Market Report: Investors fasten belts for British Airways results

BRITISH AIRWAYS encountered yet more turbulence yesterday as the stock market braced itself for what could be a depressing set of third-quarter figures today.

After the traumatic Virgin dirty tricks debacle and the saga of its relationship with USAir, BA could face the indignity of announcing a loss.

Although it is agreed that BA will achieve a year's profit, there is some divergence about the third-quarter results. Some believe it will manage a pounds 20m profit; others opt for a pounds 20m loss.

Sterling's devaluation in September, which has produced joy in many quarters, was a blow to BA. It had sold forward non- sterling ticket revenues at unfavourable rates, although operating costs increased. With a first-time consolidation of the Dan-Air loss, possibly pounds 22m, and the industry still plagued by over-capacity, it is not difficult to produce bearish forecasts.

But sterling's float should progressively benefit the 'world's favourite airline'. NatWest Securities says that next year should see the turn. 'From then on profits progress will be swift,' it believes. For the year ending next month the market is looking for profits of pounds 230m, down from pounds 285m. But then the predicted revival should lift figures to, perhaps, pounds 350m.

The shares, in brisk trading, closed 4p lower at 279p.

The rest of the stock market had an uncertain session, unable to draw inspiration from currency or political developments and denied its last-resort indicator with New York closed.

Lower interest rate hopes continued to provide a little support but the worry that yet another large rights issue would hit the market this week was a restraining influence. In, by recent standards, quiet trading the FT-SE 100 index edged ahead 2.9 points to 2,845.9. Second-line and fringe shares attracted more attention, with the FT-SE 250 index gaining 16.2 to 3,022.5.

MB-Caradon, the building materials and security group, created interest when it laid to rest a persistent market rumour by disclosing plans to sell its 25.3 per cent stake in CarnaudMetalbox.

The thought of a cash inflow immediately prompted speculation about a takeover assault. Norcros, the building materials group, became a candidate, gaining 8p to 150p, Others in the frame included Hepworth, up 11p to 347p, the brick maker Ibstock Johnsen, unchanged at 49p, and Marley, 4p higher at 113p. After an early gain MB ended unchanged at 310p; CarnaudMetalbox was 62p higher at 2,675p.

Lonrho also had a firm session, reflecting weekend publicity about the new management twosome. The shares held at 87p although Fidelity, the hyperactive US investment house, appears to have ignored the temptation of the recent rights issue.

But the involvement of the German Dieter Bock is said to have created much interest, and some believe he could provoke a Continental buying spree.

Lloyds Bank, ex a 12.5p dividend, fell 21p to 513p as analysts wrestled with its post-profits meeting. Barclays, on strengthening thoughts that its results will not be as poor as some predict, rose another 12p to 447p.

Union Discount edged ahead 6p to 105p. Some expect the long-signalled bid to appear this week. There is talk of a 130p-a- share offer, probably from an overseas group.

BET, the business services group, closed 5.5p higher at 103p. The pounds 39m sale of three businesses appeared to outweigh a profit downgrading by Barclays de Zoete Wedd, which cut from pounds 84m to pounds 73m and from pounds 120m to pounds 110m.

Unigate, reflecting its latest takeover and the planned flotation of its US restaurant operation, gained a further 15p to 357p.

The overnight strength of the Hong Kong market helped related shares. Cable & Wireless added 14p to 733p; HSBC, the banking group, 8p to 598p and Inchcape 14p to 578p.

The mechanical engineer Norman Hay jumped 10p to 36p, reflecting the arrival in the boardroom of the former merchant banker Roger Seelig; Ossory Estates, on reshaping hopes, advanced 1.5p to 7.5p.

Geest, following the finalisation of the EC banana agreement and talk of a Cazenove buy recommendation, jumped 26p to 419p.

Among the oil tiddlers Kingston Oil & Gas rose 5p to 53p. After the market closed the company said it was involved in talks that could lead to a bid. But last year's results were below expectations and any offer was 'unlikely to be at a level significantly above' 48p.

The account started on a quiet note with the FT-SE 100 index, after scoring an 11.7-point gain, settling for a 2.9 advance to 2,845.9. The FT-SE 250 index

was up 16.2 to 3,022.5. Share turnover dropped below recent levels - 516.2 million with 31,097 bargains. Government stocks were firm

LBMS, a computer group once called Learmonth Burchett Management Systems, jumped 55p to 249p as NatWest Securities said the shares were 'deeply undervalued and could double' in the next year. NatWest described the company as a 'genuine leader in the Case software tools market allied with some of the most powerful forces in the computer services industry'.

Shield Group, taking in the Stickley & Kent estate agency, has made a modest killing with the mortgage lender National Home Loans Holdings. It picked up 1 million shares at 1.25p. NHLH has been firm on recovery hopes. It rose a further 1.25p yesterday to 9.75p, highest for more than a year. S&K specialises in repossessed properties. Shield rose 0.5p to 8p.

Castle Mill International, a deeply troubled clothing and giftware group, rose 2.75p to 8.5p as talk of a revamping exercise grew louder. Brian Rousell, who runs a nightclub at Yeovil but has a property and transport background, is expected to put proposals to the CMI board this week. He has picked up a 4.2 per cent interest and has options over a further 5.16 per cent.