Market Report: M&S shares rise in heavy trading on recovery hopes

IS THE worst over at Marks & Spencer, once the nation's blue chip retailer? The shares rose 24.75p to 428p in heavy trading, a 55p gain in two weeks.

Although there is still an air of caution in the stock market, confidence in the group is recovering in some quarters. The more optimistic souls are encouraged by the reshaping so far apparent and the general acceptance of M&S's autumn clothing range.

Earlier this week the shares were overshadowed by rumours of a bearish stockbroker circular. The failure of the document to appear is also seen as favourable to the group.

M&S has been talking to analysts and the message they are getting is clearly nowhere near as bleak as might have been expected. The group goes into its close season at the end of next month and is meeting analysts as part of its investor relations programme. Just to add to the M&S recovery some dealers were convinced a large buyer was accumulating a stake.

The hovering buyer rekindled talk that M&S, now capitalised at pounds 11.5bn, could have attracted an overseas predator or that the rumoured merger with Tesco is back in the high street trolley.

The group's shares, down to 333.5p in the winter, touched 550p last year; they were as high as 664.5p in 1997.

M&S is still looking for a chairman to replace Sir Richard Greenbury. One name in the frame is Archie Norman, the head of Asda, taken over by the US giant Wal-Mart in a pounds 6.7bn deal.

Some other retailers ended the week with a flourish. Kingfisher, reflecting tax cuts in France, gained 27.5p to 741.5p. The French government is slashing VAT on building maintenance goods to 5.5 per cent from 20.6 per cent. Kingfisher's Castorama Dubois do-it-yourself off-shoot is an obvious beneficiary.

New York cast a rather gloomy shadow of trading. At one time Footsie was up 29.4 points, getting near to the level many chartists see as the break out point. But once the Dow Jones Average gave up an early glow, leading shares lost heart and Footsie ended off 8.7 at 6,375.2.

Still, supporting shares were in form. The Mid Cap index gained 7.3 to 6,054.3 and the Small Cap went to yet another peak with a 10.6 advance to 2,816. Turnover, not surprising for a bank holiday Friday, was unimpressive.

Utilities scored gains, largely on the back of upgrades by the HSBC securities house. Thames Water rose 17p to 901p and United Utilities 18p to 740p.

Rolls-Royce was thrust 9p higher to 257.25p following its interim figures, but Hilton's results and betting changes prompted a 4.5p fall to 239p.

Reed International, the publisher, topped the Footsie leader board with a 26.75p gain to 421p. Bottom fishing, after recent weakness, was said to be responsible, with turnover suggesting it was institutions taking advantage of the shares which recently hit a 379p low. They have been as high as 630p in the past year.

Among the smaller players bid action was again evident. Walker Greenbank, famed for its expensive wallpaper, firmed 1.5p to 61.5p after rejecting what it described as a "tentative" takeover approach. It is the second time the company has turned down the would-be bidders who are led by its former chief executive Charles Wightman.

Mr Walker said: "This second tentative approach, backed by a private equity investor, was at an inadequate price." The group's shares were 42p in June; they topped 100p five years ago.

Desire Petroleum, once allegedly sitting on a fortune off the Falkland Islands, was another on the bid trail. It was suspended at 24p after rolling out a bid for Gaelic Resources, a Dublin group with interests in Portugal. Last year when the Falklands oil rush was at its peak Desire touched 445p. Gaelic held at 1.25p.

Norbian, the security equipment group, was beamed 23.5p higher to 340p as a 350p a share management buy-out appeared.

Fund manager Johnson Fry, up 15p at 201.5p, said it may receive a bid following a strategic review. It is thought the offer will come from overseas although there are indications the Aberdeen investment group may be prepared to launch a bid.

But Systems Integrated Research said talks with a bidder had been abandoned; the shares fell 11p to 23.5p.

Sira Business Services, which cleans offices and leisure operations, held at 14p. The group, capitalised at pounds 4m, is on the look-out for acquisitions. Chairman Robert Weigl said: "We need to build a stronger and substantially larger corporate presence." He is looking for deals of up to pounds 10m which would be funded by cash and shares.

The Allied Carpets saga continued with Haagweg, controlled by the Mulliez family who run bidder Tapis Saint- Maclau, lifting its stake to just below 3 per cent. Rival bidder Wassall was also in the market, increasing its holding to 24 per cent. Allied shares firmed 2p to 88p.

Packaging shares were unwrapped. David S Smith lost 10.5p to 185.5p and Arjo Wiggins Appleton 12p to 219.5p. Rexam fell 6p to 293p.

Engineers were also weak; Glynwed International fell 7p to 237.5p and FKI 6.5p to 221p.

Newcomer SignCorp, which designs and makes advertising signs, traded up to 134.5p against a 125p placing. It accompanied its arrival by agreeing to buy SignCorp International for pounds 3.9m.

SEAQ VOLUME: 843.7M

SEAQ TRADES: 69,130

GILTS INDEX: N/A

EARTHPORT.COM, which arrived on the fringe Ofex market at 100p a year ago, has fixed up a web site deal with two Footsie companies. Details should be known next week.

The shares rose 5p to 712.5p. The company, which also has a quote in Bermuda and plans a Nasdaq presence later this year, has held talks about a National Lottery involvement. "We are the only authorised lottery on the Internet", says the chairman, David Vanrenen.

SHARES OF Gowrings, the Burger King fast-food restaurant to garage group, rose 5p to a 151.5p peak after stockbroker Peel Hunt edged its year's profits forecast up to pounds 1.94m.

For the following year analyst Paul Hickman is shooting for pounds 2.2m. He urged investors to buy before Gowrings' "full value is more widely appreciated".

The shares were 91.5p last year and were down to 62p four years ago. Mr Hickman's target price is 200p.