EMI hits lowest note for six years

EMI, the showbiz group, fell to its lowest for six years as the stock market expressed unease about the pounds 15m three months' loss at its HMV Media associate.

There are hopes that the business, created to combine WH Smith's Waterstone book shops with EMI's Dillons chain in an pounds 800m deal in March, will soon be fit enough for a share flotation. But although a cheerful spin was put on the loss the market was far from impressed and EMI fell 14p to 314p.

It has 42.5p per cent of HMV with venture capitalist Advent International also sitting on 42.5 per cent. Tim Waterstone, founder of the Waterstone chain, has the rest of the shares. The loss has been struck after pounds 17.3m of finance charges. Sales were up 2.4 per cent at pounds 242.1m.

The EMI turntable has produced a horrendous tune for EMI and its erstwhile partner, Thorn, since the 1996 summer-time demerger. It was agreed at the time that splitting the showbiz operations from the more mundane rental business of Thorn would unlock EMI's hidden value.

But it has been all downhill since the break up as EMI's music side has come under increasing pressure and Thorn, after a succession of gloomy tidings, slumped from a 400p high. It is now being relieved of its agony by an agreed takeover bid. At one time the shares were 138p; they are now 250.5p.

EMI's off key experience is partly due to the failure of the long mooted takeover bidder to appear. At the time of the split the shares were equal to 738p. Hopes of a bid from Seagram, the Canadian drinks giant with a thirst for showbiz, have provided the melody for an occasional rally but with the Canadians settling for Holland's PolyGram, EMI's remaining prop was removed in the summer and the shares have fallen from a spring-time 613p.

Shares had a relatively firm session with Footsie ending 48.3 points higher at 5,038.4; the return above 5,000, which has become a psychological level, brought comfort to some observers. Government stocks rose by more than half-a-point. In brisk trading the index swung from a 54.4 fall to a 62.3 gain with New York's firmness offering sufficient confidence for a late rally. Mid and small cap shares made modest headway.

Imperial Chemical Industries, already suffering profit downgradings, had another poor session, falling 50p to 430p. The latest buffeting followed the failure of the group's planned sale of its Crosfield unit in the US to WR Grace. ICI fixed up the deal to sell its silicon and chemical operation to Grace in April and last week chief executive Charles Miller Smith produced an upbeat speech on ICI's prospects in New York. There was surprise that the Grace break down should be announced so soon afterwards. Most City chemical analysts were yesterday flying from Spain after visiting a British Vita plant, up 3.5p at 212.5p.

Royal Bank of Scotland, still regarded as a Halifax target, jumped 41p to 710p. HSBC and Dresdner Kleinwort Benson upgraded their stances on the shares. Halifax firmed 6p to 787p. Banks were generally firm after Salomon Smith Barney made positive noises although Barclays dipped 38p to 1,017p.

Reuters, described as "ludicrously cheap" by Collins Stewart on Tuesday, was even cheaper as Merrill Lynch hit the information group. The shares fell 11.5p to 450p as the investment house issued a 12-month 400p target.

Smiths Industries topped the Footsie leader board with an 81.5p gain to 781.5p. British Aerospace, 28.5p higher at 425p, and Rolls-Royce, 14p higher at 219p, were pulled higher in the Smiths slipstream.

Cadbury Schweppes, the soft drinks and sweets group, hardened 26p to 800p ahead of an investment presentation next week. Worries about its US operations continue and there are hopes that the group will produce positive comments about its Dr Pepper and Seven-Up trans-Atlantic activities which, some feel, are still being hampered by its reliance on the bottling network of its arch rivals, Coca-Cola and PepsiCo.

Telecoms were strong with overseas buyers evident. BT dialled a 29p gain to 744p and Orange 40p to 510p.

Lonrho Africa lost 3.5p to 54p. It continues to oppose the Blakeney Management's attempts to put four directors on its board but blunted its message with a profits warning.

Panmure Gordon, in a review called Brewers' Droop due today, suggest switching out of Scottish & Newcastle, 5p stronger at 765p, into Bass, which has collapsed following a sober trading statement. Bass, off 10p at 668p, has been as high as 1,175p this year.

St. James, the insurance group, remained in demand, up 25.5p to 247p on Prudential Corporation bid hopes, and Close Brothers, the merchant bank, reflected director buying with a 38.5p advance go 439.5p. Arcadia, the retailer, rose 19p to 227p on HSBC support.

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