Market Report: Westland takeover talk becomes airborne again

IT WAS fitting that on the dullest day so far this year a whiskered takeover rumour should be resurrected.

Shares of Westland, the helicopter group, were propelled higher as talk circulated that the GKN engineering group was pondering the future of its 20.64 per cent interest.

Westland shares, already highly rated, rose 14p to 289p with the warrants 16p stronger at 205p. GKN fell 9p to 580p.

Since the turbulent days of 1985, when Westland was at the centre of unprecedented Whitehall manoeuvres, the helicopter group has picked itself up and its shares are now hovering at a peak, more than doubling since the start of last year.

Profits this year are expected to climb from pounds 30.5m to pounds 36m with the loss of an important Canadian order seemingly having only marginal impact.

The rest of the stock market produced few features, although trading was busy with turnover again approaching 1 billion shares. But futures selling, more small but persistent profit-taking and some uninspiring reports from the high street ensured a subdued display.

The disappointing result of the Government stocks auction was another inhibiting influence, helping to lower gilts by nearly a point.

The FT-SE 100 index fell 8.8 points to 3,427.3 and the FT-SE 250 index 3.3 to 4,076.4.

Burton was one of the retail casualties. A downbeat statement left the shares 8.75p lower at 58.75p. Marks and Spencer also failed to offer inspiration with its trading comments, falling 15.5p to 426.5p.

The gathering malaise spread to Argos, down 12p to 357p, Kingfisher, 10p to 643p, and Storehouse, 8p to 231p. But MFI's results pushed the shares 5p better to 179p.

The Marks caution also entrapped food retailers, with J Sainsbury lowered 6p to 441p and Tesco 7p to 223p.

Profit downgradings weighed on sentiment. James Capel cut its estimates for the RMC building materials group by pounds 5m to pounds 172m and by pounds 15m to pounds 195m. The shares fell 33p to 993p.

Negative comments from Kleinwort Benson and NatWest Securities lowered Tate & Lyle 14p to 439p and James Capel advised a switch from British Airways, 7p down to 464p.

The market has been growing increasingly apprehensive about BA. The ultimate liabilities of the air mile schemes is causing more and more comment. And the growing number of small competing airlines taking to the sky are likely to nibble away at profits.

But it was not all one-way traffic. Capel felt BA cash should be pumped into BAA, the airports group, up 8p to 1,032p. Amec, the builder, gained 6p to 137p with UBS thought to be providing the push.

Pearson, up 4p at 668p, continued to draw support from Henderson Crosthwaite, which believes the shares have a current value up to 720p.

The securities house expects BSkyB, the satellite television service where Pearson has a 17.5 per cent interest, to achieve profits of pounds 20m this year against losses of pounds 76m last year. There is also talk that BSkyB will restructure to cut debts, although a flotation is still regarded as a distinct possibility.

Henderson believes Pearson's profits will come out at pounds 218m last year and pounds 246m this year.

Utilities had a good session. Waters were helped by a positive investment presentation by North West Water, up 7p at 562p.

Garages accelerated following the latest car sales figures. Lex Service advanced 13p to 521p and T Cowie 7p to 337p. Inchcape, the Toyota distributor which has attracted several buy recommendations, rose 14p to 606p.

Rodime, a gamble on successful US patents litigation, put on 5.5p to 49p with the market still bewildered by the enthusiasm of Cazenove for the shares.

Essex Furniture eased 4p to 259p on the sudden resignation of its stockbroker, Williams de Broe. Builder Bellwinch held at 54p as Hoare Govett became the company's stockbroker.

Waverley Mining, weak recently, rebounded to 55.5p, up 6.5p. Coal Investments improved 2p to 57p. Shandwick, the public relations group, added 5p to 48.5p in a further response to its results.

Heywood Williams, the building materials group, held at 422p. Greig Middleton expects profits to climb from the pounds 19m forecast by the company for this year to pounds 36.5m next year and pounds 46m in the following year.

Signet, the old Ratners, was the subject of another speculative run. Hopes of a restructuring went the rounds.

The shares rose 1.5p to 37p with the convertible preference, which effectively control the company's fate, moving ahead by 1.25p to 65.5p.

The suggestion creating the excitement was that the revamp would include the preference being swapped into ordinary shares on a three-for-one ratio.

Redbird Holdings, the rather mysterious Panamanian company, is still quietly gobbling up shares of building materials group British Dredging. It first moved onto the register a year ago with a 3.14 per cent interest. Yesterday it disclosed that its stake had reached 10.17 per cent, by buying a further 130,000 shares. RMC has an 8.89 per cent stake. BD shares held at 135p.

Shares of Ascot Holdings, the pubs and property group created from the wreck of Control Securities, are edging ahead. Yesterday they rose 0.25p to 8.75p. There is talk that it has lined up a property disposal comfortably above book value. The company has been steadily unloading assets. Last month it raised pounds 36m by selling the Belhaven Brewery at Dunbar, Lothian.

The FT-SE 100 index fell 8.8 points to 3,427.3 and the FT-SE 250 index 3.3 to 4,076.4. Turnover was 972.6 million shares with 36,905 bargains. The account ends today with settlement on 7 February. Government stocks gave ground.

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