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Beaufort Securities Breakfast Alert - Carillion tried to 'wriggle out' of pension contributions

Beaufort Securities Breakfast Alert - Carillion tried to 'wriggle out' of pension contributions

Markets

Europe
The FTSE-100 finished Friday's session 0.65% higher at 7,665.54, whilst the FTSE AIM All-Share index was up 0.55% at 1,074.03. In continental Europe, the CAC-40 finished 0.87% higher at 5,529.15 whilst the DAX was up 0.31% at 13,340.17.

Wall Street
Last Friday in New York, the Dow Jones rebuffed recent concerns and marked a new high by closing 223.92 points firmer at 26,616.71. The S&P-500 added 33.62 points to end the week at 2,872.87 and the Nasdaq finished 94.61 points to the good at 7,505.77.

Asia
In Asian markets this morning, the Nikkei 225 was 16.48 points lower at 23,615.40 heading into the close. The Hang Seng was down 143.68 points at 33,010.44 and the Shanghai Composite was 19.50 points lower at 3,538.63.

Oil
In early trade today, WTI crude was 0.26% higher at $66.31 per barrel but Brent was down 0.16% at $70.41 per barrel.

 

 Headlines

Carillion tried to 'wriggle out' of pension contributions
Carillion "wriggled out" of payments into its company pension schemes as its troubles grew, while it carried on paying shareholder dividends and bosses' bonuses, say MPs. The Work and Pensions select committee is questioning the way pension investments were managed at the collapsed outsourcing giant. The schemes overall are in deficit. But last year contributions to the pension funds were deferred until 2019, to help shore up the firm's finances. The committee has published a letter from Robin Ellison, chairman of trustees of Carillion's DB Pension Scheme, giving an account of the last few years and suggesting they have been left with a funding shortfall of around £990m. The letter shows that pension trustees were "kept in the dark" about the state of Carillion's finances until late last year, the committee argues, and that dividends and bonuses were paid out at the expense of pension fund contributions. The select committee's chair, Frank Field said: "It's clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years." Mr Ellison will appear in person to answer questions from committee members later this week as pressure grows on those involved to explain why the pension funds' shortfall was allowed to widen sharply as the company's difficulties worsened.

Source: BBC News

 

Company news

 

Armadale Capital (LON:ACP) 2.25p – Speculative Buy
Armadale announced an exploration update and licencing applications commence at Mahenge Liandu graphite project in Tanzania. Additional trenching has confirmed the continuity of the deposit and results will be incorporated into an updated resource model. Mapping of a graphite schist unit to the east of the Mahenge Liandu deposit suggests there is a potential for a second deposit within the licence area. A social and environmental study has commenced marking the first step in the application process for a mining lease approval from the Tanzania Government. Completion of a Scoping Study is now expected by the end of Q1 2018. Work continues upgrading the current high-grade JORC-compliant resource of 40.9Mt grading 9.41% TGC with results expected by the end of February. Mahenge Liandu is one of the highest-grade graphite projects in Tanzania and thus has the potential to produce high-quality graphite concentrates, which should be suitable for a number of commercial applications.

Our view: We continue to be impressed with the exceptional high-grade, shallow intercepts coming from Mehange Liandu, representing some of the highest grades reported from graphite deposits in Tanzania. Armadale is looking to capitalise on the expected growth in the graphite market driven by increasing applications particularly in the energy storage market. We look forward the updated resource estimate in February as well as results from the scoping study by the end of Q1 2018. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Armadale Capital PLC

Cora Gold (LON:CORA) 16.85p – Speculative Buy
Cora Gold, the West African focused gold exploration company, announced encouraging results from its Stage 1 drill programme at its flagship Sanankoro deposit in southern Mali. High-grade intercepts up to 52.80g/t Au were returned from reconnaissance drilling at Target 1, confirming discovery of a new gold zone with 1,200m strike length and potential to increase to more than 3,000m. Initial assay results returned impressive thicknesses and grades including 17m grading 5.43g/t Au (including 8m grading 11.24g/t Au), 11m grading 5.24g/t Au (including 1m grading 52.80g/t Au), 20m grading 2.15g/t Au, 15m grading 1.41g/t Au and 10m grading 1.37g/t Au. These results indicate a strong potential to carry economic grades and widths at shallow depths as all the holes were drilled to a vertical depth of up to 100m. Stage 2 drilling comprising 4000m of RC/AC and 500m of diamond core drilling has commenced and will focus on Zones A, B and C. Mapping suggests that Target 1 sits along a structure that could be linked to Zone B, located c. 4km to the south.

Our view: The above high-grade assay results are not surprising given the presence of visible gold across many holes at Sanankoro. This coupled with the shallow intercepts underpin the potential of Target 1 to carry economic grades and widths. Target 1 remains open to the north, south and at depth. Stage 2 of the drilling program has commenced focusing on connecting Zones A and B as well as exploring the newly identified Zone C to the west. We look forward to further encouraging assay results. In the meantime, we maintain our Speculative Buy recommendation on the stock.

 

Fox Marble Holdings (LON:FOX) 11.40p – Speculative Buy
Fox Marble has received £2m from the single India based investor who took part in the latest c.£3m placing. The money transfer was subject to Indian regulatory approval and took a few weeks. The Indian investor is also a newly signed up customer of Fox Marble’s range of polished slabs.

Our view: This is an unusually important investment, demonstrating a potentially major customer’s confidence in Fox Marble and its product. The money will also be used to remove Fox’s existing debt and fund increased production at its marble quarries. We expect 2018 to be the year when Fox’s business turns the corner, both in terms of production tonnage and product sales. We reiterate our Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to Fox Marble Holdings PLC

 

Tesco (LON:TSCO) 212p – Hold
Tesco recently reported its Third Quarter (to end November) and Christmas trading results which showed continuing positive like-for-like (LFL) revenue growth at Group level, and importantly in key, high margin trading regions such as the UK and Republic of Ireland (ROI). This momentum and the fact that the Booker merger should complete early March-18, all augurs well for future earnings and cash flow growth. We believe that a number of positive factors are moving in Tesco’s favour now, such as less intense price competition from the hard discounters - Aldi & Lidl - stronger and more reliable revenue growth across the Tesco Group, improving balance sheet ratios, and the prospect of greater synergies than anticipated from Booker. Hold
Click here to see Beaufort's research note on Tesco published on Friday


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