Market Report: Northern Foods suffers bout of indigestion

NORTHERN FOODS, which had disdainfully resisted the stock market's ragged summer decline, came under pressure yesterday as what could be the first in a series of profit downgradings appeared.

The shares fell 14p to 608p as Smith New Court gently shaved its estimates. Until last week they were riding at a 635p peak.

Northern has been an outstanding performer this year as the market has happily digested its acquisition of the Express and Eden Vale dairy businesses from Grand Metropolitan for pounds 360m. Although a pounds 234m rights issue had to be absorbed the deal was seen as providing quickly realisable benefits for Northern.

But, as if to underline the fragility of the market, Northern was knocked off its pedestal by a modest downgrading on a day shares made progress.

SNC has trimmed this year's forecast by pounds 3m to pounds 162m and next year's by the same amount to pounds 182m. Last year the group achieved pounds 126.2m.

The securities house, which is still keen on Northern shares, appears to have lowered its expectations largely because of increasing competition in the biscuit industry.

The rest of the market made headway on - once again - lower interest rate hopes.

After Friday's dead cat bounce, when the Bank of England was seen as attempting to edge rates lower, and Monday's predictable relapse, the FT-SE share index gained 24.7 points to 2,493.7 on vague - some would say forlorn - hopes that the Germans could be encouraged to nudge their rates down in the near future.

Indeed the Germans were quick to make it clear they had no intention of obliging. So, on past form, the market should be down again today.

Trading was again thin, although better than Monday's level, the lowest for 18 months. Electricals were the star performers, encouraged by the continuing array of profit and dividend increases and a more lenient than expected 'watchdog' pricing policy.

British Aerospace was another to miss the party. In a turbulent session the shares were at one time down 26p as worries continued to multiply about the Euro-fighter. They ended 6p lower at 231p.

VSEL, however, encountered a more encouraging defence development. The Ministry of Defence's decision to order a fourth Trident submarine lifted the shares 35p to 423p.

Vickers collected a downgrading, falling 6p to 135p. Carr Kitcat & Aitken has reduced its forecast by pounds 25m to just pounds 10m with the slide in Rolls-Royce car sales forcing the revision.

Glaxo Holdings was helped by a more positive approach by some US analysts towards drug shares. Wertheim Schroder and Merrill Lynch appeared to lead the rethink, which coincided with the first official US presentation for the Wellcome share sale.

Meetings continue in the US this week and will also be held in Hong Kong, Singapore and Australia. Canadian, Japanese and continental meetings occurred last week.

Wellcome shares rose 17p to 900p; Glaxo 28p to 677p.

Pilkington eased 2p to 118p, despite more buying by the Abu Dhabi Investment Authority, which lifted its stake from 6.3 per cent to just over 7 per cent. It is the third time in a month the ADIA has increased its Pilks involvement.

BAA, the airports group, slipped 1p to 662p. Yamaichi lifted its forecasts and said buy. It now expects pounds 305m this year (against earlier estimates of pounds 278m) and pounds 340m next ( pounds 301m). Last year BAA achieved pounds 192m.

Acquisitive Lloyds Chemists had another difficult session, dropping 18p to 287p at one time. The shares, down 22p on Monday, closed 8p lower at 297p.

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The brewer Marston Thompson & Evershed, strong lately on takeover hopes, fell 9p to 250p as the Whitbread Investment Company hinted it could not find a buyer for its 31 per cent interest and would therefore place some of the shares in the market.

But Boddington Group, where WIC has to reduce a 21 per cent interest, gained 4p to 163p.

Pentland, on its Adidas deal, rose 14p to 144p and Sema Group improved 16p to 300p on its planned link with France Telecom, the state-owned group.

BM Group fell 7p to 120p as Gartmore Investment Management cut its stake to 3.8 per cent. The previous stake was thought to be 6 per cent.

ML Holdings, the aerospace group, dropped 6p to 29p as TT Group trimmed its stake by 50,000 shares to just below 7 per cent. The sale - and TT's interest in AB Electronics - effectively killed bid hopes.

Shares rebounded, with lower interest rate hopes again providing the inspiration. The FT-SE share index ended near its best of the day, up 24.7 points at 2,493.7. The FT 30-share index rose 15.2 to 1,906.2. Trading volume remained depressed, with turnover reaching 381.8 million shares from the 21,241 bargains registered

Midland Bank shares fell 5p to 459p, reflecting the downturn in the Hong Kong market. Dealings in the HSBC Holdings (Hongkong & Shanghai Banking Corporation) bond being issued as part of the takeover currency are expected to start in London on Friday and will be actively traded. They have been confined to a grey market existence. Yesterday's price was 334p.

Shares of the bathroom and kitchen group Spring Ram have weakened as the campaign for the MFI share flotation has gathered pace. It seems some investors have sold to take up the MFI offer. The shares, down 2p to 132p yesterday, have fallen 22p in a week. Nomura believe MFI shares are 'good value' at 115p, forecasting profits of pounds 85m this year and pounds 98m next.