Stock of the day 30/06/2015 – Serco Group PLC/Anite PLC

It’s a case of differing fortunes for Wednesday’s reporting companies, as both Serco Group and Anite announce their latest results.

The precipitous declines Serco Group has seen since mid-2013 haven’t abated this year and the company is in a unenviable position ahead of its half year results on Wednesday. Serco’s nightmare November 10th 2014, which saw the stock plunge 32% after the announcement that Serco was to raise £550 million through selling shares whilst cutting its profit forecasts and writing off £1.5 billion due to contract losses, exacerbated the company’s already dire situation, leaving it at £1.60 by the start of 2015. That’s a long way from the £6.89 price it was trading at in July ’13.


(Source: IT-Finance.com 30/06/2015)

A flat January gave way to a change in fortunes across February, and Serco rose from £1.54 to £2.33 during the second month of the year. However, its semi-annual report on March 12th wiped away much of February’s exuberance, with the stock falling 11% from £2.06 to £1.84 as the company announced a £1.3 billion write-off in relation to loss-making contracts, an almost absurd drop from the £98.4 million profit it made in 2013. The news at the end of March that Serco was to sell its Great Southern Rail business for a mere £2.5 million caused further market conniptions, and the stock fell another 15.5% from £1.63 to £1.38.

Since then Serco has posted steady declines, and is currently trading at £1.19 (30/06/2015, IT-Finance.com), only around 6p from its recently hit 12 year lows. And with a lack of dividend on the horizon for investors in 2015, and the collapse of a takeover deal for its Indian business by Blackstone, Serco is at a consensus rating of ‘hold’ with an average target price of £1.64.

Like Serco, Anite had a disastrous 2013, but some M&A news has left it in a very different position ahead of its full year results on Wednesday. From a peak of £1.63 in February ’13 Anite had fallen all the way down to a low of £0.73; it managed to enter 2014 slightly higher at £1, but a disappointing year saw it tumble to £0.80 by the start of 2015.


(Source: IT-Finance.com 30/06/2015)

A better than expected projection for its third quarter trading in February caused a 7% jump for the tech company, from 82p to 88p; this rise was maintained until it hit a peak of 94p by February 19th. Yet this price couldn’t be sustained, and by the end of April the stock had steadily declined back to 84p. Another bullish comment on its full year results in the middle of May pushed Anite up by 8% to 91p, and like in February sparked a run of gains that eventually led to its breaking the £1 mark at the start of June for the first time since January ’14.

However this was all small fry compared to the jump Anite made on June 17th; news the company had accepted a £388 million cash-bid from Keysight Technologies pushed the stock 25% higher to £1.28, its highest price since August 2014. Since then Anite has maintained this level, and is at a current trading price of £1.27 (30/06/2015, IT-Finance.com). A combination of the Keysight deal, and the company’s expected £120.5 million in sales with a pre-tax profit of £22.2 million has left Anite with a consensus rating of ‘buy’ with an average target price of £1.06.

Tuesday’s stock news:

A rocky few months was just made worse for Vedanta Resources, which fell by 7.3% this morning after Deutsche Bank downgraded the stock to ‘hold’ due to issues with the prices of iron and copper. On top of this were reports that Zambia is intending to cut power to its mines by around 16%, something that would have knock-on events for Vedanta, leading investors to flee the mining stock as Tuesday continued.

There was similarly bad news for Foxtons; a ‘sell’ rating from Citigroup pushed the property stock lower by around 4%, adding to the decline the stock has undergone since the start of June. The month has seen the company’s recent acquisition uSwitch asked to provide information to Ofgem in relation to a competition law investigation alongside reports of an impending legal action from the company’s landlords. Citigroup itself referenced Foxtons’ ‘limited scope for margin expansion’ and lack of ‘consolidation optionality’ when announcing its downgrading.