by complaints of share shop inefficiency.

This week the other leading holiday operators have also been in demand although, until yesterday's burst of activity, Thomson had been left out in the cold.

The holiday sector has been encouraged by favourable comments from Warburg Dillon Read, which has alighted on Thomson and Airtours as its favoured shares.

It could be argued that the sudden strength of holiday shares is related to the modest revival in oversold leisure shares this week. Forward holiday bookings are thought to be running at a heady level, although capacity has been reduced. This week's base-rate cut should further encourage a summertime rush to the sun.

Airtours, up 9p to 430.5p, was strong on Thursday as hopes returned that its major shareholder, the US Carnival Corporation, was planning a bid. First Choice, the number three holiday group, rose 5.5p to 147p.

Preussag, the German group, was said to be chasing Thomson. Any bid, however, would be complicated by its control of Thomas Cook, the first package tour operator. Three days ago Preussag said it was looking to raise pounds 750m to increase its tourism business, which has replaced such heavy industries as coal, steel and engineering as its core activity.

Thomson has, since its flotation, been on the expansion trail and on Monday acquired two businesses for around pounds 28.5m. Until the share sale it was controlled by the Canadian Thomson family. Now the Canadian interest is down to 20 per cent.

Most other shares were down in the dumps. Footsie, ruffled by fears of higher US interest rates, fell 84.6 points to 5,855.3 in another busy session. Even the in-form mid cap index, strong for much of this year, lost its enthusiasm, falling 21.1 points to 5,211.5. It was left to the small cap shares to keep the bull flag flying, with their index up 8.5 to 2,209.9.

J Sainsbury's disappointing trading statement - and, presumably, the bread war - lowered the shares by 36p to 393p, a 12-month low. Tesco lost 5.75p to 181.75p and Safeway 12p.5p to 278.5p. Associated British Foods, the Sunblest bread group, crumbled 28p to 520p.

Footsie's top player was BG, up 19p to 360.5p EMI, the showbiz group, continued to score from Warburg Dillon Read support, up a further 18.5p to 450.5p.

WPP, the advertising group, gained 12p to 474p on Goldman Sachs support, and NFC advanced 6p to 147.5p after meeting analysts.

Tate & Lyle, the sweeteners group, improved 20.25p to 450p as BT Alex.Brown suggested a 500p target.

Ladbroke, confirming it is the Stakis stalker, fell 8.75p to 230p; Stakis rose 4.5p to 141.5p. Vaux, the hotel and pub group that is near to selling its two breweries and 350 bottom-of-the-barrel pubs, put on 20.5p to 275p on the theory that it, too, will be drawn into the maelstrom of corporate action in the hotels sector.

There was mixed news on the takeover front. Weir, the engineer, collapsed 26p to 281p as it ended discussions with Flowserve, a US group. The Americans, it seems, were prepared to bid 300p a share; whether they will return to the fray with a hostile offer remains to be seen.

Watts, Blake Bearne, the china clays group, firmed 15p to 490p after its major shareholder, the Belgian Sibelco group, produced its signalled offer. Portsmouth & Sunderland Newspapers firmed 25p to 1,725p after Newsquest, unchanged at 301p, indicated bid hopes.

Rebus, the computer group, jumped 22p to 159.5p as offer talks were confirmed.

Wyko, a precision engineer, said it had not collected any offers but was reviewing its options. The shares gained 13p to 94p.

BICC, the cables and construction group, remained on the wanted list, gaining 1.5p to 84p on continuing bid speculation. But engineer FKI, widely tipped as the next bid target, fell 5.5p to 163.5p in busy trading.

Northern Leisure, the discotheque chain, added 10.5p to 148p as the group continued to benefit from bid talk and the revival in the heavily battered leisure sector.

Profits warnings flowed again. Salt group Staveley fell 9.5p to 71.5p and MDIS, no stranger to providing dire tidings to shareholders, lost 3.5p to 42p after cautioning that results would be below expectations.

Gyrus, a medical group, firmed 2p to 175.5p; it raised pounds 10.5m by placing shares at 146p. Future Integrated Technology, unchanged at 25p, raised pounds 115,000, placing shares at 21p. Oxford Molecular hardened 2.5p to 39p as a long time seller was cleared.

Dawson International, gained 5p to 17p - five years ago the shares were 159p - as aggressive investor Guinness Peat arrived with a 5.4 per cent shareholding. Phillips & Drew, the fund manager that has been flexing its investment muscles lately, is already involved in the textile group with a 21.7 per cent stake.

Fitness First, the health club chain planning to move from AIM to a full listing next week, jumped 26p to 398.5p.

SEAQ VOLUME: 1.08 billion

SEAQ TRADES: 75,759

GILTS INDEX: 115.86 +0.08

EXPECT takeover action soon from AIM-listed Pubs'n'Bars. The group is thought to be near to taking over a 34-strong pubs chain with which it is already closely related. Talks are also going on with another pubs company and there are hopes they will be concluded in the next few weeks.

Pubs'n'Bars, with its shares unchanged at 50p, is capitalised at pounds 1.8m.

SHARES IN Rage Software were again busily traded as stories went round that Microsoft may take a 5 per cent stake in the computer games group.

The company recently said it was in talks with Microsoft on distribution of its latest football game, Ruud Gullit Striker. Rage shares firmed 0.5p to 14.75p: Seaq put turnover at 5.4 million. Three years ago the price touched 25p.