News Column

CORRECT: UK WINNERS & LOSERS: Tesco Underperforms

August 18, 2014

Jon Darby



(An item published at 1004 BST misstated the Nyota Minerals stake in KEFI Minerals. The correct version follows.)

 

LONDON (Alliance News) - The following stocks are the leading risers and fallers within the main London indices midday Monday.

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FTSE 100 WINNERS

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ARM Holdings, up 2.3%. The micro-chip maker received a boost after analysts at Goldman Sachs turned more positive on the company and added the stock to its Conviction Buy list. Goldman has a price target of 1,400 pence, suggesting more than a 50% upside to the stock.

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FTSE 100 LOSERS

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Tesco, down 0.6%. The supermarket giant leads the blue chip fallers following a report in the Sunday Times that one of its biggest investors has warned that the incoming Chief Executive may need to slash the group's GBP1.2 billion dividend. Dave Herro of Harris Associates said that in general, dividends should be covered by free cash, which they are not currently at Tesco, meaning that the supermarket giant either needs to cut its dividend or generate positive cash flow. Dave Lewis will join Tesco as the new Chief Executive on October 1, joining from Unilever and taking over from outgoing CEO Philip Clarke.



Wm Morrison Supermarkets, down 0.1%. Further weighing on the supermarket sector, the Sunday Telegraph reported that Morrison is planning to extend its opening hours in an effort to help flagging sales. The move is being seen as the latest in the ongoing war between the supermarkets as they try to retain market share from upcoming discount retailers. Head of research at Shore Capital Clive Black notes that longer hours also means higher operating costs, "as staff need to be deployed beyond basic care and maintenance cover in order to serve customers."

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FTSE 250 WINNERS

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Bovis Homes, up 5.5%. The housebuilder announced a very positive update, raising its interim dividend to 12.0 pence from 4.0 pence, as pretax profit rose to GBP49.4 million for the six months ended June 30, from GBP18.6 million a year earlier. Revenue jumped 75% to GBP322.1 million from GBP184.4 million a year earlier. The housebuilder also set out a strategic update, targeting an optimum housebuilding level at which its until costs will be lowest of between 5,000 to 6,000 homes per year. In the first half of 2014, Bovis reported 1,487 legal completions.



Petra Diamonds, up 1.7%. The mining company said that it expects an increase in diamond production to 3.2 million carats in the coming year, up 3.2% on the 3.1 million carats produced in the year to June 30. The group also said it remains on track to meet its five-year target, though it said capital expenditure in its South African operations will rise in 2015.

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FTSE 250 LOSERS

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Amlin, down 0.7%. The insurer reported an 8.0% fall in first half pretax profit, hit by a GBP24.6 million foreign exchange swing, largely on the weakening of the dollar, as well as a 52% increase in large catastrophe losses. The group said it made a GBP148.5 million pretax profit in the six months ended June 30, compared with GBP161.4 million in the corresponding period last year.

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AIM ALL-SHARE WINNERS

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Sirius Minerals, up 8%. The mining company said it has signed an additional binding take or pay offtake agreement for polyhalite from the York Potash Project in North Yorkshire. Sirius said the agreement has been reached with a Central America-based fertilizer distributor, though it did not name the company. The agreement is for an initial five years from the first commercial production at the site, with an option to extend the deal for another five years.



Richland Resources, up 7.1%. The mining group said it has started work on the refurbishment of its Sapphire project in Queensland, Australia and would change the name of its Australian operating subsidiary, along with the name of the Sapphire site. Richland said the work on the Sapphire site will focus on re-commissioning the purpose-built alluvial processing plant, which was the largest plant of its kind in the southern hemisphere when it was first commissioned.



Orosur Mining, up 4.8%. The group swung into a profit in its last financial year, on the back of significantly lower impairment costs compared with a year earlier. The South America-focused gold miner posted a pretax profit of USD3.7 million for the financial year to May 31, compared with a pretax loss of USD15.6 million the prior year, when it booked a total of just over USD18.4 million on the impairment of assets, as well as exploration expenses and an exploration write off. It said profit was also helped by lower corporate and administrative expenses.



Nyota Minerals, up 4.2%. KEFI Minerals unveiled an updated mineral resource report on the Tulu Kapi gold deposit in Ethiopia. KEFI Minerals said a mineral resource of 1.9 million ounces of gold has been estimated following twelve months of drilling on the site. Nyota Minerals has a 10.3% stake in KEFI Minerals, and a 25% stake in KEFI Minerals (Ethiopa) which owns the whole of the Tulu Kapi project. Nyota is preparing for a shareholder vote on selling its remaining stake in the Tulu Kapi project to KEFI Minerals.

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AIM ALL-SHARE LOSERS

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Kea Petrolium, down 65%. The New Zealand-focused oil and gas company saw its shares plummet after it said that its Puka-3 well is being plugged and abandoned. Kea said the wireline logging encountered a thicker than expected Mount Messenger reservoir section of 30 metres measured depth, however the sands were predominantly water wet. An oil water contact was interpreted in the upper part of the sands, which was significantly shallower than prognosed, it said.



LiDCO Group, down 17%. The biotechnology company said its revenue is expected to drop to GBP3.7 million in the half year to end-July, from GBP4.2 million a year earlier. It said that after a "solid" first quarter, it has experienced a level of de-stocking in the UK, and a lack of sales to its distributor in Japan. LiDCO will announce its interim results in mid-September.



Red24, down 15%. Shares dropped Monday after the crisis assistance company said its pretax profit in the current financial year will take a big hit from the decision by a key customer to review their product range in the UK. The group said the decision will impact on its current financial year with the loss of around GBP500,000 in revenue and a corresponding loss in the contribution to its pretax profit of approximately GBP250,000.

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Source: Alliance News


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