Having suffered operational problems for some time, Gem Diamonds (GEMD) has been busy upgrading its equipment and realigning its mining towards higher-value, higher-grade ore. This process will benefit the group in the future and is a key reason behind our 'buy' rating on the stock in this week's issue of Shares, alongside rising diamond prices. Sadly, this preparatory work will have a negative impact on the current year's production, forcing Gem to downgrade 2013 guidance which has knocked the share price by 4% to 136.75p. Our bullish stance is unchanged by today's announcement.
The market is worried that Barclays (BARC) is planning a £4 billion rights issue. The bank’s shares are down 3.6% to 308.4p after confirming talks with regulator, the Prudential Regulation Authority (PRA), about its financial and capital management plans. Read our news analysis here.
Marketing communications (marcom) group WPP (WPP) jumps 1.6% to £11.94 following news of a merger between Publicis (PUB:PAR) and Omnicom (OMC:NYSE). While the combined group would usurp WPP as the world’s biggest marcom by sales, the deal has prompted talk that WPP may strike back with its own M&A drive.
Beset with delays, there's another setback to Rio Tinto's (RIO) Oyu Tolgoi project, albeit not affecting the current open pit operations. The Mongolian government needs to approve project financing terms for undergound mine development, yet parliament is in summer recess. Therefore Rio says that negotiations including financing will be pushed back; a new timetable has yet to be agreed. The market doesn't seem too worried as the shares are only down 0.2% to £29.14. That could partially be down to good news elsewhere in the Rio camp where the company has agreed to sell its 80% stake in the Australia-based Northparkes copper and gold mine to China's CMOC for $820 million.
Health, hygiene and home products group Reckitt Benckiser (RB.) rises 1.2% to £46.81 on strong half-year figures including better-than-expected 6% second quarter like-for-like sales growth (stripping out the pharmaceuticals division). Chief executive officer Rakesh Kapoor highlights strong performances from health brands Mucinex, Durex and Strepsils and hygiene offerings Dettol and Lysol. Reckitts flags 230 basis point gross margin improvement to 58.7% driven by price increases, cost savings and a withdrawal from lower margin private label business. We last looked at Reckitt in February – click here to read.
Gold and silver producer Polymetal (POLY) dips 0.9% to 620p after flagging $280 million to $340 million potential impairment charges on its assets following lower commodity prices, to be taken at half-year results on 28 August. This overshadows a decent second quarter where production grew 8% year-on-year.
Product testing giant Intertek (ITRK) has already flagged weakness in its minerals division as a reduction in global mining activities means there's fewer commodity samples to test and the industry has started a price war to secure any business they can get. Yet interim results today show the rest of its business is doing well, achieving a 4.8% rise in pre-tax profit to £127.9 million. Sadly the market doesn't like the falling group margin – primarily down to problems in the minerals business – which means there's a negative share price reaction, down 0.8% to £30.38.
A rebound in horticultural products play William Sinclair (SNCL:AIM) is interrupted by yet another profit warning, sending the shares 15% lower to 127.5p. The weather-sensitive small cap warns of a third quarter horticulture sales miss and a shortfall in production of peat-free product SuperFyba. This will leave full-year sales lighter than previously forecast. On a positive note, sales into the retail market in June and July were double those achieved a year earlier with the help of better weather. Westhouse Securities analyst Robert Sanders cuts his sales forecast from £48.7 million to £47.7 million and has downgraded his £300,000 profit estimate to a £600,000 loss. We last looked at the business in detail in early June.
Property and casualty insurer Hiscox (HSX) has avoided the industry’s trend for low investment returns and pricing pressure to report impressive interims. The company’s £180.7 million pre-tax profit, up 44% year-on-year, for the six months to July beat consensus, helping to drive up the shares by 4.1% to 636p. This was ahead of the £117 million consensus and the result of low exposure to recent catastrophes and foreign exchange gains.
Sausage and bacon supplier Cranswick (CWK) falls 5p to £11.63 after a sizzling run. Investors are taking profits following a mixed first-quarter update. Underlying sales were 10% ahead year-on-year, driven by strong growth across most product categories. The Hull-based food producer conceded operating margins were lower than the previous fiscal year as a whole, reflecting rising hog prices as well as the start-up costs of a new pastry factory in North Yorkshire. Read our analysis of Cranswick from late May.
Electrical power kit supplier XP Power (XPP:AIM) edges nearly 3% up to £13.61 after showing its ability to take market share in low growth times. Half-year revenues, profits and margins all rise, and it is bringing on new Vietnam capacity sensibly. This is no surprise to Shares, we flagged the opportunities to outpace slow markets twice last year, first in January '12 at 800p, and again in October '12 at £10.10. (NB: The latter links open as large pdf files)
Profit takers moved on aerospace firm Senior (SNR) which falls 2.5% to 265.6p despite producing in-line interim results with adjusted pre-tax profit up 6.2% year-on-year to £48.3 million. Bears may have received some encouragement from mention of pricing pressure in the civil aerospace market.
Ukraine and Russia focused oil firm JKX Oil & Gas (JKX) advances 4.8% to 65.5p after swinging from a loss of $5.1 million in the first half of 2012 to a $7.5 million profit for the first six months of 2013.
Latin American oil explorer President Energy (PPC:AIM) gains 4.7% to 17.5p after saying old oil wells in Argentina are showing good potential for commercial rates after a programme of hydraulic stimulation.
A pair of significant new contract wins sees buyers swoop to ID management software specialist Intercede (IGP:AIM), sparking a 13% jump to 73p, the highest since January. Worth about £2 million combined, this bolsters confidence in £8.8 million full-year revenue forecasts.
Fledgling marketing communications group Porta Communications (PTCM:AIM) jumps 11.7% to 8.38p on the back of a better-than-expected first half. Sales in the six months to 30 June were the same as for the whole of 2012.