Market Report: Next bounces back as directors buy up shares

STOCK markets are far from perfect. In the short term, they have a tendency to overreact. And when a company issues a profit warning, the share price normally falls further than it really should do.

At least, that's the usual complaint from the directors of the unfortunate company involved. (Though they never seem to make the same point when a piece of positive news lifts the shares more than they deserve.) Unfortunately, directors on the receiving end of a share price plunge are rarely brave enough to back up their words with deeds.

The same cannot be said of the directors of Next, however. The retailer, a former star of the sector, saw its market value reduced by a quarter when it issued a shock profit warning last week. In less than a month, the shares had fallen by almost a third.

Until yesterday, that is, when three directors dug into their pockets and bought some. And we're not talking small amounts. David Jones, the chief executive, splashed out what must be the best part of a year's salary on 100,000 shares at 5.50p. Directors Simon Wolfson and Andrew Varley followed suit, buying 130,000 and 15,136 shares, respectively. Next shares promptly rallied 15p to 550p.

The rise was one of the few blue spots in the FTSE 100, which generally drifted on weak markets in the Far East and the US as well as the strong pound. The Footsie ended the day down 27.4 points at 5911.9 and the mid- and small-cap indices also slipped back.

Another riser was National Power, reportedly attracting interest from US power groups after its recent profit warning. The generating firm's shares surged 27p to 612p.

GEC, up 12.5p to 464.5p, continued its recent rise on speculation that the defence electronics group is about to announce a far-reaching joint venture with Alenia, the Italian defence group.

Cement group Blue Circle got a busy reporting week for the building & construction sector off to the worst possible start with a disappointing set of full-year results. Last night, analysts were slashing back profit forecasts on worries about Blue Circle's exposure to economic turmoil in Malaysia and increasing price competition in Chile. The shares fell 25.75p to 366.75p. The gloom also bogged down rival cement groups RMC and Rugy, both of which report results later this week. RMC was 28p lighter at 975p while Rugby drifted 0.5p to 123p.

The construction group Hepworth, reporting results today, leapt 26p to 264p on reports it is about to become the subject of a bid from a German company.

Allen Vickery, chairman and chief executive of JBA, the enterprise software group which shocked the market with a profit warning last month, announced that he had bought 15,000 shares at 640p while US fund management group Janus revealed it has a 10.9 per cent stake. Nevertheless, the shares slipped 2.5p to a 12-month low of 615p.

Capital Radio danced to a new all-time high of 744p, up 19p, ahead of presentations to analysts on its restaurants division today. The shares have now recovered most of the losses caused by the acquisition of My Kinda Town, the pizza chain.

News that catalogue retailer GUS was likely to win its bid battle for Metromail, the US group, was poorly received by investors, who marked the shares down 30p to 742p.

A pounds 212m acquisition in the US helped TI, the engineer, to 523p, up 10p.

British Biotech slumped to a new two-year low of 67.75p, down 4p, as investors continued to worry about the outcome of clinical trials and the composition of the board.

Colt Telecom, the local loop operator whose shares have fallen from a 1630p peak in recent weeks, recovered some of those losses with the news it was buying a 1,000-kilometre fibre optic network in Amsterdam for pounds 41m. Colt is building similar networks in London, Paris and Frankfurt.

General Cable firmed 12.5p to 168p after major shareholder Generale Des Eaux agreed to a bid from rival cable operator Telewest, whose shares slipped 2p to 92.5p. Telewest's cash and shares offer values General Cable shares at almost 180p.

Shares in Xaar, controlling a revolutionary new printing technology, jumped 23.5p to 139.5p. The shares, floated at 110p last autumn, had drifted as low as 102.5p on worries that venture capital group 3i wanted to sell stock. Now that 3i has reduced its stake to 14.7 per cent, the overhang has cleared.

Taking Stock

INSURANCE broker Bradstock Group leapt 5p to 63.5p. The rise continues last week's jump, when heavy trading lifted the shares from their two- year low of 54p. Despite the company's protestations of ignorance, various investors remain convinced that a bid, pitched at about 80p a share, is in the offing. Hong Leong, a Malaysian group which is Bradstock's joint venture partner and has a 4.7 per cent stake, is touted as a possible buyer.

WILLIAM FITCH, chairman of nursing home minnow Tamaris, has shelled out pounds 6m for a 20 per cent stake in the company at 3p a share - a 0.75p premium to the market price, which was unchanged at 2.25p yesterday. The shares were bought from Singapore group Roseview, which had been planning a joint venture with Tamaris but decided to abandon the project after economic turmoil hit the region.