£376m hit for funds firm after South Africa chaos
SOME £376.3m was wiped off the value of asset management group
Investec yesterday as political uncertainty in South Africa sparked a flight from stocks with exposure to the region.
The South African stock market tumbled as it emerged the country’s finance minister Pravin Gordhan had been sacked late on Thursday. Gordhan had been seen as a strong barrier against corruption in the country.
He was one of several cabinet members to be let go by South African president Jacob Zuma in a midnight reshuffle. The rand fell to a two-month low against the dollar as investor jitters kicked in.
The biggest victims on the FTSE to the revelation were financial firms Old Mutual (down 7.5pc, or 16.3p, to 200.6p) and Investec (down 9.9pc, or 60p, to 544p), which have a large proportion of their business in the region, and miners including Anglo American (down 3.4pc, or 43p, to 1219.5p).
Russ Mould, investment director at AJ Bell, said: ‘Johannesburg’s economy is precariously balanced and the rand’s drop does mean that South African earnings are now worth less in sterling terms, so the negative share price reaction is perfectly understandable.
‘But long-term investors should resist the temptation to secondguess political events – the ultimate deciders of investment return are company cash flow and share price valuation, and it is difficult to determine right now whether these events actually change the earning potential of any of these stocks.’
The FTSE 100 finished the week down 0.6pc, or 46.6 points, at 7322.9. AstraZeneca announced an agreement for the commercial rights to cancer treatments in the US and Canada. Shares were off 0.3pc, or 14.5p, to 4912.5p.
Safestay soared as it announced an £18.4m debt restructuring.
The AIM-listed firm, which operates hostels across the UK, has replaced its existing bank debt with a single five-year banking facility with HSBC. Safestay said the move should reduce the cost of its debt. The group has also raised £ 12.6m of new capital through a sale and leaseback agreement on its Edinburgh and Elephant & Castle hostels. Shares surged 9.3pc, or 4.5p, to 53p.
Inmarsat advanced as it revealed its subsidiary, Inmarsat Government, had been chosen to work with US phone network AT&T.
The telecoms provider wants Inmarsat Government to help deliver satellite communication solutions as part of its FirstNet network – which is an independent US Department of Commerce agency that operates a wireless broadband network for police, firefighters and the emergency medical services. Shares gained 1.8pc, or 15p, to 850.5p.
CVS Group soared as it revealed half-year operating profit had rocketed 75.3pc to £9.5m.
The firm, which operates veterinary practices and pet crematoria, saw revenues rise 28.5pc to £129.4m in the six months to December 31. Analysts at Investec upped the stock to a ‘buy’ rating. CVS acquired 20 surgeries over the period, including four in the Netherlands, and has bought 13 more since the start of this year.
It operates 394, with a 13pc share of the small animal vets market in the UK. CVS said results had been in line with expectation and it was confident about the rest of the year. Shares jumped 10.3pc, or 107p, to 1142p.
A £2.6m contract with Citigroup boosted shares in EG Solutions.
The software firm is understood to have made a three-year deal with the bank for the use of its back- office systems. Shares advanced 5.6pc, or 3.5p, to 66p.