Payout on judgment day leaves BAT at low for year

MARKET REPORT

BAT Industries, the tobacco giant, suffered the predictable battering following the unexpected US court ruling awarding a lung cancer sufferer $750,000 damages.

The shares crashed 8.8 per cent to 464p, lowest for more than a year. Yet around a quarter of the fall had nothing at all to do with the US judgment. The tobacco giant went ex-dividend which wiped 12.5p from the price before a share was traded.

Even so BAT finished at its lowest of the day, reflecting the stock market's unease about the US verdict.

There are undoubted worries that the setback could, with BAT facing more than 200 such cases, open the floodgates with the tobacco industry finding it difficult to contain the legal turmoil.

The only other case that the tobacco barons lost was subsequently overturned on appeal. And BAT is clearly confident it will emerge victorious when its appeal against the latest ruling is heard.

But the legal setback will undermine sentiment and must prolong the tortuous battle between the cigarette makers and cancer sufferers. It must also strengthen the case for BAT to rejoin the demerger trend, floating off its financial services group, leaving the tobacco operations to stand and fight alone. After all, it embraced the demerger culture when, after the failed Sir James Goldsmith-inspired bid, it hived off its Arjo Wiggins Appleton paper side and the Argos stores business.

BAT was not the only blue chip to suffer from dividend payments.

Seven FT-SE shares went ex-dividend, wiping almost 11 points from Footsie. Biggest fall was the responsibility of Glaxo Wellcome accounting for 3.9 points; BAT's cut was 2.3 points.

But for the dividend stripping, Footsie would have achieved a modest gain. In the event it fell 7.4 points to 3,803.3. The supporting FT-SE 250 index gained 7.4 to 4,331.9 - its ninth gain on the trot. The reappearance of lower interest rate hopes helped sentiment, particularly among retailers.

Electricities were discomforted by a Houston Industries takeover strike. Unfortunately, the Americans, seen as the big candidate to launch a bid for a UK group, have looked elsewhere, paying $2.4bn for NorAm, a resource group.

So old takeover faithfuls East Midlands Electricity fused 12p to 593p and Yorkshire Electricity 12p to 727p. National Grid also failed to generate much enthusiasm, at least until towards the close. At one time the shares were down 5.5p to a new low.

Fears Professor Stephen Littlechild, the industry regulator, will today produce tough new controls did the damage. But then some investors took the view the fall had been overdone and the shares ended with a 1p gain at 175.5p.

British Gas fell 4p to 198.5p although Ofgas proposals, due later this week, are expected to be much less draconian than at one time seemed likely.

Takeover talk returned to lift Pearson 13p to 660p and J Sainsbury's US ambitions and its increased UK market share produced a 4p gain to 399p. New issue Somerfield gave up 2p to 157p.

Grand Metropolitan, 5.5p firmer at 456p, edged towards its year's high. The shares were awakened by the Guinness takeover fiasco which appears to have concentrated attention on the vulnerability of the food and drink group. There have long been rumours of a leveraged bid; if one should appear it could prompt the food and drink demerger Grandmet admits that it has considered.

After a long, ragged reverse Antonov, the gearbox designer moved into higher gear on talk of an investment presentation. The shares rose 15p to 65p. Scott Pickford, a maker of materials testing machinery, had the distinction of producing the opposite of a profit warning; results, it said, would be better than expected. The shares scored the day's best gain, up 36 per cent to 45p. Chemical Design made an impressive AIM debut. Placed by stockbroker Durlacher at 110p, the shares closed at 133p.

Emess, the lighting and fire protection group, firmed to 34p following a 9 per cent trading profit gain and a move to remove the drag of the group's preference shares.

Full redemption of the preference, issued to fund acquisitions in 1988, would cost pounds 60m. The group has made them irredeemable and lowered the conversion from 128p to 55p; the price gained 5.25p to 80.5p.

Yorkshire Foods produced an after-hours statement saying it knew of no reason for a 7p gain to 72p. And to rub salt into the buying it forecast lower second-half profits.

TAKING STOCK

Tom Cobleigh, the pubs chain where the big shareholder is looking for the exit, gained 15p to 223p. European Acquisition Capital, which backed the group when it was launched, has appointed Hambros to handle the sale of its 50 per cent interest. A trade sale or a placing among institutions are the options being considered.

SkyNet, the Ofex wonder share, has postponed its move to AIM, due this week, as the Securities and Futures Authority probes, in an "informal review", dealings in its shares. After June's introduction the price surged from 27.5p to 275p. There has been comment about possible share sales and the ownership of the group's vehicle tracking system has been questioned. SkyNet had planned to raise pounds 2m in a 250p placing.