AA drops 3pc as an­a­lysts pre­dict a div­i­dend chop

Daily Mail - - City & Finance - by Paul Thomas

IN­VESTORS fled the AA over fears the road­side as­sis­tance firm could be about to slash its div­i­dend. Ger­man in­vest­ment bank Beren­berg down­graded it to ‘sell’, ar­gu­ing that the out­look for the firm is bleaker than it was a few months ago.

Beren­berg pre­vi­ously down­graded the AA in Oc­to­ber over wor­ries that in­vest­ment in its IT sys­tems and in­sur­ance di­vi­sion would cause costs to spi­ral.

In a note to in­vestors yes­ter­day, Beren­berg warned that the AA could be forced to cut its div­i­dend as it be­lieves the ‘short-term risks to [the firm] to be greater than pre­vi­ously as­sumed’.

The bank, which cut its tar­get price for AA from 119p to 100p, is also wor­ried about the ef­fect that in­creas­ing in­sur­ance pre­mium taxes and fluc­tu­at­ing de­mand for road­side ser­vices will have on the health of the com­pany. Shares plunged 3.5pc, or 4.15p, to 114.5p.

The FTSE 100 ended the day nurs­ing a 0.64pc, or 47.04 point loss, tak­ing it to 7247.66, while the

FTSE 250 was down 0.41pc, or 80 points, to 19,653.57.

Like the AA, con­ve­nience store op­er­a­tor McColl’s had a fairly mis­er­able day af­ter it emerged its sales were hit by the demise of whole­saler Palmer & Har­vey at the end of last year. McColl’s, which has more than 1,650 stores and newsagents around the coun­try, says it has tried to solve the is­sue by en­ter­ing into a short­term con­tract with Nisa.

De­spite turnover grow­ing by nearly a fifth and prof­its up 4pc, in­vestors were made ner­vous by the an­nounce­ment that like-for­like sales were down more than 2pc in the 11 weeks to Fe­bru­ary 11. That was enough to push the com­pany’s share price down 3.2pc, or 8p, to 241p.

How­ever, bro­kers were more up­beat, with Peel Hunt say­ing the mar­ket had got its ‘knick­ers in a twist’ about McColl’s trad­ing state­ment. In a note to in­vestors reit­er­at­ing McColl’s ‘buy’ rat­ing, Peel Hunt said: ‘While we are not triv­i­al­is­ing the im­pact or im­por­tance of the Palmer & Har­vey dis­rup­tion, and the ef­fect on fore­cast mo­men­tum, we think this is purely one- off and ig­nores the big­ger, rosy pic­ture.’

In­vestors in All Share-listed in­vest­ment trad­ing plat­form

Fidessa Group were left feel­ing warm and fuzzy af­ter a re­sults an­nounce­ment beat ex­pec­ta­tions.

Bullish pre­dic­tions for 2018 and 2019 prompted bro­ker Jef­feries to boost the firm’s rat­ing from ‘hold’ to ‘buy’.

And clearly in­vestors loved what they heard as Fidessa’s shares rose a whop­ping 11.9pc, or 310p, to 2915p.

Dis­ap­point­ing earn­ings did not rub the shine off miner Pe­tra Di­a­monds. Strikes in its South African op­er­a­tions and a seizure of di­a­monds in Tan­za­nia had hit earn­ings and re­sulted in a £67.8m loss in the six months to De­cem­ber 31. How­ever, a more pos­i­tive out­look for the di­a­mond mar­ket and the firm’s claim it had found up to £50m of sav­ings calmed in­vestors. Shares rose 4.7pc, or 3.2p, to 71.9p.

Plat­inum miner Lon­min was feel­ing the ef­fect of the ris­ing price of the pre­cious metal and a bet­ter out­look for dig­gers in the re­gion now that scan­dal-hit South African pres­i­dent Ja­cob Zuma has re­signed. Its shares fin­ished the day up 7.1pc, or 5.25p, at 79p.

News that ac­tivist hedge fund Value Act had taken a 5.4pc stake in Mer­lin En­ter­tain­ments, the owner of amuse­ment parks Le­goland and Thorpe Park, cat­a­pulted its share price. The firm has a his­tory of push­ing for man­age­ment changes and merg­ers in other firms it has in­vested in.

Mer­lin’s shares climbed 4.1pc, or 14.1p, to 365.5p.

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