MARKET REPORT: Cape's crusade burns investors
21:03 GMT, 25 May 2012
Stop me if you’ve heard this one before. An industrial services firm issues a profit warning after taking a charge on delayed contracts in a foreign country.
Sound familiar It will to investors in Lamprell, which lost more than 60 per cent of its value last week when it told just such a sob story.
This time it was Cape, which tumbled nearly 37 per cent as its own very similar tale of woe sent owners of the stock heading for the exit door in their droves.
It all hinges on a contract awarded to Cape in 2010 by the snappily-titled Snamprogetti Chiyoda s.a.s. di Saipem for the provision of insulation work on the Sonatrach GL3-Z LNG Project in Algeria. Try saying all of that after a couple of Babychams.
The project has been beset by delays and an internal review has determined that it is ‘projected to produce a significant loss’.
Cape says it is doing all it can to turn things around, but still expects to take a 14m one-off hit in its interim results.
It didn’t take quite the shellacking that the markets gave poor old Lamprell (down 1.8p at 102.4p), but came down a hefty 118.5p to finish at 205p.
A brief respite in the wailing and gnashing of teeth emerging from euroland came to the aid of the Footsie. Italian premier Mario Monti inspires rather more confidence than his swashbuckling predecessor Silvio Berlusconi. He said Greece will probably remain in the eurozone, adding that he expects eurozone bonds to appear before very long.
There was some further support from the German consumer, who is loosening his belt a touch according to fresh confidence surveys.
It was certainly no repeat of Thursday’s powerful fightback from the falls that have characterised the not-so-merry month of May. But the blue-chip index did manage a meagre 1.48 points rise to close at 5351.53. In New York, where Wall Street’s hotshots are looking forward to a long holiday weekend with no Monday trading, the Dow Jones slunk down 19.9 points to 12,509 by lunchtime.
Buyers saluted the tricorn hat of Admiral Group, which led the way among the FTSE’s top brass. Up it sailed, gaining 32p to 1116p, as stock pickers were encouraged by some bullish analysis from accountants Deloitte.
They reckon the British motor insurance business is on course for its first underwriting profit in 18 years, as the gap between payouts and premium income narrows. Fellow insurer Aviva, in the hunt for a chief executive after the Shareholder Spring forced the abdication of Andrew Moss, was doing nearly as well early in the session. It was helped by a note from Exane BNP Paribas, which reckons that the stock is ‘too cheap’.
The French bank’s analysts say Aviva’s new boss, whoever that may be, should float its ‘growth operations’ such as Poland. Food for thought.
But along came Canaccord Genuity to spoil the party, cutting its target price from 410p to 320p. That was enough to burst Aviva’s bubble and after soaring 4 per cent early on, it finished up a rather less exciting 0.4p at 268.4p.
Terry Duddy, the boss of beleaguered Argos-owner Home Retail Group, was granted company stock worth 2m as part of the firm’s long term incentive scheme. The chief executive was one of four executives who shared a 5.6m stock pot, which will pay out in 2015 if the group hits performance targets. Shares, which have lost 64 per cent of their value in the last 12 months, rose 1.75p higher to 77.15p. After all, it’s always nice when the boss puts his money where his mouth is.
If punters aren’t waiting for their telly in the queue at Argos, they might well be down the road at Dixons Retail Group. It was going gangbusters early in the day, climbing 7 per cent after announcing it had secured a new 300m lending facility, expiring in 2015 and replacing one due for repayment next year.
But like an old TV screen, fading to black by way of blue, green and most of all red, it finished the day down 0.26p to 13.99p as realists pointed out that things just aren’t that pretty on the high street.
The losers list was dominated by banks, as Spanish lender Bankia looked set to go cap in hand to the cash-strapped Spanish government for an even bigger bailout.
Lloyds finished bottom of the pack, losing 1.11p to 25.8p, while RBS shed 0.57p to 20.87p and Barclays came down 3.6p to 181.7p.
Miners weren’t in great form either, but the most interesting movement was with Xstrata, in the midst of the long road to a merger with the fine upstanding folk at Glencore. Liberum Capital said it doesn’t hold out much hope of Glencore improving the terms of its merger offer, nor does it think shareholders would be better off going it alone.
Xstrata dipped 22.4p to 912.6p, while Glencore finished 5.35p easier at 340.65p.
Yell Group’s decision to rebrand itself as Hibu has to be the worst name change since funk god Prince changed his name to a squiggle.
No rebranding exercise was going to cover up its Himalayan loss reported this week, and keen observers were left scratching their heads by the company’s own admission that the new name doesn’t really mean anything.
Now Moody’s has downgraded its credit rating from Caa2 to Caa3. That was enough for a 12 per cent fall, down 0.24p to 1.75p.
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