AA drops 3pc as analysts predict a dividend chop

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.