Serco (SRP) is becoming a classic falling knife share, Questor said in The Sunday Telegraph. Its loss of the contract to run London’s Docklands Light Railway caps a grim 12 months for the outsourcing group. The problem for Rupert Soames, the new Chief Executive, is that Serco is in danger of being locked into loss-making contracts for years as costs increase. The closer management looks into the company, the more problems it finds. Yet the shares are still not cheap despite downgrades. Steer well clear.
If you like a risk and think Balfour Beatty (BBY) shares have hit bottom, now is the time to buy, Danny Fortson wrote in The Sunday Times. Shares in the construction company have fallen by a third since March as it has published two public warnings since its annual results. The latest came on July 3rd when Balfour revealed problems at its engineering services arm. Most of its troublesome over-budget contracts run out soon and it is a big, diversified company. Things could get worse but the company is also vulnerable to a takeover with rumours of private equity interest. If investors are feeling lucky they may want to have a go, Fortson said.
Shares of N Brown (BWNG) have fallen almost 30 per cent this year and now offer good value, Midas said in The Mail on Sunday. Chief Executive Angela Spindler has been in post for a year and has cut the outsize clothing retailer’s number of brands to three. She is also opening more stores because even if shoppers like to buy online they often want to try them in a shop first. Within a few years almost all her target customers will be within a 45-minute drive. She has accelerated N Brown’s move into the US as part of a general injection of life.
The Sunday Times’s Danny Fortson thinks a rise in Hays’ (HAS) dividend is in the offing. The recruiter’s annual profit is expected to be about £141m, around the level when it said it would increase the dividend. It would probably be a small rise and not all that soon but it’s better than nothing, Fortson said in his Inside the City column.
Quadrise Fuels’ (QFI) shares have jumped from 10p in October 2012 when Midas tipped them to 35.25p but The Mail on Sunday tipster thinks there is more to come. Its low-cost, greener fuel for the shipping and power industries could be revolutionary. Last week it revealed that tests with the world’s biggest shipping firm, Maersk, had gone well. Those who bought the shares should sell a quarter of them to bank some profits and adventurous newcomers should take a punt.
BUSINESS PRESS HEADLINES:
Christine Lagarde has hinted that the International Monetary Fund may be preparing to cut its global growth forecasts as she warned that a pick-up in economic activity could prove “less robust than expected” amid “depressed” levels of investment. The head of the Washington-based fund suggested that efforts from central banks to accelerate a recovery in the global economy may now be “finding their limit” and urged governments to inject a “booster shot” by increasing investment in areas such as infrastructure, education and health. - The Daily Telegraph
Mothercare's (MTC) decision to reject a £270m takeover approach from US rival Destination Maternity has won the backing of two leading institutional shareholders, Fidelity and Allianz Global Investors. Support for the board's position comes despite Destination Maternity's Chief Executive, Ed Krell – a former investment banker – last week flying to the UK to press the case for a deal. – The Guardian
Burberry (BRBY) has made an eleventh-hour attempt to clarify why it has awarded a £440,000 allowance to Chief Executive, Christopher Bailey, issuing a supplementary note to shareholders. The move came as the fashion house braced itself for a protest vote from shareholders unhappy at pay arrangements for Bailey, who was promoted to chief executive in May. As well as his cash allowance, investors are concerned about £22.5m of "golden handcuff" and other share awards in the last year. – The Guardian
Business leaders are poised to ramp up investment this year in spite of the general expectation that base rate will as much as double in the next 12 months. Finance directors at big UK companies plan to step up recruitment and boost spending as they consider now is the right time to start taking risks, in a clear sign that recovery is beginning to inspire confidence. Deloitte’s quarterly survey of chief financial officers found that 57 per cent “expect discretionary spending to increase”, the highest level since the survey began seven years ago. - The Times
Mamas & Papas, the upmarket prams and maternity wear chain, is considering a sweeping store closure programme as part of a rescue plan. The struggling chain, which is battling growing losses, is in talks to be saved by the financiers behind London’s famous Liberty department store. BluGem, a private equity firm, has offered to inject about £20m into the company in return for a majority stake but it is also keen to reduce the number of Mamas and Papas high street stores. The retailer has around 55 shops. - The Daily Telegraph
More than 150 businesses from across the solar power industry and beyond have joined forces to warn David Cameron of the threat to a sector that could be worth almost £80bn globally by the end of the decade. The coalition of companies, which includes furniture giant Ikea, will submit a letter to the Prime Minister today urging him to back the “thriving” sector. - The Scotsman
