Buy-back bonanza for three firms' investors

IT WAS a bumper day for shareholders yesterday as three companies announced substantial share buy-backs. WH Smith led the way with plans for a pounds 250m capital return following the completion of the pounds 300m sale of Waterstone's to HMV Media. Burmah Castrol, the lubricants group, also showered its shareholders with pounds 250m. Separately Ascot, the engineering mini conglomerate, announced a pounds 50m share buy-back.

Shareholders in WH Smith will receive 53.75p per share, representing a return of 10 per cent of the company's market value, or pounds 150m. The buy- back will be effected via the issue and buy-back of B shares. At the same time where will be a consolidation of the company's share capital on the basis of nine new ordinary shares for every 10 currently held. The remainder of the capital return will be conducted though market purchase of around pounds 100m.

The size of Smith's cash return was in line with analysts' expectations and the City drew additional comfort from the company's comments that it would consider further buy-backs. These will depend on the outcome of negotiations with Virgin over the sale of Smith's 75 per cent stake in the Virgin-Our Price music group.

"We will sell to Virgin if they are prepared to pay us a sensible price for the business," said Richard Handover, Smith's chief executive. "But we're in no great rush to do it." Smith's has an option to buy the remainder of the business next year.

He said there were no plans for further corporate activity. "We're just in the process of buying John Menzies and we have a lot of work to do on the existing business." Smiths shares edged up 5p to 542.5p.

Burmah Castrol plans to return not less than pounds 250m of capital to shareholders although these plans are not expected to be executed until after April 1999. The company intends to seek shareholder approval at this year's annual general meeting to buy back up to 10 per cent of its share capital. Management will renew this power annually.

But the company is likely to wait until ACT is abolished in the spring of next year before moving ahead as this would be more tax efficient and "serve shareholders' best interests".

Tim Stevenson, the new chief executive, said the eventual figure could be higher than pounds 250m. It is part of a strategy of balance sheet management under which the company will also redeem its small number of preference shares.

Burmah shares soared 69p to 1170p on the buyback plans plus better than expected pre-tax profits which were 7 per cent ahead at pounds 279m.

Shares in Ascot Holdings, the engineering group run by Hamley's chairman Howard Dyer, climbed on news that the company is returning pounds 50m to shareholders, worth around 61p per share. Ascot is seeking shareholder approval for the re-purchase of up to 10 per cent of its stock.

Mr Dyer said that trading results in the first two months of the year were ahead of 1997's and that substantial funds were being committed to organic growth. The shares rose 31.5p to 296.5p. Profits last year rose from pounds 6m to pounds 30m.