Market Report: Southern Electricity's buyback triggers a buzz

ANOTHER regional electricity group plans to indulge in a stock market buyback.

Southern Electricity, in a little-noticed statement, said it intended to buy in up to 10 per cent of its shares.

At yesterday's price of 576p, up 5.5p, a 10 per cent interest would cost about pounds 155m.

With profits likely to come under increasing pressure as the industry's regulator, Stephen Littlechild, seeks to reduce charges to the consumer, share-buying represents one way the cash-rich electricity groups can try to hand benefits to their shareholders.

Electricity shares have been hit recently by a leaked letter from Professor Littlechild that outlined his plans for curbing profits.

Before the letter, Eastern Electricity tried the buyback trick, and mounted a successful programme.

On a dull day Southern shares rose as the sector, still fretting about Professor Littlechild, gave more ground.

Elsewhere, drug shares, for long in the investment sick bay, perked up on the rash of US takeovers worth dollars 7.6bn. But the rest of the stock market was assailed by political worries. In subdued trading the FT-SE 100 index dipped below 3,100 points before rallying a little to settle 25.3 points down at 3,100 exactly.

Sentiment was unsettled by further wrangling among the Tories and the growing conviction that the party faces acute embarrassment at tomorrow's local poll and then at the European elections. Sterling wobbled on the foreign exchange market and government stocks suffered falls approaching two points.

Reflecting the surprise dollars 2.3bn SmithKline Beecham bid for Diversified Pharmaceuticals and the dollars 5.3bn offer by Roche of Switzerland for Syntex, the drugs sector was one of the few to make progress. What intrigued many observers was the valuation placed on the two US groups by SB and Roche, indicating, they believed, that drug shares had been oversold.

SB jumped 25.5p to 415p and Wellcome 23p to 547p. Zeneca rose 10p to 699p and Glaxo Holdings 11.5p to 588p. Even Chiroscience one of the year's new-issue flops, managed a 2p gain to 129p.

The shares, offered for sale at 150p, were helped by a statement that early tests indicated a wider use for its version of a local anaesthetic.

The hard-pressed London International Group was another to catch the bug, up 8p at 112p.

Banks were mostly lower. Standard Chartered, off 36p at 959p, had to contend with the added disadvantages of a weak Hong Kong market and its decision to put in receivers at Placeton, Peter de Savary's main company. HSBC dipped 27p to 679p.

Television shares were blurred by the Heinz food giant's decision to switch its promotion from television to direct marketing. Carlton Communications fell 6.5p to 902p and Granada 10p to 549p.

Reuters was busily traded with a 2.6 million share deal, thought to have been conducted by James Capel, unsettling the market. With London Wall Equities adopting a bearish stance, the shares fell 24.5p to 507p.

Rolls-Royce was ruffled by a denial that it had forecast a dividend increase. The shares fell 7.5p to 196p.

With hopes of an interest rate cut continuing to fade, interest- sensitive shares were friendless. Drinks, properties and stores wilted. Dixons fell 7p to 200p as Hoare Govett downgraded its forecast for the year just ended by pounds 4m to pounds 70m.

Oils ran into profit-taking ahead of tomorrow's first-quarter figures from British Petroleum, down 4p at 382p.

Lasmo drifted off 1.5p to 148p and bidder Enterprise Oil fell 6p to 410p. Salomon Brothers calculates the offer is worth 130p.

Manchester Utd had to be content with a 5p gain to 684p as it finally clinched the Premier championship.

Gerrard & National continued to advance on last week's figures and reorganisation, up 17p at 485p. Smith New Court, which recently opened an office in South Africa, put on 12p to 375p on the seemingly peaceful conclusion to the country's elections.

Arcon International advanced 3p to 53p as it received planning permission for an underground zinc-lead mine at Galmoy, County Kilkenny. The mine, for long in the melting pot, has a projected yearly output of zinc concentrate of 120,000 tonnes.

The FT-SE 100 index fell 25.3 points to 3,100 and the FT-SE 250 5.8 to 3,775.3. Turnover was 559.6 million shares with 24,633 bargains logged. The account ends on 13 May with settlement on 23 May. Gilts were weak.

Ambitious stores group Upton & Southern rose 2p to 32p as stockbroker Townsley forecast a swing into profits following the takeover of the Reject Shop chain. Analyst Richard Finch is looking for a pounds 3.8m loss in the 18 months to the end of July and profits of pounds 1.15m in the next year, followed by pounds 1.9m. He suggests buying while Upton is 'in transition and out of the limelight'.

IT was quite a day for CIA, the media buyer. Market-makers crashed the shares to 131p and then to 256p as confusion reigned about a share split. When it became clear it occurs on Thursday, the shares quickly went to 387p, unchanged. CIA announced it had formed a joint media agency with Gold Greenlees Trott and Kleinwort Benson gave a profit upgrading, to pounds 5.2m

Courtyard Leisure, the wine bar business, is thought to be in talks to clinch a big takeover. Its supporters must be hoping it has better luck than it had with two other attempted deals. Ali Safa, chairman, negotiated to buy operations linked with the impresario Harvey Goldsmith and the Aviemore sports centre in Scotland, but the deals collapsed. The shares held at 21p.

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