MARKET REPORT: Defence contractor Chemring falls 8% after veiled profit warning about ‘disruption’ at its sites
Investors are a sceptical bunch, and the City was clearly not quite convinced by Chemring’s attempt to reassure the market yesterday.
The troubled defence contractor, which has equipment on the Curiosity Mars rover programme, said 85 per cent of its profit and 60 per cent of its revenue will be made in the second half of the year because of ‘planned and unplanned’ disruption at several of its sites.
Many in the City will have read the news as a veiled profit warning, despite Chemring also saying that its full-year expectations have not changed.
Defence contractor Chemring said 85 per cent of its profit and revenue will be made in the second half of the year because of ‘planned and unplanned’ disruption at several of its sites
It is still suffering disruption to flare manufacturing operations following an explosion in Salisbury last August that killed one employee and injured another.
And it has now said that as well as a planned temporary closure to a plant in Australia, its sites in Tennessee and Norway both ‘experienced the failure of manufacturing equipment’.
Investors will find out the full-scale of the disturbances when it releases first-half results on June 5. Yesterday’s news sent Chemring shares down by 7.9 per cent, or 12.2p, to 142.8p last night.
A profit warning for engineering group Renishaw sent the FTSE 250-listed group’s share price down 11.2 per cent, or 470p, to 3730p.
Stock Watch – Xaar
Shares in tech company Xaar fell after revenues slumped 36.5 per cent and pushed the firm into the red.
Cambridge-based Xaar makes the printer part that transfers ink on to paper – known as the printhead.
Revenue plunged from £100million in 2017 to £63.5million last year, partly driven by poor sales of printheads used to decorate ceramic tiles.
It made a £12million loss compared with an £18million profit last year.
Xaar shares shed 7 per cent, or 8.7p, to 116.3p last night.
Renishaw, which makes components such as robotic equipment that can be used in brain surgery, said it expects pre-tax profit to be £123million to £141million, down from £146million to £166million estimated in January.
It expects a slowdown in demand in Asia for its products to continue throughout the rest of the financial year.
AJ Bell investment director Russ Mould pointed out Renishaw’s previous profit stumbles were during notable global economic upheavals such as the 1997 Asian debt crisis and financial crisis between 2007-2009.
He said the latest could reflect a ‘slowdown in the smartphone market and the bloated inventories which have caused so much difficulty for silicon chip makers’.
Elsewhere on the FTSE 250 – where a lot of the headline corporate news was concentrated yesterday – shares in energy group Enquest rallied as it said revenue and profit rose, and issued a confident outlook on production at its flagship Kraken field in the North Sea. Shares rose 11.3 per cent, or 2p, to 19.64p.
The FTSE 250 moved into the red yesterday, losing 0.21 per cent, or 41.40 points to 19,347.58, while the FTSE 100, on the other hand, rose 0.88 per cent, or 64.30 points to 7355.31.
Legoland, Alton Towers and London Dungeon operator Merlin shed 5.5 per cent, or 20.2p, to 348.7p after Berenberg cut its rating to ‘Sell’ from ‘Hold’.
Analysts said they struggle to see the company achieving earnings growth in any division this year despite its cost-saving plan and investments in new sites and hotels – though they did say the company was ‘priced for perfection’.
And Crest Nicholson shares fell 8.9 per cent, or 34.6p, to 354.2p after JP Morgan cut its target price for the housebuilder in a sector review note – from 440p to 400p. Crest shares also went ex-dividend yesterday, meaning its shares no longer qualify to receive the most recently declared payout.
Kier shares lost significant ground for the second day running after it posted a first-half loss of £36million on Wednesday.
Kier’s stock fell 7 per cent, or 30.2p, to 399.2p per share.
And finally, Diaceutics shares rose 15 per cent on its first day of trading on AIM.
Belfast-based Diaceutics, which provides data analytics services to big pharma companies, raised £17million at a placing of 76p – in the first float on AIM so far this year.
Shares rose 15.13 per cent, or 11.5p, to 87.5p.