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“Against last Friday’s widespread sell-off in global markets, Monday’s 0.2% fall in the FTSE 100 could have been a lot worse. The minimal decline would suggest that investors aren’t in panic mode despite the negative headlines about new troubles in the bond market. “Ocado, Tesco and Vodafone are among the worst FTSE 100 performers on Monday morning, with Schroders and Severn Trent heading up the select few stocks in positive territory,” says Russ Mould, Investment Director at AJ Bell.
French Connection
“The retailer has confirmed media speculation that it is thinking about future options for the business including putting itself up for sale. This follows reports that founder and 42% shareholder Stephen Marks wants to sell his large stake.
“French Connection has long been seen as a value trap – the business contains hidden value but ongoing problems with trading have seen the share price remain weak. A sale of the business could help to lift it out of the ‘trap’ as long as the suitor is prepared to invest some time and money in sorting out the bad bits and nurturing the good bits.
“At the half year stage (31 July), French Connection had a £12.8m net cash position which equated to nearly one third of the company’s market value before today’s news triggered a hike in the share price.
“The company is confident it will make a breakthrough at the end of the current financial year (31 January 2019) with a return into profit.
“The retail arm has been poor for a long time, yet its wholesale business has been doing much better. It recently sold the Toast mail order business for £23.3m, providing cash to support its working capital requirements and potentially trigger a resumption of dividend payments.
“It is easy to see why someone might be interested in buying the business, as long as they acknowledge there will be some turnaround work to undertake and that rewards may be further down the line.
“A potential buyer would have to have to look at the company’s leases and create a plan to streamline the estate of physical stores. It could seek to do more licencing deals as this is proving to be a resilient part of the business, so why not focus more attention here to accelerate growth? And there could be opportunities to make the wholesale business even larger.
“There could even be an opportunity to capitalise on French Connection’s brand awareness and revitalise the brand strength which it previously enjoyed in the 1990s.”
Lancashire
“Insuring against catastrophes, which by their very nature are unpredictable, means enduring spells of volatile trading.
“This is the key takeaway from today’s news from Lancashire Holdings, which is likely to slip into a third quarter loss thanks to up to $75m worth of losses linked to its Marine business and exposure to hurricane Florence and typhoons Jebi, Mangkhut and Trami.
“A more pressing long-term concern is the continuing drift in premiums for non-life insurance and, for the most part, a benign claims environment.
“This has put pressure on Lancashire’s earnings and dividends, undermining its credentials as an income stock. As a result, in the last five years the shares have lost nearly 30% of their value.”
These articles are for information purposes only and are not a personal recommendation or advice.