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Most followed: Serco, Capita, Beowulf, Lloyds. Molins, BAT..

Latest result from the Outsourced Cup: Serco 3 Capita 0.
Reading the smoke signals

In the battle of the outsourcing giants, Serco has comprehensively trounced Capita today.

Most of the big news sources agree that Serco (LON:SRP)  is a turnaround story, and that it is, to use the modern buzz-phrase, gaining traction.

“Serco shares jump 11% as turnaround gains traction”, says the FT.

“Serco narrows losses as turnaround gains traction”, reports the Daily Telegraph.

“Serco shares jump on turnaround hopes”, according to Reuters.

“Serco Group soars as turnaround gains momentum” is the Proactive Investors headline.

The group, which runs all kinds of things that government bodies used to run, such as train services and prisons, sat atop the FTSE 250, with a 16.8% rise after its full-year results.

Meanwhile, Capita (LON:CPI), which makes its money running all kinds of things that government bodies used to run, is lurking in the FTSE 100 cellar, nursing a 5.6% fall.

Unlike the Serco story, the headline item is not so easy to pick out from the admittedly (overly) detailed Capita results statement.

One says the profit is down, another says underlying earnings are up, a third said the shares have fallen on a smaller bid pipeline, which is pretty much the Proactive line.

Among the small caps, Scandinavia-focused iron ore project developer Beowulf Mining (LON:BEM) has seen its shares dive after it announced it would be raising money through a share issue at 3.25p a pop.

Market makers have slashed the mid-market price to 4.4p from last night's closing price of 6.2p.

As discounted share issues go, that's pretty severe but as Beowulf admitted, now is not a good time for the bulk metals industry.

“Low metal prices and a broad lack of confidence has led to an unfavourable environment for exploration and development companies to raise capital and advance with project development,” it said in its statement.

The company has sought to modify its strategy in response to market conditions by seeking to acquire lower risk and potentially high return mineral assets across the Nordic region, which begs the question: what was its strategy before?

The market will undoubtedly turn at some point and the £1.25mln raised by the company, which currently has a market capitalisation of less than £20mln, should buy it some time as it pursues its new direction.

When I was a cub reporter, I was told that Molins (LON:MLIN) made those cigarette vending machines you used to see in pubs. It turns out that information was wrong, and it actually makes the machines that make the cigarettes.

There is more to the business than pandering to the needs of nicotine addicts, because the company has been puffing along merrily, judging by the share price performance over the last five years, which shows the shares little changed.

That's even after today's 14.5% fall after the market tried to read the smoke signals in the company's results statement.

“There is currently little sign of an immediate recovery in the tobacco sector, although the order book at the beginning of the year for the instrumentation business was strong,” the company said.

Curiously enough, British American Tobacco (LON:BATS) reported results this morning in which it reported the number of cigarettes sold rose 1.7% year-on-year in the second half of the year, but perhaps it is not selling to the same people as Molins is targeting with its vending machines.

With an underlying pre-tax profit of just £3.8mln, Molins could have done without an exceptional charge of £1.1mln, of which £900,000 related to the company's defined benefit pension schemes.

The divi has been cut from 5.5p in 2014 to 4.0p in respect of 2015, with the group saying it is mindful of the significant rise in the statutory levy payable to the Pension Protection Fund.

Contrast that with Lloyds Banking (LON:LLOY), which has set another £4bn aside for potential claims for payment protection insurance mis-selling, according to its results statement this morning.

Its impairment charges (i.e. write-downs) fell 48% to £568mln, which is good news for the government, which still retains a sizeable stake in the lender, while pension funds will likely be cheering the special dividend of 0.5p that will supplement the full-year pay-out of 2.25p.


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