The Times 13/08/19 - Vox Markets | Vox Markets

The Times 13/08/19

Talks are under way with its bondholders over a further £150 million cash injection to ensure that Thomas Cook Group (TCG) does not run out of cash over the coming winter. The money would come on top of a proposed £750 million recapitalisation that will hand control of the business to Fosun International, the Chinese conglomerate that has an 18.1% stake. In a statement yesterday, Thomas Cook said that the £150 million would “provide further liquidity headroom through the coming 2019-20 winter cash-low period and ensure the business can continue to invest in its strategy”. Analysts said that recent market fears caused by the collapse of Late Rooms and Super Break, the holiday providers, and a profit warning from On the Beach were likely to have been a factor in the decision to seek an extra cash buffer. 

An American bear raider has dismissed as “preposterous” a claim by Burford Capital (BUR) about market manipulation of its shares, calling it an act of “pure desperation” to divert attention from the litigation funder’s own actions. Burford, whose shares plunged last week after a highly critical report by Muddy Waters, said yesterday that it had found evidence from an analysis of trading. More than £1 billion was wiped off the value of the stock last week after Muddy Waters accused the company of “egregiously misrepresenting” its return on investments.

Shares in Eve Sleep PLC (EVE), an online mattress retailer, have been frozen because of a possible merger with a loss-making private rival. Eve Sleep, which has lost 95% of its value since it was floated in 2017, believes that an acquisition of Simba Sleep could speed up a restructuring plan and improve its chances of making a profit from selling directly to consumers. In a statement to the stock market yesterday, Eve said that it had suspended shares to allow it to analyse whether a deal would need to be structured as a reverse takeover, and as such whether a general meeting would need to be held to seek the permission of shareholders. A reverse takeover allows private companies to become publicly traded without a formal stock market flotation process.

Tullow Oil (TLW) said that its Jethro well had encountered even more oil than the 100 million barrels it had estimated before drilling. Paul McDade, its chief executive, said: “It looks like we have something we would develop. It looks like we have a long-term business in Guyana.” Guyana has been one of the areas of most excitement in the industry since Exxon Mobil, the American oil major, struck oil in 2015. Tullow said that the discovery “significantly derisks” other potential prospects that it could explore. Tullow aims to begin drilling next week at a second well, named Joe, targeting a different geological formation in slightly shallower water nearer to the shore. Carapa, a third well in which it has a stake, is scheduled to be drilled later. Tullow has a 60% stake in the Orinduik licence. Total, the French energy group, owns 25%, while Eco (Atlantic) Oil & Gas NPV (DI) (ECO), which is listed in Canada and on Aim, London’s junior stock market, owns 15%. Eco chief executive Gil Holzman, said that it was a “revolutionary moment” and a “transformational event” for the company, which reported a net profit of only C$4.2 million (£2.6 million) in its last financial year.

M&C Saatchi (SAA) startled the City yesterday by warning of a £6.4 million hit to its annual results as a result of “incorrect accounting”. The Aim-listed advertising and public relations group disclosed that a “misapplication of accounting policies” had led to some fees that were yet to be received being recognised erroneously as revenues. In addition, some assets that the company no longer used had been included incorrectly on its balance sheet. The mistakes were discovered by an internal review set up in May after KPMG and the company’s audit committee had raised concerns. Executives are ready to commission an independent review “to be doubly sure”, although they said they were confident that they had found “the full extent” of the errors.

The auditor of Staffline Group (STAF) has resigned as Britain’s big accounting firms look at their client lists to ensure that they are not likely to cause embarrassment. PWC stepped down this month and agreed not to take part in the recruitment business’s tender to find a new auditor. The Big Four firm indicated that a section of Staffline’s most recent annual report, in which it warned that there was “material uncertainty” about the group’s ability to continue as a going concern, was connected to the resignation. In Staffline’s 2018 annual report, PWC said that lenders had waived breaches of covenants attached to its debt facilities and warned that further breaches were likely for the 12 months from June 30, 2019, because of increased debt and lower profits. It said that the business was reliant on the continuing support of its lenders.

Cenkos Securities (CNKS) was in turmoil yesterday after staff resigned, revenues slumped and a leading shareholder attacked the board’s choice of chief executive. Last November it said that Jim Durkin, a founder and former boss, would be taking charge again from Anthony Hotson, who replaced him in 2017. His reappointment was snarled up with regulators and faced opposition from Crystal Amber, an activist investor with a 7% stake in Cenkos. Jeff Hewitt, 71, acting chairman, said yesterday that Mr Durkin, 59, had been approved by the Financial Conduct Authority and would start “with immediate effect”. Mr Hotson, 65, will step down immediately. Richard Bernstein, head of Crystal Amber, said: “We want someone to lead the consolidation of the sector. Cenkos should be acquiring mid to small-cap brokers. I’m not sure that’s Jim’s skill-set.”

Revenues are up by a tenth at Clarkson (CKN) this year, even though the shipping and financial conglomerate has had to grapple with stormy economic conditions and market fears of political uncertainty. Executives said that trading had been “robust”, but they acknowledged that its financial services division had endured a “particularly challenging” six months. Andi Case, 52, chief executive, said that investors’ confidence had been “impacted” by economic and political uncertainty and that this had been “particularly evident in the capital markets, which have remained all but closed in the first half”. However, pre-tax profits rose from £18 million to £19.2 million, helped by a 10% rise in revenues to £167.8 million.

Tempus – Independent Oil & Gas (IOG): Hold. Perhaps best to wait until Calenergy transaction is formalised and the results from the Harvey well are in

Tempus – SSE (SSE): Buy. Retail disposal is a sideshow to offshore wind

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Mentioned in this post

BUR
Burford Capital
CKN
Clarkson
CNKS
Cenkos Securities
ECO
Eco (Atlantic) Oil & Gas NPV (DI)
EVE
Eve Sleep PLC
IOG
Independent Oil & Gas
SAA
M&C Saatchi
SSE
SSE
STAF
Staffline Group
TCG
Thomas Cook Group
TLW
Tullow Oil