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“The FTSE 100 is flashing red after being dragged down by companies in the utilities, mining, tobacco, pharma and banking sectors. The blue chip index traded 0.35% lower on Thursday morning, making the UK an outlier among European markets. In Asia, Japan’s Nikkei 225 index continues its strong run since early February by nudging up another 0.15%,” says Russ Mould, Investment Director at AJ Bell.
Purplebricks
“Purplebricks is a classic case of trying to do too much, too fast. Success in the UK gave management confidence they could take over the world. Alas, that has proved nothing more than a pipe dream.
“Efforts to crack the US and Australia haven’t resulted in the expected revenues and so the company has been forced to issue a profit warning, triggering a 38% slump in its share price.
“Chief executive Michael Bruce is rolling up his sleeves and taking on responsibility of running the day-to-day operations for the US operations, as well as leading the wider group.
“Mr Bruce spent nearly a quarter of a million pounds on Purplebricks shares just before Christmas. He has now seen approximately £76,000 wiped off the value of that investment, adding to today’s trading-induced headache.
“The overseas setbacks will be a huge embarrassment for the company which has tried to be a pioneering force in the real estate sector. However, the board have plenty of experience of dealing with mishaps. A few years ago it was accused of exaggerating levels of instructions and sales figures, and more recently an analyst claimed it was hiding the true number of homes it sells.”
Centrica
“British Gas owner Centrica is being voted down by shareholders on fears it will stop paying generous dividends in the future.
“A warning that the energy price cap will constrain cash flow in 2019 could be taken as code for a potential dividend cut. You also have to remember that a November trading update saw the company explicitly link the destiny of the dividend to meeting targets on debt and cash generation.
“Income is a big reason for owning utilities stocks, where regulated and therefore predictable revenue has historically underpinned generous payouts.
“But while Centrica’s payments were maintained at 12p per share for 2018, the firm made no mention of 2019’s potential dividend as it announced plans for significant cost-cutting.”
“Beyond the yield it is tricky to see what investors might find exciting about the stock. It is still losing customers and its oil and gas production business is expected to see falling volumes this year.
“The company is targeting the sale of non-core businesses as it looks to keep borrowings under control, with the £230m sale of its Clockwork home services arm in the US providing a good start towards a £500m target for 2019 as a whole.”
These articles are for information purposes only and are not a personal recommendation or advice.