De La Rue shares sink as survival prospects fall

Ishen Patel
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De La Rue shares sink as survival prospects fall

De La Rue plc (LON: DLAR) have seen their shares crash on Tuesday morning after the firm warned shareholders about ‘significant doubt’ over future trading.

De La Rue is a British company which has its headquarters in Basingstoke. The firm manufacturers paper and security printed products including bank notes, printed passports and tax stamps.

Shares of De La Rue crashed 22.57% on Tuesday to 135p. 26/11/19 12:02BST.

At the end of October, the firm issued a profit warning to shareholders following a speculation about tough market conditions.

Whilst recovery has been made, significant efforts will be required to save an increasingly failing business.

In the update provided this morning, De La Rue have bailed on plans for a dividend this year and warned shareholders about the ability for the firm to continue to operate.

“We have concluded there is a material uncertainty that casts significant doubt on the Group’s ability to continue as a going concern,” it said today as it fell to a £9 million loss.

Net debt has soared while the group warned it has become overly reliant on banknote printing contracts.

The firm said “The risk that the group is not able to generate the necessary cost savings to enable a significant contract to deliver required profitability levels and cashflow risk associated with the unwind of the working capital build from H1.”

De La Rue flagged “a period of significant management change and instability” over its last six months and said it would suspend future dividend payments in an attempt to keep a lid on its net debt.

Shareholders should be alarmed as the former chairman, chief executive and senior independent have left the company which shows that De La Rue could be a sinking ship.

“This has led to inconsistency in both quality and speed of execution,” new CEO Clive Vacher said. “The new board is working to stabilise the management team, which we believe will take some time.”

“De La Rue is teetering on the brink,” warned Markets.com’s chief market analyst, Neil Wilson.

“Far from drawing a line under the previous performance before the arrival of Vacher and [new chairman Kevin] Loosemore, the profits warning in October – the second this year – was only the meat in the rather unsavoury sandwich.”

“The company is on the edge here. There has been trouble in Venezuela and the SFO investigation remains ongoing – but by far the biggest blow and the source of the company’s collapse in market capitalization was losing the contract to make UK passports,” Wilson added.

“I don’t buy the argument that printing banknotes in a cashless world makes them structurally irrelevant – cash in circulation is growing all the time. The need for more secure notes that De La Rue makes is becoming more important, not less. Bad management and decisions seems to be the main reason for the malaise.”

Vacher concluded “We have seen significant changes since the start of the year in the market for currency, including pricing pressure as a result of reduced overspill demand. This has had a material impact on volumes and profitability in H1 2019/20 and it will also take time for the currency market to normalise”

“Our authentication business continues to show good growth and provides some degree of balance to the currency headwinds, while demand for polymer substrate is also exceeding our expectations”.

“In response, we are reviewing our cost base and will make the structural changes that will further strengthen our competitiveness in a challenging market. We continue to focus on building momentum in the higher-margin security feature market and continue to innovate to improve our position in this fast-growing area”.

“Between now and the end of calendar Q1 2020, we will complete a full review of the business and design a comprehensive turnaround plan for the company. In the meantime, we have already identified and started to implement the urgent actions needed to stabilise the business and allow us to complete the review. With strong emphasis on cost control and cash management, coupled with a focus on innovation and reversing the revenue decline, we will become a leaner, more efficient company and drive shareholder value.”

It seems that De La Rue are falling victim to the tough market conditions and Brexit complications which are stalling business.

De La Rue could follow the similar fate of high street retailers such as Mothercare (LON: MONY) and Thomas Cook (LON:TCG).

Shareholders are now expecting the worse, and if De La Rue can make any recovery from this crisis then shareholders will be appeased.

However, it only seems like a matter of time before we see the eventual collapse of De La Rue and shareholders should brace themselves for a turbulent ending.

Pound falls as Conservative poll lead narrows

Jamie Gordon
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Pound falls as Conservative poll lead narrows
With the general election little more than two weeks away, the general public and market indices alike wait with baited breath. What is on offer are two starkly different visions for the future of the UK, with both equally likely to intensify existing divisions. Today, however, the pound showed the market’s preference, as it dipped following a narrowing of the Conservative party’s lead in the polls. “It is hard to disagree that a Conservative majority is the most likely outcome of the election, but with markets priced for this with a high degree of confidence, the hurdle is low for GBP slipping back to the bottom of its recent range,” says Adam Cole, a foreign exchange strategist with RBC Capital Markets. Analysts have already warned that Sterling has erred on the side of overconfidence in a Conservative majority, and the publication of each party’s manifestos through the past week has done little to temper the anxieties of markets or the UK’s oldest party. Labour face the same criticisms of ‘nice ideas, where is the funding coming from?’, which is a question they’ll struggle to sidestep. Regardless of their insistence to the contrary, extracting tax from the highest earners is a fool’s errand without an international and unilateral effort, which puts their fiscally-led ambitions in jeopardy. Meanwhile, the Conservatives will have to lean heavily on their Brexit policies, as many of their proposals outside of infrastructure spending are either efforts to reverse the damage it has inflicted since 2010, or are simply uninspiring. The party has struggled to answer substantive questions on policy, surrounding NHS performance and the stark failure of their flagship ‘starter homes’ housing policy. Their inability to offer any kind of tangible guarantees to the electorate were evidenced on the latter issue alone: when put under the cosh Housing Secretary Robert Jenrick merely restated the party’s commitment to a ‘vibrant’ market, while Liz Truss looked like she’d seen a ghost as Andrew Neil took apart the party’s failings on live TV. The contest looks more closely thought then imagined then. Though the Conservatives are certainly the favourites, we’re hardly being spoilt for choice with credible options. Speaking on recent polling data and the market’s response, Spreadex Financial Analyst Connor Campbell commented, “Showing an increasing sensitivity to election matters, the pound gave back some of Monday’s gains following the latest poll.” “Yesterday the pound rose on reports that the Conservatives were facing an 80-seat majority after December 12. Well, today, a survey by Kantar shows Boris Johnson and co.’s lead has been cut from 18 points to just 11 in the space of 7 days, news that has left sterling down 0.3% against the dollar and euro alike. That followed an ICM poll late on Monday giving the Tories just a 7 point lead, a 10-point reversal week-on-week.” “With the pound in the red, the FTSE was able to eke out a 0.1% rise while its Eurozone peers trickled lower. Returning to 7400 after last Friday sinking below 7250, the UK index sat at its best price for 2 and a half weeks. In contrast the DAX and CAC slipped 0.2% apiece, slipping under 13250 and 5925 respectively.” Overall, it has been a fairly quiet morning following Monday’s rallies. Greencore Group plc (LON: GNC) reported a revenue dip, Topps Tiles (LON:TPT) are pessimistic on the GE outlook, Pets at Home shares (LON:PETS) saw its profits increase and the market reacts to Uber (NYSE: UBER) losing its London licence. “The muted movements of the European indices, alongside the prospective flat open for the Dow Jones later today, reflects a lack of trade deal updates this Tuesday. Though there was a call between key players Liu He, Robert Lighthizer and Steven Mnuchin, the post-discussion statement claiming that ‘both sides discussed resolving core issues of common concern’, had ‘reached consensus on how to resolve related problems’ and agreed to ‘stay in contact’ over their remaining differences was a tad too vague to spark significant growth. At least, not after Monday’s gains.”  

FCA issues ban on marketing of mini-bonds to retail investors

Ishen Patel
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FCA issues ban on marketing of mini-bonds to retail investors

The FCA have announced that they will ban the marketing of mini-bonds to retail investors following the collapse of London & Capital Group earlier this year.

The restriction will become active as of January 1st 2020, and last for 12 months while the FCA looks to take action to enforce permanent legislation into marketing restrictions.

Mini-bonds have tempted investors on the potentially greater returns compared to mainstream products but have also made investment more risky.

However, amid the high return potential there has been controversy including the notable collapse of London Capital & Finance, where over 12,000 people had invested and are facing difficulties recovering their funds.

The FCA described a mini-bond as a ‘kind of IOU issued by a company to an investor’.

In return the investor receives a fixed rate of interest over a set period of time, and at the end of the tenancy the investors money is repaid.

The return on investors’ money entirely depends on the success and proper running of the issuer’s business. If the business fails, investors may get nothing back, which highlights the risk in the initial investment.

However, the FCA only has intervention powers in markets and not the sale of the products themselves.

The regulator said they could still be marketed to “sophisticated investors”, who could declare themselves able to understand the risks, or high net-worth individuals with an annual income of more than £100,000 or net assets of £250,000 or more.

Almost 12,000 people who put a total of £236 million into a high-risk bond scheme marketed as a fixed-rate ISA with London Capital & Finance (LCF), lost their money.

Andrew Bailey, FCA chief executive, told the BBC’s Today programme: “This is the sixth piece of intervention we’re doing this year. We are also in close discussions with the internet service companies, because we want to limit the marketing of these things through that channel.

“We think it is inappropriate to market the complex versions of these instruments to retail customers, not to the high net-worth individuals, but to retail customers.

“We want to see more action. I’m keen that the legislation that the government proposed on online harms – which I know addresses really important issues which are outside our world – can also include financial harms.

“I also want more action from Google – I think they can play a big role because it is the major channel now and we find these things just popping up all the time.”

Moira O’Neill, head of personal finance at Interactive Investor, said she could understand the attraction of mini-bonds.

“Savers are now in the unfortunate position where even if they can lock their money away for four years, they will only get 2%. So the prospect of lending money to a company via a mini-bond for a similar period and getting four times that amount, or more, is tempting,” she said.

“But mini-bonds are paying higher rates than bank accounts precisely because they do contain an element of risk – essentially the risk that the company could go out of business.

“And it’s often too difficult for customers to assess if are they paying enough to take that risk.”

“My gut reaction has been long been one of general wariness as even the name mini-bond is probably a misnomer. But the rise of mini-bonds has been hard to ignore. “Meanwhile, the sector as a whole has escaped the kind of in-depth analysis that is normal for both the equity and corporate bond market.”

The FCA have issued a statement saying that the ban will apply to ‘more complex and opaque arrangements where the funds raised are used to lend to a third party, invest in other companies or purchase or develop properties’.

The FCA defended its actions to enforce the marketing bam following an increased incident rate of promotions leading to frauds and scams which involve no attempt to meet financial promotion rules.

The FCA has made a concerned effort to tackle the risk for investors from mini bonds, as they see the risk to consumers.

The FCA have investigated more than 80 cases of regulated activities that may have been carried out with the right FCA authorization.

Additionally, the FCA have looked to persuade the internet service providers, particularly Google, to take more action, for instance to take down websites promptly where they are likely to involve a breach of law or regulations.

Andrew Bailey added : ‘We remain concerned at the scope for promotion of mini-bonds to retail investors who do not have the experience to assess and manage the risks involved. This risk is heightened by the arrival of the ISA season at the end of the tax year, since it is quite common for mini-bonds to have ISA status, or to claim such even though they do not have the status.

‘In view of this risk, we have decided to complement our substantial existing actions with a further measure which will involve a ban on the promotion and mass marketing of speculative mini-bonds to retail consumers. We believe this will enable us to further consumer protection consistent with our regulatory principles and the FCA Mission.’

The ban will mean that unlisted speculative mini-bonds can only be promoted to investors which are sophisticated or high net worth, excluding retail or casual investors.

The press released concluded by saying that the FCA intends to launch a communications campaign to improve consumer awareness of the risks, and considerations that might be needed to be made before pursing high risk investments.

Commenting on the FCA’s ban on the promotion of mini bonds, Michael McKee, partner at DLA Piper, said: “After London Capital & Finance’s collapse it was inevitable that the FCA would take a hard line on mini-bonds which always looked more risky than most other retail products.”

Udg Healthcare shares dip despite increased operating profit

Ishen Patel
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Udg Healthcare shares dip despite increased operating profit

Udg Healthcare PLC (LON: UDG) have seen their shares dip on Tuesday despite increases in operating profit growth and a sound update to shareholders.

Udg Healthcare were formerly known as United Drug is a Dublin based international company and partner to the healthcare industry. The firm provides clinical, commercial, communication and packaging services.

The pharmaceuticals industry has seen a mixed set of results by firm across financial 2019.

Market leaders such as Pfizer (NYSE: PFE) and GSK (LON: GSK) have reported bullish interim updates, which gives them further foot holding the global pharmaceuticals market.

Additionally, Roche (SWX: ROG) announced the acquisition of US drugmaker Promedior last week.

The FTSE250 (INDEXFTSE: MCX) listed firm reported adjusted operating profit growth of 5% to $158.4m (€143.8m) in the 12 months to 30 September, as it announced its third acquisition of 2019.

On a more sour note, shareholders will be concerned that the firm saw revenue decline by 1% to $1.3 billion.

UDG Healthcare PLC reported a “year of strong strategic progress” on Tuesday, with both platforms doing well.

“2019 was another year of strong strategic progress for UDG Healthcare. We delivered good financial growth with adjusted earnings per share increasing by 7% on a constant currency basis, the top end of guidance,” said Chief Executive Brendan McAtamney.

“Our two global platforms, Ashfield and Sharp delivered a strong performance through a combination of underlying growth and the benefit of acquisitions.”

Last year, UDG reported two new US business acquisitions in Create NYC and SmartAnalyst which caused shares to rally.

Ashfield reported a 3% revenue growth to $949.2 million, with adjusted operating profit rising by 10% to USD110.0 million in a “good” year.

“Looking ahead to financial 2020, we expect to continue to deliver good growth across our businesses, supplemented by further strategic acquisitions utilising our strong balance sheet,” said CEO McAtamney.

Shareholders should not be too phased by the dip in share price this morning, but should be more optimistic for future outlook as the firm looks to complete its acquisition deals.

Greencore shares slip following annual revenue decline

Ishen Patel
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Greencore shares slip following annual revenue decline

Greencore Group plc (LON: GNC) have seen their shares sink on Tuesday after the firm gave shareholders a disappointing update alluding to declining annual revenues.

Greencore Group plc is an Irish food company, which was established by the Irish government in 1991. The firm now sells convenience food related and boasts itself as the largest sandwich manufacturer globally.

Shares of Greencore sunk 5.48% to 234p on Tuesday morning. 26/11/19 11:07BST.

Greencore have had a mixed financial 2019, as the firm reported struggles in July which led to shares slipping, however recover was made soon after.

The company, which prepares over 700 million sandwiches a year, said in an update on Tuesday that it had completed the sale of its US business for £55.9 million on Monday, which helped pre-tax profit triple to £56.4 million in the year to the end of September.

The FTSE250 (INDEXFTSE: MCX) listed firm reported declining sales from continuing operations by 3.5% to £1.4 billion in the year to the end of September.

Chief operating officer Peter Haden will also step down as an executive director at the end of December, before leaving the group in April, as part of a bid to “simplify the management structure”.

Patrick Coveney, chief executive officer, said he expects next year to deliver profitable growth, with a target to achieve mid single-digit organic revenue growth in the medium term.

He added, “over the past twelve months we have fundamentally reset our business”, saying that the group’s plan was “expanding our category and channel capabilities within the diverse, growing and attractive UK food to go market”, such as the recent £56 million acquisition of UK salad maker Freshtime.

House broker Shore Capital said Greencore was now “fully focused on the UK market, and with leading exposure within attractive ‘food to go’ categories”, seeing future growth being augmented by selective bolt-on deals and capital discipline.

The food and drinks industry have seen mixed results and firms have had limited success.

Firms such as J D Wetherspoon (LON: JDW) and Greggs (LON: GRG) have given shareholders strong updates seeing their shares rally.

Notably, Compass Group plc (LON: CPG) saw their shares sink this morning as the firm gave a gloomy outlook to shareholders for financial 2020.

Compass Group shares sink following pessimisitc outlook

Ishen Patel
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0
Compass Group shares sink following pessimisitc outlook

Shareholders of Compass Group plc (LON: CPG) have seen their shares sink on Tuesday morning, after the firm gave shareholders a gloomy outlook amid speculative future business.

Compass Group plc is a British multinational contract food service which resides in Surrey. It is the largest contracted foodservice company in the world with operations in over 50 countries and employs over 550,000 people.

Shares of Compass Group sunk 5.77% after the announcement to 1,956p. 26/11/19 10:50BST.

Earlier this year, the FTSE 100 (INDEXFTSE: UKX) listed firm reported strong growth driven by North American operations and the performance seems to have continued through the next quarter.

Despite a relatively strong financial 2019, Compass have given shareholders a gloomy update alluding to tough market conditions and Brexit complications.

Compass reported a 5.7% increase in full year underlying revenues reaching £25.2 billion for the year ending 30 September. Operating profit rose 4.7% to £1.9 billion.

Operating margin was 7.4% while free cash flow grew 9.3% to £1.25 billion.

Group chief executive Dominic Blakemore said that despite the good performance, Compass was “not immune to the macro environment”.

“Deteriorating business and consumer confidence in Europe has impacted our business and industry volumes, new business activity and margin,” he said.

He added that the firm was taking “prompt action” in Europe and the rest of the world markets to adjust its cost base.

The cost saving action is expected to result in £300m of exceptional costs across this year and next.

Blakemore continued: “Our expectations for the group in 2020 are positive although we remain cautious on the macro environment in Europe. The pipeline of new contracts in North America is strong and Rest of World is growing well, although we are seeing some hesitation in decision making in Europe.

“Thanks to the group’s geographic and sectoral diversity, we are nevertheless confident of continued progress. As such we expect organic growth to be around the mid-point of our 4-6 per cent range whilst maintaining our strong margin1 as we mitigate the expected volume pressures through our cost actions.

“In the longer term, we remain excited about the significant structural growth opportunities globally, the potential for further revenue and profit growth, combined with further returns to shareholders.”

The food and drinks industry have seen mixed results and firms have had limited success.

Firms such as J D Wetherspoon (LON: JDW) and Greggs (LON: GRG) have given shareholders strong updates seeing their shares rally.

Other competitors such as the Restaurant Group (LON: RTN) have not been so successful, as they saw their shares dip yesterday despite success from their headline branch Wagamama.

CRH shares jump following strong quarterly update

Ishen Patel
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2
CRH shares jump following strong quarterly update

CRH PLC (LON: CRH) have seen their share price jump on Tuesday morning after the firm updated shareholders with strong third quarter figures.

CRH shares jumped 2.37% to 2,977p on Tuesday morning. 26/11/19 10:38BST.

CRH is an international group of diversified building materials businesses which manufacture and supply a wide range of products for the construction industry.

CRH operate and are managed in Ireland, where it has earned accolades such as being the largest Irish company.

The FTSE100 (INDEXFTSE: UKX) listed firm reported a 9% rise in third quarter profit on a like-for-like basis.

The firm alluded this boost to strong demand and pricing which it expects to continue to 2020.

Shares were at a three year high on Tuesday morning, and certainly this update has sparked shareholder excitement.

The building materials supplier by market value said it expects 2019 earnings of 4.15 billion euros, including its European distribution unit which it sold for 1.64 billion euros this year.

The increased earnings growth to the three months ending September 30 was driven by a 12% climb in its Americas materials division, as CRH is the biggest producer of asphalt for highway construction.

Like-for-like earnings at its building products and Europe Materials divisions rose by 3% and 6%, respectively.

In its Western and Eastern European markets it saw volumes growth while construction activity in the United Kingdom continued to decline amid Brexit-related uncertainty.

“We expect the positive underlying momentum in our businesses to continue and we look forward to another year of progress,” Manifold said on a conference call.

The housing market and home building market has had mixed experiences, but certainly shareholders can be pleased with the results published by CRH.

The recovery of the home builders market will certainly please CRH, as firms have given shareholders optimistic updates.

Homeserve plc (LON: HSV) saw their shares rally last week after a bullish interim update.

Additionally, the merger of Galliford Try plc (LON: GFRD) and Bovis Homes Group plc (LON: BVS) should stimulate further business for CRH and shareholders should be satisfied with the quarterly trading update.

London Uber ban: reactions

Dina Caruso
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London Uber ban: reactions
Transport for London announced yesterday that it will not be renewing Uber’s (NYSE:UBER) licence to operate in London, insisting that it is not “fit and proper”. Uber’s past itself is filled with controversies, including its poor workplace culture and the treatment of its drivers. Having revealed several breaches to the safety and security of passengers, TFL decided to drive the ride-hailing app out of London – but what do people think? Uber UK has said that it will be appealing TFL’s decision: https://platform.twitter.com/widgets.js

Meanwhile, Karren Brady was among many to take to Twitter and share her views:

https://platform.twitter.com/widgets.js Similarly, Tony Parsons‏ also praised London’s black cabs: https://platform.twitter.com/widgets.js Matt Lucas‏ posted the following Tweet: https://platform.twitter.com/widgets.js Andrew Boff‏ did not hold back with his opinion against the decision: https://platform.twitter.com/widgets.js Sadiq Khan‏’s statement on TFL’s Uber decision was also shared on the social media platform: https://platform.twitter.com/widgets.js How will this impact your commute?

Topps Tiles shares decline on election warning

Dina Caruso
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Topps Tiles shares decline on election warning
Topps Tiles shares (LON:TPT) were down on Tuesday after the retailer warned that consumer demand has weakened even further since the general election was called in October. Shares in the tile retailer were 3% lower during Tuesday morning trading. The UK was granted yet another extension to its European Union departure deadline, prolonging the period of political and economic uncertainty. Parties are now preparing for the general election on the 12th of December. Topps Tiles said on Tuesday that in the first eight weeks of the new financial period, retail like-for-like revenues declined by 7.2%. The company said that a reduction in the uncertain political climate is intrinsic to the improvement of its short term outlook. The warning came in the company’s financial results for the full year, in which it revealed that adjusted revenue for the 52 weeks ended 28 September 2019 was “broadly flat”. “This has been another year of strategic progress for Topps, with a resilient sales performance in our retail business and significant development in our commercial operations,” Matthew Williams, who will be stepping down from his position as CEO at the end of November, commented on the results. “At the start of the new financial year, trading conditions have become more challenging, with consumer demand weakening further since the General Election was called in late October,” the CEO warned. “Against this backdrop of heightened political and economic uncertainty, like-for-like sales in the first eight weeks have declined,” the CEO continued. “Whilst we expect external events will continue to weigh on consumer confidence for the immediate future, we remain confident that our market-leading retail offer and growing commercial operations give us a strong platform from which to deliver sustainable growth over the medium and long term.” As the election date approaches, the question remains; when will this period of political doubt end? Shares in Topps Tiles plc (LON:TPT) were down on Tuesday, trading at -3.68% as of 09:18 GMT.

Pets at Home shares rise on “strong” H1

Dina Caruso
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Pets at Home shares rise on “strong” H1
Pets at Home shares (LON:PETS) rose on Tuesday after the UK’s largest pet supplies retailer saw its profits increase for the half year. Shares in the company were up almost 10% during Tuesday morning trading. Pets at Home said it had a “strong” first half period over the 28 weeks to 10 October. Group underlying profit before tax on a comparable basis increased by 18.9% year-on-year, amounting to £45 million. Group revenue was up by 9.4%, with vet group revenue increasing by 19.6%. Pets at Home added that, because of its strong first half performance, the business remains confident about its full year outlook. Indeed, it expects full year profit towards the top end of current market consensus, despite the prevailing consumer uncertainty. Indeed, as the nation has been granted yet another extension to its deadline to depart from the European Union, uncertainty among consumers continues to weigh on some businesses. “I am very pleased with what we have achieved in the first half of the year,” said Peter Pritchard, Group Chief Executive Officer. “We have executed our plans well, and this has been reflected in the strong customer sales growth across the Group,” the Group Chief Executive Officer continued. “Our commitment, and that of the Group’s Joint Venture Partners, is to make sure pets and their owners get the very best advice, care and products; and this has led to record levels of VIPs, First Opinion practice clients and subscription customers. In short, our pet care strategy is working.” Peter Pritchard said: “We have seen sustained momentum in Retail, with a 2-year like-for-like of 13%. This has been complemented by a meticulous delivery of our Vet Group recalibration. The programme to buy out a number of Joint Venture practices is already complete, whilst changes we have made to the fee arrangements for ongoing practices are already showing signs of positive progress and will be followed by further planned adjustments in the second half of the year.” Shares in Pets at Home Group plc (LON:PETS) were up on Tuesday, trading at +8.97% as of 08:48 GMT.
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