Market Report: Worries over special costs short-circuit Dixons shares

THE PLUG was pulled on the shares of Dixons, the electrical retailing chain, as the stock market fussed about year's figures, due to be presented today.

In occasionally brisk trading they fell 5p to 170p, lowest for more than three years.

Although underlying trading may not be as depressing as some fear, it is the array of special costs that has unsettled sentiment.

It is expected that the disposal of the troublesome US retailing operation could produce a pounds 215m exceptional, the Currys closure programme pounds 20m and the shift of head office from Ealing, London, to Hemel Hempstead, Herts, a further pounds 3m.

Against such wounds trading profits will be overwhelmed. There are suggestions they will be down to pounds 62m from pounds 79.5m. But John Richards and Sean Eddie at NatWest Securities are looking for pounds 76m followed by pounds 95m.

The Dixons worries extend beyond today's results. The Office of Fair Trading is examining extended warranties on electrical goods which, some analysts claim, represent as much as 75 per cent of profits.

The shares were riding above 300p when Dixons bid unsuccessfully for Kingfisher in 1986. They peaked at 418p before the 1987 crash.

The rest of the stock market was dragged out of the doldrums by a firm New York opening. At one time the FT-SE 100 index was down 25.1 points, but by the close the fall had been cut to 5.4 at 2,965.

The supporting FT-SE 250 index closed in positive territory, reversing the Footsie with a 5.4 gain to 3,435.8.

Indications that Germany was reluctant to come to the aid of the dollar at the Group of Seven meeting dampened hopes that the Bundesbank would lower interest rates tomorrow.

German bunds fell sharply and early half-point gains by government stocks were wiped out as trading became subdued. With the Federal Open Markets Committee pondering whether to lift US rates, Monday's dream of Germany offsetting a US increase vanished.

Investment meetings were a feature. Allied-Lyons rose 4p to 549p after it told analysts it looked for retail growth of 7 per cent. Airtours, the holidays group, slipped 2p to 450p following a presentation.

A visit by NatWest to the Kwik Save food retailing group also drew a negative response. NatWest was said to have turned cautious, leaving the shares 17p down at 544p.

J Sainsbury dipped 4p to 402p. UBS was said to be negative ahead of today's shareholders' meeting.

But RMC continued to score from profit upgradings, up 15p at 878p. T&N, the vehicle components group, improved 7p to 231p. Hoare Govett was said to have lifted its forecasts from pounds 87m to pounds 92m and from pounds 105m to pounds 122m.

Camas, hived off from English China Clays, rose 5p to 77p on SG Warburg support.

Among insurances Commercial Union was firm, up 18p to 536p on reports that it was ready to scale down its near pounds 1.5bn bid for Group Victoire, the French insurer. On the life pitch Britannic gained 21p to 407p and Refuge 9p to 280p.

British Airways climbed 12p to 392p following a sharp improvement in first-quarter passenger traffic, particularly at the more lucrative premium end of the business.

South African shares were ruffled by the surprise announcement that Derek Keys planned to quit as Finance Minister. Minorco fell 30p to 1,325p.

Pittencrief, the oil group demerged from its US communications operation, attracted attention. There was talk that following the split it looked vulnerable to a bid. The shares rose 3p to 104p.

Coda, the computer group, continued to suffer from Monday's disappointing figures. The shares lost 18p to 150p, making a 72p fall over the two days.

Motor distributors had an attack of nerves following European Motors' disclosure that it planned to raise up to pounds 20m for an acquisition. Its shares reversed 11p to 123p, dragging Cowie 10p lower to 249p and Quicks 4p to 165p.

Minmet held at 5.5p. The Irish resources group placed shares at 5p, raising pounds 200,000. The cash will be used for Russian gold exploration.

A 23 per cent stake has been taken in Gulf Exploration, once a quoted US group. The Russian interests will be pumped into Gulf, which is expected to regain a US listing.

The FT-SE 100 index fell 5.4 points to 2,965 and the supporting FT-SE 250 index rose 5.4 to 3,435.8. Turnover was 481.5 million shares with only 19,496 bargains. The account ends on 15 July with settlement on 25 July.

Bill Heiligbrodt, president of Service Corporation International, is preparing to fly in from Texas to try to revive the comatose pounds 87m takeover bid for Great Southern, one of the UK's leading funeral companies. Great Southern's defence document dismisses the 600p-a-share bid as totally inadequate. The market anticipates a higher offer with the shares standing at 605p.

Apollo Metals is likely to feel the pinch this year and profits could be down to pounds 530,000 from pounds 1m. But, with aluminium up 40 per cent since November and Apollo's German operation likely to improve, Charles Mathias of Credit Lyonnais Laing thinks the shares are a buy. He believes the dividend will be held at 3.6p and profits will recover to pounds 1.8m next year. The shares are 93p.

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