Market Report: Talk of RJB cashback to shareholders shores up ailing coal producer

RJB MINING emerged from the depth of its underperformance yesterday amid talk that its shareholders may be in for a cash back.

As the non-financial crowd focused on the alleged sale of the company's Northumberland pit to an associate of a Serbian warlord, dealers kept their eye on the ball and their ears to the ground. What they heard was that the struggling coal group has finally decided to reward its long- suffering investors with a special payback. The whispers did little to stop the Serb-related fall in the share price and at the end of the session RJB was down 1p to 35.5p, another record low.

However, traders at the coal-face of the stock market's rumour mill were convinced that the cashback is coming. The whispers have it that a group of shareholders including Fidelity, PDFM and the aggressive US hedge funds Millgate Capital have won their battle with chief executive Richard Budge over the issue.

Mr Budge wanted to use RJB's healthy cashflow for acquisitions and was not keen on a cashback. However, the investors found the support of chairman John Robinson who has apparently convinced his chief executive to budge.

The return of capital, which will probably take the form of a special dividend or share buyback, could be around pounds 15m, or around 10p for each share. Such a figure would make RJB shareholders around a third richer - not a bad bonus for investors who have seen the value of their shares fall from over 590p three years ago.

The rest of the market was victim of a tug-of-war between bull and bears. The latter came out on top in the FTSE 100 which closed 39.8 lower to 6511.6 after eight winning sessions. A drop in its second-largest constituent, Vodafone AirTouch, 21p lower to 296.25p on growing concerns of a hostile strike at Mannesmann, played a big part in the index' downfall. A wobbly start in the Dow despite interest-rate positive US productivity data did not help. A couple of large programme trades by big fund managers helped to swell turnover to over 2bn for the second day running. The gloom did not extend to the second liners. The FTSE 250 closed 22.3 better at 5918.8 on a flurry of bid rumours. The Small Cap, also boosted by takeover talk, soared 33.9 to 2786.7.

The blue-chip's rout would have been worse had it not been for corporate action talk. Carlton Communications beamed 33p higher to 503.5p on growing whispers of an approach by Italian rival Mediaset. Building materials group Blue Circle cemented a 18.75p rise to 329.75p on renewed rumours of a strike from Hanson, down 0.5p to 493p, or a foreign predator.

Beer group Whitbread, 20.5p up to 613.5p, bucked a falling sector amid late mutterings that a bid is on its way. Rival Granada, 10p higher to 573.5p, has been mentioned as a predator in the past. Pub groups Bass, 1.5p lower to 649p was undone by news of a competition probe into soft drinks prices, while rival Scottish & Newcastle closed 2p up to 505p only because of late rumours of a deal for its holiday division.

Bid talk returned to haunt insurers Legal & General, up 5.5p to 171.25p in big volume, and Royal & Sun, 17p better at 459.5p. Gas group Centrica finished 1.75p higher to 174.5p in heavy trading amid mild talk of a strike, while rehashed rumours of an offer from Tesco 5.5p better at 188.5p, lifted Marks & Spencer, 5.75p better at 274p. Fellow struggler Somerfield bagged a 7p rise to 91p on obvious whispers of a bid. No such luck for cable group Telewest Communications, 10.25p down to 294.75p. A large institution was said to have dumped its stock after news that the anti-trust watchdog was to probe NTL's acquisition of rival Cable&Wireless Communications, down 64.5p to 671p from Cable & Wireless, down 460 to 734.5p. Software group Sage plunged 271p to 3801p despite speculation of talks with Microsoft.

In the midcap, engineer Cookson bashed 21p better to 228p after a positive analysts' meeting while rival FKI rose 14.25p to 162.75p in anticipation of good results next week. United Biscuits rose a tasty 16p to 233p on whispers that a private equity investor or US giant Nabisco could bid, while security group Securicor added 5.75p to 155.75p in good volume on takeover chat.

The small engineer Babcock soared 11.5p on talk of a 125p-per-share bid, while Vocalis Group climbed 66.5p to a record 315p on talk that is voice- activated software could be used by BT, down 14.5p to 1239.5p, and Swedish phone group Ericsson. Reflective ink group Reflec shone 3.75p higher to 10.75p on whispers of share buying by famous investor Shami Ahmed. Careless punters made a mistake and bought Irish data company Reflex, 3p higher to 10p, instead.

Conference group Gearhouse stepped 2p up to 128.5p amid talk that one of its mystery bidders is rival Avesco - 27.5p better to a record 655p - the maker of Who Wants To Be A Millionaire?.

Education group SHL soared 65p to 252.5p after unveiling offer talks. However, after the close it said the talks had been terminated.

SEAQ VOLUME: 2.098bn

SEAQ TRADES: 125,287

GILTS INDEX: N/A

f.guerrera@independent.co.uk

THE INFORMATION technology group Morse Holdings appears to be going places. The stock soared 15p to an all-time high of 294.5p amid whispers of new deals. Insiders believe that the supplier of hardware and software to business users has won a couple of new contracts with well-known clients. The deals should extend the rally in its share price. The stock has had an amazing run, rising from a low of 205.p in August.

KEEP AN eye on ML Labs. The biotech company has had a good run on the back of a couple of positive announcements on two of its drugs. However, followers of the stock believe that there is more to come. There are some whispers that ML is lining a major corporate deal, with some dealers suggesting that it could spin-off one of its US subsidiaries on one of the European or American hi-tech exchanges.