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Interserve weak as Kier Group cash call comments spark concerns for constructors

A look at some of the London market's biggest risers and fallers on Monday
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Analysts at Liberum Capital said Keir's comments clearly have "implications for the rest of the Construction sector, where we see Interserve as most vulnerable”

Embattled outsourcing mid-cap Interserve PLC (LON:IRV) was under pressure again in late afternoon trading, down 8.9% to 25.50p as analysts fretted again about the firm’s survival in the wake of contracting peer Kier Group PLC’s (LON:KIE) move on Friday to raise cash to prop up its balance sheet.

Launching the £624mln rights issue, Kier’s management said that while the group’s financial position has not adversely impacted the order book to date, they believe that the external environment has changed recently - partly as a result of Brexit - and banks, suppliers, customers and bondsmen all want the firm to have lower leverage.

In a note on Monday placing their ‘buy’ rating and 1,400p price target for Kier ‘under review’, analysts at Liberum Capital said: “This clearly has implications for the rest of the Construction sector, where we see Interserve as most vulnerable.”

After dropping over 22% on Friday in response to the deeply-discounted 33-for-50 rights issue priced at 409p a share, Kier’s shares lost another 8.4% on Monday, falling to 465.20p.

Elsewhere in the mid-cap contracting sector, MITIE Group PLC LON:MTO) lost 5.5% at 136.90p and Keller Group PLC (LON:KLR) shed 3.2% at 567p.

Liberum’s analysts commented: “Keller has a positive working capital model. Mitie, while not a construction company, clearly has a high level of leverage.”

2.30pm: Ted Baker hit by "forced hug" allegations

Fashion firm Ted Baker PLC (LON:TED) has responded to the media reports that have sparked a sell-off in the company’s shares today.

Reports emerged that an online petition had been started, the aim of which was to discourage “forced hugging” and other forms of sexual harassment that allegedly take place at the company’s workplaces.

The company’s founder and boss, Ray Kelvin, has been singled out as someone who, the petitioners claim, is overly tactile in his interactions with staff.

“Ray, and the company's leadership, have always prided themselves on Ted Baker being a great employer and business to work with. Accordingly, they and the board take these concerns very seriously and the board has directed a thorough and urgent independent external investigation is carried out into these matters,” a statement from the retailer said.

The company acknowledged that “hugs have become part of Ted Baker’s culture but are absolutely not insisted upon”.

Predictably, the reaction on Twitter has been vigorous.

The shares lost around one-sixth of their value, wiping around £150mln off the stock market capitalisation.

1.00pm: Egdon on the rise after top-turvy five days

Egdon Resources Plc (LON:EDR) has had a topsy-turvy five days but was on the up today after a production update from its Ceres field.

The shares rose 12.6% to 7.6p after the company revealed that its net gas production from the Ceres field, including back-out gas, during November averaged 1.16 million cubic feet of gas per day or 193 barrels of oil equivalent per day (boepd).

Egdon said this was the first full month of production following the successful installation of a new flow-meter in October and was in line with forecasts.

As a result the company expects gas sales net to Egdon for November to be in excess of £235,000.

Boutique broker VSA Capital reiterated its ‘buy’ recommendation on the stock, with a target price of 50p.

“Whilst Ceres, in which EDR has a 10% stake, has been shut-in the reservoir pressure has been able to recover hence this strong initial production level. EDR guided to an average for group production of 150-180boepd in the first half of the financial year,” the broker said.

“With our full year forecast at 210boepd, which is driven in part by a full contribution of Ceres in H2 along with recent oil market volatility we leave our estimates unchanged at this time. Gas prices have pulled back from Q3 2018 highs of approximately 84p/therm; however, now at around 68p/therm they remain well supported versus recent prior trading range,” VSA said.

Today’s news will provide some solace for Egdon shareholders who saw the company’s share price plunge last Wednesday after its application for planning consent for the Wressle Development was refused at the meeting of the North Lincolnshire Council Planning Committee.

11.30am: Diversified Gas & Oil beats expectations "on all levels"

Diversified Gas & Oil PLC’s (LON:DGOC) results for 2018 will be “materially ahead of current market expectations”.

The new guidance is based on the performance in the year-to-date following the completion of asset acquisitions earlier this year.

Broker Mirabaud said the trading update beat expectations on all levels.

“Assuming the final two months of this year match up to October actuals (which may be conservative given sharply higher US gas prices) we think that the company is on course to beat our FY18 revenue and EBITDA forecasts by more than 10% and 20%, respectively. Furthermore, although more speculative in nature, the inference for next year is also positive with annualised October revenue and EBITDA more than 10% ahead of our FY19 forecasts,” the broker said.

“As the numbers clearly show DGOC is in excellent financial shape following a period of rapid growth that has seen the company execute more than US$900mln of acquisitions in the past 12 months. In our opinion, today's statement highlights the quality of the two transformational deals struck in H2 (EQT & Core Appalachia) for which this is the first "actual" reported financial data. Furthermore, it shows that management is becoming adept at rapidly integrating new portfolios, sweating the assets harder than previous owners and extracting scale benefits – which serves as a validation of the overall business model,” the broker concluded.

10.45am: Omega Diagnostic clobbered by legacy issues

Interim results from Omega Diagnostics Group Plc (LON:ODX) sent the shares of the medical diagnostics kit supplier sharply lower on Monday.

The company reported a steep fall in first-half revenues following recent disposals and unstable order patterns due to stockpiling by some customers, sending its shares diving 11.4%.

House broker, finnCap, said the interim results were in line with the October trading update, “albeit complicated by the disposal of its legacy infectious diseases business, closure of loss-making German and Indian operations and exceptional profits/write-backs”.

“Progress with VISTECT CD4 (both the 350 and Advanced Disease tests) continues, with the prospect of early order traction thought to be increasingly closer,” the broker noted, as it left its full-year forecasts unchanged.

It left its target price under review pending clarity over the regulatory status of VISITECT CD4, it point-of-care test for HIV patients.

10.00am: Faron flying but Nuformix hands back most of its early gains

Faron Pharmaceuticals Oy (LON:FARN) received a shot in the arm from news concerning its Clevegen, its wholly-owned novel precision cancer immunotherapy drug.

The shares shot up almost 10% as the Finnish company announced that the clinical trial application to conduct a Phase I/II study with Clevegen had been approved by the Finnish Medicines Agency.

The clinical stage biopharmaceutical company said that patient recruitment into the Phase I/II MATINS study is expected to commence shortly at Helsinki and Oulu University Hospitals in Finland, with Clevegen in development for the treatment of selected metastatic or inoperable tumours.

As one clinical trial prepares to begin, the results of a pre-clinical trial have been released by Nuformix PLC (LON:NFX) for its NXP002 fibrosis programme in human idiopathic pulmonary fibrosis (IPF).

Multi-patient tissue studies were performed in partnership with Newcastle University using a leading-edge human tissue trial model that closely replicates the clinical disease.

Cambridge-based Nuformix said the data demonstrates NXP002 candidates strongly inhibit fibrosis ex-vivo (outside the living organism), even in very severely fibrotic patient tissue, giving strong support for treating IPF and other fibrotic lung conditions.

Furthermore, NXP002 demonstrated specific action measured against key inflammatory targets and it outperformed the current standard of care treatment, Esbriet.

Shares in Nuformix were up 1.9% at 2.65p, having reached as high as 2.95p at one point.

8.45am: Convenience stores operator McColl's severely inconvenienced; Dunelm feeling kuschty after directors purchase shares

Another day, another retailer issuing a profit warning; today it is convenience stores operator McColl’s Retail Group PLC (LON:MCLS).

The shares lost almost a quarter of their value as the company indicated it now expects full-year underlying earnings (EBITDA) to be around £35mln; in its half-year results statement in July the company tempered full-year expectations by saying it expected EBITDA to be about the same as the £44mln achieved in 2017.

To be fair to McColl’s, it has been the victim of circumstances beyond its control – namely the collapse of Palmer & Harvey, which caused significant supply chain disruption.

Supermarket giant Morrisons stepped into the breach to supply 1,300 of its 1,556 stores but with management focused on this transition plans for the launch of the Safeway range in its shops.

“We are extremely grateful for Morrisons' support during this period, and whilst the transition is now complete, we are continuing to experience a number of challenges. We are working together to address these issues and to develop an optimal range and promotional offer for the future,” McColl’s said.

There was cheerier news elsewhere in the retail sector, where Dunelm Group PLC (LON:DNLM) shares rose 11.5% to 604.5p after chief financial officer Laura Carr and non-executive director William Reeve bought some shares in the home-wares seller.

Reeve increased his holding to 15,000 shares through the purchase of 2,500 shares at 550.49p a pop; Carr opened her account with the purchase of 25,000 shares at 552.52p a share.

Carr, who has a basic salary of £365,000, has been given options over 105,893 shares as part of a long-term incentive plan; the options may be exercised at 551.5p each on or after November 30, 2021, depending on the satisfaction of a performance condition over the three financial years commencing on July 1 of this year.

Dunelm also got a boost from an upgrade in rating by City broker Peel Hunt to 'buy' from 'hold' with a 750p target price.

Proactive news headlines:

Faron Pharmaceuticals Ltd (LON: FARN) announced that Clinical Trial Application (CTA) to conduct a Phase I/II study with Clevegen, its wholly-owned novel precision cancer immunotherapy drug has been approved by the Finnish Medicines Agency (FIMEA).

Diversified Gas & Oil PLC (AIM: DGOC) told investors that results for 2018 will be “materially ahead of current market expectations”. The new guidance is based on the performance in the year-to-date, following the completion of two asset acquisitions earlier this year.

Mkango Resources Ltd (LON:MKA, CVE:MKA) told investors that the final batch of drill results from the 2018 drill programme, at the Songwe Hill rare earths project, has unearthed the highest grades to date. The company, in a statement, said that the results of the majority of the remaining holes (19 of 21) from the 10,900 metre drill programme saw significant zones of rare earths mineralisation grading above 1% total rare earth oxides (TREO).

Union Jack Oil PLC (LON:UJO) told investors that it has now completed its deal to acquire a 16.665% interest in the West Newton project, in Yorkshire. It comes ahead of an appraisal well drilling programme which is due to spud in the first quarter of 2019.

Shield Therapeutics PLC (LON:STX) has received the go-ahead to file for the US approval of Feraccru, its iron deficiency treatment. The AIM-listed company expects to hear shortly from the US Food and Drug Administration the date in 2019 it will complete its review of the drug.

BATM Advanced Communications Limited (LON:BVC) is to work with chip design giant Arm on solutions for the recently-launched Neoverse ecosystem, which serves the global internet infrastructure market.

Stobart Group Ltd (LON:STOB) said it was trading in line with expectations as it continues to progress its growth plans for its aviation and energy businesses.

Plastics Capital PLC (LON:PLA), the niche plastics product manufacturer, said its full-year performance will be ahead of last year, in line with expectations.

Ceres Power Holdings PLC (LON:CWR) has confirmed press reports that it is in talks with Chinese engines giant Weichai Power regarding a potential further investment in the AIM-listed company.

Active Energy Group PLC (LON:AEG) is to raise just under £1.5mln to kick-start its forestry operations in Canada. Last week, the company published confirmation that it had been awarded management contracts for two huge tracts of forest in Newfoundland and Labrador.

Powerhouse Energy Group PLC (LON:PHE) said it has raised £650,000 through a share placing to support the continuity and expansion of its commercial and engineering efforts.

Arix Bioscience Plc’s (LON:ARIX) portfolio company, Autolus Therapeutics PLC (NASDAQ:AUTL), has dosed the first patient in a Phase 1/2 clinical trial of its AUTO4 therapy for relapsed or refractory TRBC1-positive peripheral T cell lymphoma (PTCL).

ADES International Holding Ltd (LON:ADES) has completed the acquisition of eleven oil and gas rigs located in Saudi Arabia from US firm Weatherford International. In July, ADES agreed to pay Weatherford a total of $287.5mln for 31 rigs, eleven of which are in Saudi, twelve in Kuwait, two in Southern Iraq and six in Algeria.

Shares in W Resources PLC (LON:WRES) jumped in early trading Monday as it delivered the first shipment of tungsten concentrate from its La Parrilla mine in Spain.

Kibo Energy PLC (LON:KIBO) told investors that it has received a request from China-based SEPCOIII for a further extension as it mulls a decision to potentially invest in the company. A previous extension was given in October and the AIM-quoted company said it would now hold a board meeting later this week to consider the request.

Metal Tiger PLC (LON:MTR) has returned to Greatland Gold PLC’s (LON:GGP) share register, buying shares in the market to amass almost a 0.5% stake in the Australia-focused gold, copper and nickel explorer.

Tekcapital PLC (AIM: TEK) said its wholly-owned portfolio company Lucyd Ltd has signed Richard Sherman, cornerback of the San Francisco 49ers NFL team, as its chief brand officer. The firm noted that Sherman will bring a large fan following and international recognition to the Lucyd brand.

Seeing Machines Limited (LON:SEE) has appointed Luke Oxenham as its new chief financial officer (CFO) with immediate effect.


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