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Yell drops 18% after warning on outlook and banking covenants, renames itself Hibu

admin — Tue, 22 May 2012 15:47:53 +0000

Directories group says move to digital products slower than expected and risk of not meeting covenants

Debt-laden directories group Yell has dropped around 18% after it warned its attempted shift towards digital products was not moving ahead fast enough, and it may not meet its banking covenants this year.

Full year revenues fell 14% to £1.6bn with print sales down 21%, with earnings down £47m to £461m. The company said:

Yell has not progressed as fast as it would like in bringing new products to market, with the sheer scale and logistics of the task stretching its nascent teams.

The group has debts of around £2bn and agreed a relaxation of its covenants to allow its new strategy time to succeed. Now it has hired Goldman Sachs and Greenhill “to put in place a new capital structure” ahead of its debt maturing in 2014. But it warned:

As a consequence of increasingly difficult trading conditions and a greater proportion of future income expected to come from as yet unproven new strategies, there is a higher risk in the current year than in the previous year that the group would not be able to meet its financial covenants with its lenders.

The news has sent Yell’s shares down 0.56p to just 2.6p.

And after five months it has come up with a new brand “to help customers and consumers find, and identify with, its new products.” That brand is “Hibu” – whatever that means – and the company will also use that name, although it also says its print products will continue to use their existing names. Gareth Davies at Numis has a reduce recommendation on the business:

Headline numbers are fine, but outlook statement on covenants is a concern. The equity, in our view, is just not worth the risk given current macro fears, potential difficulties in refinance and the structural challenges faced by the business. For those looking for a highly geared bombed out recovery play our preferences would be Trinity Mirror over Johnston Press and Yell.

Yell

Nick Fletcher

FTSE rises cautiously with all eyes on what Europe will do next

admin — Tue, 22 May 2012 15:47:52 +0000

European markets split with French CAC and German DAX up but Spanish IBEX and Italian FTSE MIB down

The panic of last week, which sent the FTSE 100 down to a five-month low, was replaced by caution and intrigue today as the stock market of leading shares closed up 36 points at 5304.

The G8 leaders’ call for Greece to stay in the eurozone soothed fears of the country’s imminent exit and appears to have steadied the market – albeit temporarily.

The problems are far from over and the reaction from the markets to this Wednesday’s meeting of leaders in Brussels will be one to watch.

The German DAX and French CAC were both up 59 and 19 points respectively, at 6331 and 3027, while the Spanish IBEX and Italian FTSE MIB both dropped slightly – 42 points and 36 points respectively to 6524 and 13012.

With a lull in the political arena it was left to India-focused mining company Vedanta Resources to steal top place of the biggest risers on the FTSE 100.

The company’s shares were up 49.5p to £10.05, a rise of 5.16%, thanks to a jump in copper prices.

But precious metals suffered in equal measure, leaving miner Fresnillo the biggest faller, dropping 39p to £13.44, a fall of 2.9%. Randgold was also affected, dropping in early trading, to recover and close up 39p, or 0.8%, at £48.39.

Gold and silver prices both fell, with traders waiting to see where the eurozone lurches next, although polls are now suggesting pro-austerity parties could get enough votes for a coalition in Greece’s newest election on June 17.

Other strong performers in the FTSE 100 included Man Group, closing up 3.5p, or 4.7%, at 78.4p, following its purchase of investment group Financial Risk Management.

While banks Royal Bank of Scotland (up 0.8p, or 4%, to 20.3p) and Standard Chartered (up 42p, or 3.3%, to £13.14) were both strong risers.

It is worth remembering the taxpayer-controlled RBS did suffer badly last week though.

In the FTSE 250 the biggest riser was Heritage Oil, up 9.5p, or 8.25%, to 124.25p, with biggest faller Waitrose food delivery firm Ocado losing 6.7% of its value to close at 103.6p.

The company is expected to suffer when Waitrose introduces its own in-house delivery service.

There was little in the way of announcements, but Rolls-Royce Group (down 3.5p, 0.4%, at 804p) did say it has won a $136m contract to supply Dolphin Energy to transport natural gas from Qatar to the UAE and Oman, in one of the biggest cross border projects in the region.

Barclays (up 3.9p, 2.2%, at 179p) also revealed its plans to sell its $6.1bn stake in BlackRock, which the US asset manager said would see it buyback $1bn of its own stock.

Tomorrow, Vodafone Group – one of the FTSE’s biggest firms – announce their final results and analysts will be looking out for any update on the phone giant’s £1bn bid for Cable & Wireless Worldwide.

Simon Neville

Homeserve slumps by a quarter as FSA probes possible mis-selling

admin — Tue, 22 May 2012 15:47:52 +0000

Repairs and insurance group plans to cut back UK operations after recent problems with customer service

Homeserve is being investigated by the UK financial regulator over possible mis-selling, the repairs and insurance group has confirmed, sending its shares down by nearly a quarter.

The company suspended its UK telesales operations after failures in marketing and complaints handling, leading to a management reshuffle and a decision to cut back its UK business.

Homeserve said it had taken longer than expected to restart telesales, and admitted the Financial Services Authority is investigating its past performance. This could take several months to complete.

Meanwhile it reported an 8% rise in underlying profits to £126m, but a 9% fall in UK customer numbers. It plans a smaller, more focused business in the UK, while developing its overseas operations.

Confirmation of the FSA probe has sent its shares tumbling 53p to 174.4p. Analyst David Brockton at Espirito Santo said:

HomeServe’s full year profit is 1% below our forecast, which represents the relative good news in an otherwise negative update. The statement confirms for the first time that the FSA intends to investigate past issues, raising the likelihood of a fine. We understand the FSA investigation will centre on HomeServe’s governance, controls and processes.

Customer numbers are also expected to fall 2.2-2.4m during 2013 on stable retention, implying a material downgrade to our 2014 forecasts of around 20%. These results will ensure the perceived risk profile remains high and do not rebuild credibility in the investment case.

Henry Carver at Peel Hunt issued a sell note, saying:

The 2012 numbers are ahead, but plans to downsize the UK business means we expect to downgrade our 2014 pretax profit estimate by around 25%. Also, an investigation into historical activities by the FSA is about to begin, for which the scope has not yet been finalised. The international business is progressing well, but there is clearly still a long way to go before the UK business stabilises. We are placing our price target under review and maintain our sell recommendation.

Homeserve

Nick Fletcher

Mining shares boost FTSE 100 on hopes of Chinese growth

admin — Tue, 22 May 2012 15:47:52 +0000

Leading commodities consumer reportedly brings forward infrastructure projects to boost economy

Leading shares are moving higher as eurozone politicians jostle for position ahead of Wednesday’s key EU summit, but positive news from China has lifted mining shares.

Rio Tinto is the biggest riser in the FTSE 100, up 101p at £29.24 after reports suggested China will accelerate infrastructure spending to help boost its slowing economy. The government has asked for project proposals by the end of June, said the China Securities Journal, including those initially intended for the end of the year.

Other miners also benefited from the news, with Antofagasta adding 31p to £10.61 and Xstrata up 23.6p at 966.6p. Indonesian-focused Bumi is 54.1p better at 437.1p after Barclays began coverage with an overweight rating and 565p price target. The bank said issues about debt and political change were improving, and Bumi was now at a turning point:

We believe that under new management the company can continue to ease its debt burden, push through a strong expansion scheme and improve corporate governance.

Overall the FTSE 100 is up 26.27 points at 5330.75, helped by better than expected UK inflation figures. But downbeat comments from the OECD and IMF regarding the economic effects of the eurozone crisis mean the index has come off its best levels.

Man‘s share price boost from Monday’s announcement of the purchase of investment firm FRM did not last long. It is now down 1.8p at 77p after JP Morgan Cazenove cut its price target from 100p to 85p. Bank of America Merrill Lynch, however, has stuck with its buy rating on the hedge fund group albeit the bank has edged down its target from 230p to 220p.

But Marks & Spencer is up 0.3p at 338.5p despite a 1% drop in underlying annual profits.

Nick Fletcher

Markets fail to react to G8 leaders’ call for growth

admin — Tue, 22 May 2012 15:47:51 +0000

• A muted opening to the FTSE sees the uncertaintly remain over the Greek crisis
• Man Group top of the early risers are agreeing to buy rival Financial Risk Management

G8 leaders will be no doubt disappointed with the markets’ reaction to their weekend attempts to avoid the continued gloom hanging over Europe.

The heads of the most powerful countries in the world said they have a desire for growth and want to keep Greece in the eurozone, although how that will happen remains to be seen.

In response the markets did, well, very little really, staying almost flat.

One glimmer of hope was the the FTSE 100, which after five consecutive days of falling, started the morning up 21 points, or 0.4%, at 5288.

The German DAX was also slightly up, 9 points, at 6281, as was France’s CAC up 10 at 3018.

But Spain and Italy’s indexes both continued to dip. The Spanish IBEX was down 35 points, or 0.5%, at 6531, while the Italian FTSE MIB dropped 82 points at 12973.

The continued belief is until the Greek crisis has been concluded, there will be little in the way of good news coming from the markets.

There was some respite on the FX market for the euro, which had been trading at a four-month low against the dollar, after speculators cut some of their bearish positions, which had seen short positions against the euro climb to the highest levels on record.

It led to stirling hitting a two-week low against the euro today, £1 is now worth €1.27, as IMM positioning data showed net euro short positions fell.

Lauren Rosborough, senior FX strategist at Societe Generale explained: “It looks like the euro is consolidating to some extent.

“If we get some form of contagion [in the eurozone] sterling will benefit from that relative to Europe, but the UK economy will also be affected. It’s a bit of a double-edged sword.”

Sterling has rallied against the euro in recent weeks with the pound seen as a potential safe-haven, but this could be knocked later this week when the Bank of England release the minutes from its latest policy meeting, which could reveal an appetite for more quantitative easing.

On the FTSE 100, the biggest early riser was listed hedge fund manager Man group, which was up 6.6% to 80.3p a share at 10am.

The jump came after the company said it is set to buy hedge fund research specialist Financial Risk Management (FRM).

The deal will see FRM integrated into Man’s existing multi-manager business, giving it a combined business with £12bn in assets under management.

The FRM brand will be kept, with current MD Luke Ellis made chief executive of Man Multi-Manager.

The deal will be completed by Q3, and will cost Man up to $82.8m in cash, depending on FRM retaining its current asset levels. Man also get 47.5% of FRM’s performance fees over the next three years as part of the deal.

Peter Clarke, Man Group chief executive, said: “This transaction provides us with the opportunity to significantly improve the profitability of our multi-manager business. By combining the complementary investor bases of the two businesses and pairing FRM’s well regarded investment process with Man’s managed accounts infrastructure, we can increase revenues with no material change to Man’s current cost base.”

However, it is worth remembering it has been a tough year for Man, who have lost two-thirds of their value in the last year.

The other biggest early risers were mining group Vedanta Resources, up 5.7% to £10.13 a share, followed by Royal Bank of Scotland up 3.6% to 20.7p.

Of the biggest fallers, Tesco headed the pile, but only dipping 1.1% to 310p and, unlike the previous week, none of the top ten biggest morning fallers included any banks.

Overall the outlook is still far from rosy.

James Hyerczyk, analyst at Autochartist, said: “Although value-based investors may be looking for an opportunity to re-enter or add to established positions, the downside momentum has been too strong to stop the price slide.

“As long as there is relentless selling pressure, the index may move lower to test the November bottom at 5,075.20 before garnering strong enough buying to turn the tide.”

Chris Weston, institutional trader at IG Markets, said: “The world is bereft of good news and perhaps the most optimistic thing the bulls can cling onto right now is new polls are predicting that pro-bailout party New Democracy would get 23% of the votes [in the Greek General Election].”

It would seem the G8 have brought themselves the slightest of breathers, but investors remain weary following a statement that was strong on sentiment but short on solutions.

Simon Neville

Pursuit Dynamics’ Gamble fails to pay off as P&G pull out of exclusive deal sending shares crashing

admin — Tue, 22 May 2012 15:47:51 +0000

• Technology firm’s shares down 78%
• Trading at £7.32 a share just 18 months earlier
• Revenues to be “materially below” expectations, company says

Shares in technology firm Pursuit Dynamics have been some of the most volatile on the stock market in the last 18 months.

But it seems the tug-of-war between the bears and the brokers has finally been won by the former, as shares slumped to just 15.5p – down a staggering 78% by lunchtime.

Just remember, this was a company trading at £7.32 a share in December 2010, with Mirabaud Securities, its broker, suggesting a target price of £21.

This morning the company finally confirmed an exclusive deal to provide its cost-saving technology to Procter and Gamble had fallen through.

The business said it now expects revenues for the year to be “materially below” expectations, and is likely to make those predictions even clearer when it announces its half-year results on Thursday.

It added: “The company has been undertaking a strategic review of the business and in light of the P&G decision the review will be accelerated to allow an update to be provided by the end of June 2012.”

Its comes just days after the company put out a stock market announcement on Friday calling for calm after shares started to fall on fears the P&G deal was under pressure.

Even members of the board tried to reassure the markets, albeit minimally.

Chief finance officer Richard Webster trebled his stake, buying 10,000 shares in March for 83.7p each. He made a loss today of £6,820.

Chief executive Jeremy Pelczer also lost £10,350 this morning – he bought 15,000 shares in February at 84.5p a pop.

“The loss of Procter & Gamble today is a significant blow for them,” said Paul Kavanagh, chairman at Killick Capital.

“They’ve got a tough job in the next few weeks in establishing with their lead investors as to what the right route for the business going forward is and whether there is sufficient in the technology to push shareholder patience further.”

The trouble started for Pursuit Dynamics (PDX) in November 2010, when the firm, which makes processing technology that helps businesses save money, announced a possible linkup with Procter and Gamble, the world’s largest household products company.

The trial to see if PDX’s product could reduce energy consumption would demonstrate the “substantial value and impact” of the technology, according to then CEO Roel Pieper.

However, by March 2011, several bears, led by outspoken trader Simon Cawkwell – aka Evil Knievil – piled in against the firm, declaring it worthless.

This started a war of words, with shares rising and falling appropriately, until last December, which saw the company announce its annual results.

It saw annual losses increase to £15.3m to the year end in September, compared with £8.7m in 2010. It was the fifth year of losses in a row and a hefty licensing fee from P&G was factored into its forecasts.

The poor results, which also revealed the P&G deal would be delayed, led to chief executive Roel Pieper to resign.

A rights issue earlier this year raised £1m, as shares were sold for 100p, despite the company hoping to raise £9.4m. By comparison, PDX raised £8m in a similar rights issue a year earlier, but at £2.50 a share.

Roel Pieper earned the nickname Jam during his time at PDX for always promising “jam tomorrow”. Some are now suggesting PDX may very soon meet a sticky end.

Simon Neville

New York markets follow cautious lead from Europe with Dow Jones up

admin — Tue, 22 May 2012 15:47:51 +0000

• All eyes on Facebook shares heading into freefall
• Nasdaq boss admits he is “embarrased” by Friday glitches

Wall Street opened in much the same way as Europe, with traders seemingly unconvinced, yet curious, with the G8 leaders declaration they want Greece to stay in the eurozone.

After suffering from its worst weekly decline for a year, the Dow Jones industrial average was up 29.71 points, or 0.24%, to 12,399.09. The Standard & Poor’s 500 Index added 2.73 points to 1,297.95.

The biggest excitement stateside came on the Nasdaq, where its newest listed company Facebook continued to falter following the razzmatazz of its IPO on Friday.

Shares plunged more than 13% to $33.12 in early trading. By comparison, rival social network LinkedIn saw its shares jump 109% after its IPO.

The suggestion goes that Facebook’s brokers (Morgan Stanley et al) bid to keep the price from dropping below $38 but the high-priced bidding could not be sustained.

The Facebook floatation wasn’t helped by the 30 minute glitch, which delayed the start of trading in the company on Friday. The shambles led to Nasdaq’s chief executive Bob Greifeld admitting yesterday he was “embarrassed” by the stock exchange’s problems.

Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey, summed up the mood among traders.

He said: “It was just a poorly done deal and it just so happens to be the biggest deal ever for Nasdaq and they pooched it, that’s the bottom line here.”

Elsewhere, rival Yahoo saw its shares drop 1% to $15.28 after rising in premarket trading.

The rises were on the back of Chinese internet entrepreneur Jack Ma buying back up to half of the 40% stake in his Alibaba Group from Yahoo for $7.1bn.

It is welcome news for Yahoo, which has had its own problems of late, including the resignation of CEO Scott Thompson after he admitted he lied on his CV.

The former boss also stepped down from the board of data-analysis provider Splunk today, completing a miserable few weeks for Thompson – he also left the board of another technology firm F5 Networks last week.

Simon Neville

British Land suffers from closure of Clinton Cards but London office rents continue to rise

admin — Tue, 22 May 2012 15:47:51 +0000

City rents up 2.5% as company’s portfolio rises to £15.8bn
Around 1% of British Land’s retail space now with administrators after Clinton’s collapse

British Land Company’s retail property portfolio only managed a minimal increase, thanks to the hits taken from the collapse of some of the High Street’s best known brands.

The property firm reported its assets are now worth £15.8bn, up from £15.7bn in the three months to the end of December.

There was a fall in retail values, with the fall of Peacocks, Game Group and Clinton Cards, but this was offset by gains in office developments.

With 0.6% of retailers in their premises in administration currently, this will nearly double to 1% because of the failure of Clinton’s.

Its London office portfolio saw rents increase 2.5%, and the company highlighted its strong relationships with major fashion retailers with Next, Marks & Spencer and H&M.

The company reported a 5.1% rise in annual underlying profits to £269 million, helped by a 5.4% overall growth in net rental income.

The company owns half of the Meadowhall shopping centre near Sheffield, as well as Drake Circus in Plymouth and around 90 retail parks.

Chief executive Chris Grigg said prospects were clouded by the outcome of the eurozone crisis but said key trends still favoured the business.

He added: “Given the ongoing shortage of quality space in both offices and retail, we believe there are further opportunities to create value and we are investing in expanding our future development pipeline.”

It has been a successful year for British Land, in November the company announced insurance broker Aon will be taking 191,000 sq ft on the lower 10 floors of its 47-floor Cheesegrater building – soon to be one of the latest new builds in the City.

The deal is for an average lease term of 19 years at £56.50 a square foot, with a 33-month rent-free period.

In the West End, Debenhams is taking 145,000 sq ft of office space at Regent’s Place at the northern end of Tottenham Court Road.

Shares were up 6.9p, or 1.4%, to 499.5p.

Simon Neville

Greece: Top 3 risks facing U.S.

admin — Tue, 22 May 2012 15:47:49 +0000

It’s not Greece that poses a problem for the United States. It’s the contagion that would spread if Greece exits the eurozone that would pose the greatest risks.

Facebook plunges 18% below IPO price

admin — Tue, 22 May 2012 15:47:49 +0000

Facebook continued to plunge as its stock dropped 8% at the start of trading Tuesday, then pulled back to a 3% loss by late morning.