Market Report: Despite a profit slide, Homeserve shares rise on talk of a payday for investors
Wednesday 21 May 2014
Homeserve leapt yesterday after the broker Liberum hinted that investors could be in for a windfall. The emergency repairs insurer revealed that pre-tax profit fell to £24.4m in the year to March, from £107.6m a year earlier. It was hit with a £30.6m fine for mis-selling in February and the whole incident cost it £46.7m.
But Liberum thinks an increase in free cashflow and a planned review of spending could lead to a share buyback or dividend hike. The talk saw Homeserve jump 23.2p to 340.3p.
The FTSE 100 struggled to stay above 6,800 yesterday, just a week after threatening to hit an all-time high. Some in the City fear that equity markets could be heading for a hefty correction; bond yields for riskier eurozone economies such as Italy and Portugal have been steadily rising over the past few days, which is a sign of growing economic pessimism. The blue-chip index closed down 42.55 points at 6,802.
Vodafone, off 11.85p at 205.3p, accounted for much of the loss, while oil and gas operators took 9.64 points off and miners accounted for a 5.21-point fall. It wasn't all bad: the cruise operator Carnival sailed up 78p to 2,380 and ITV put on 3.8p to 176.6p.
The oil and gas explorer Afren lagged on the mid-cap index, 8.8p lower at 145.3p, as first-quarter revenue and profit declined. Oriel Securities warned that the current run-rate of costs means the business does not look like generating free cashflow this year.
The world's largest sandwich maker, Greencore, jumped 11.9p to 259p after revealing an 8.2 per cent increase in revenue and a 14 per cent rise in operating profit.
Even though the Chelsea Flower Show began, the Aim-listed compost supplier William Sinclair issued a profit warning, admitting that it expects "a significant underlying net loss for the year". The shares dug down 51p to 60.5p.
The health technology provider Totally added 0.07p to 0.70p after sealing a NHS contract worth £84,000 over the next year.
UBC Media announced a reverse merger with the music service 7digital, with a £6m placing to fund the purchase of the company. The shares lost 3p to 3.25p as they headed toward the 2.7p placing level.
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