Utilities slide as Brown heightens windfall tax fears

MARKET REPORT

Labour at Blackpool did to the utilities what Frankie Dettori did to the bookies at Ascot over the weekend as Black Saturday turned into Red Monday. Investors took fright over fears, renewed by the Shadow Chancellor, Gordon Brown, that an incoming Labour government would impose a windfall tax on the privatised monopolies.

Electricity and water shares were hardest hit, with Southern Electric down 23p at 615.5p, Severn Trent 15.5p adrift at 590p, PowerGen off 10.5p at 485p and United Utilities 15p lower at 570.5p while Thames Water shed 13p to close at 538.5p. Analysts said the share price slide was prompted by concerns that the tax might raise up to pounds 10bn, nearly three times as much as the market had been factoring in.

However, the airports group BAA and Associated British Ports, another two candidates for the Shadow Chancellor's attentions, withstood the rout. BAA trimmed a mere penny to 494p while ABP ended the day down a half penny at 268p.

Away from the utilities, the stock market ended the third quarter on a quiet but positive note amid selective buying of other blue chips. The FT-SE 100 index reversed an early 12-point loss to end the day up 7.3 at 3,953.7.

The bookmakers, for once, were out of the game. After popular jockey Frankie Dettori's piece of turf history at Ascot, where he rode all seven winners on the card at accumulated odds of more than 25,000-1, the bookmakers followed up their caning at Ascot with a hammering by the dealing desks.

Analysts reckoned the bookies had been stung for pounds 10m, with ABN-Amro Hoare Govett suggesting Ladbroke, Britain's biggest bookmaker, was in for pounds 2.5m.

But those figures soon looked like wishful thinking after Stanley Leisure, a far smaller player, issued a Stock Exchange statement saying Dettori's win had cost it pounds 2.25m alone. Stanley's shares closed 7p lower at 235p.

By early afternoon estimates of the total hit had soared to pounds 30m, with William Hill, owned by Brent Walker, pounds 8m out of pocket and Bass-owned Coral pounds 4m poorer as a result of Dettori's winning streak.

Shares in Bass ended 5.5p off at 779.5p but Brent Walker, buoyed by a deal with Grand Met that settled a long-running dispute over William Hill, closed a penny higher at 3.5p.

Ladbroke was still counting its losses last night but through gritted teeth a spokesman said Dettori's achievement was good news for the industry in the long run as it had raised the profile of racing. Ladbroke's shares finished 2.5p higher at 209.5p.

A reminder of the havoc caused to the betting industry by the National Lottery, rather than Dettori, came from bookmakers Surrey Group, whose shares fell 0.25p to just 0.75p after reporting increased losses of pounds 4.7m in the year to March.

Shares in GKN rose 21p to 1121.5p on news of the engineering and automotive components group's pounds 100m contract to sell the German government seven Super Lynx helicopters.

Rolls-Royce, 4p firmer at 239.5p, also benefited from contract news. It has formed a joint venture with the overseas consultancy arm of Mersey Docks & Harbour to land a $155m (pounds 100m) contract to run a port terminal in Argentina for the next 12 years.

However, shares in Mersey Docks marked the first anniversary of a bitter dispute between the company and 329 sacked dockers by sinking 14p to 370p.

There were ugly scenes yesterday as a group of 20 demonstrators occupied the roof of the company's headquarters in Liverpool but Mersey Docks said the port continued to work normally. Mersey's shares have fallen by 100p, more than a fifth, since the dispute began when the dockers were dismissed for refusing to cross a picket line.

Elsewhere in the transport sector, shares in Eurotunnel were suspended at 113.5p at the start of trading and are likely to remain so until a French court gives its reaction to a report on the progress of talks between the company and its bankers.

Matthew Clark, still reeling from the alcopop wars, enjoyed a rare day in the sun, rising 19p to 337.5p on vague talk that Guinness might soon make a bid. The recovery came despite the cider maker reportedly dismissing the story as "equivalent to a rumour that B52 bombers have been found on the moon".

News that UK Active Value, the fund run by Julian Treger and Brian Myerson, had picked almost 8 per cent of Kenwood pushed shares in the household appliance maker 11p higher at 218.5p.

TAKING STOCK

As predicted in this column on Saturday, shares in Goodwin moved sharply higher after the tiny foundry business reported a surprise 800 per cent profits advance to just over pounds 2m. Shareholders get a special "loyalty" dividend, making a 17.94p total against 0.655p. The shares soared to 105p from 60.5p on the news and have climbed from 33p since March.

Aminex gained 3.5p to 58.5p. The oil and gas group has placed some 6.9 million shares, or 15 per cent of its enlarged share capital, with the International Finance Corp, at 57p. The IFC, the equity arm of the World Bank, is also granting Aminex a $17m unsecured loan facility. The funding will help Aminex finance development of the Kirtayel oilfield in Russia and the El Biban oilfield off Tunisia.