Shares in the FTSE 100 plumbing and building materials supplier rose briskly amid hopes of special dividends
Wolseley (LSE: WOS.L – news) rose above a lacklustre London market on talk the plumbing and building materials supplier is poised to make hefty cash returns to investors.
Shares in the FTSE 100 company climbed 56p, or 1.7pc, to £34.17, boosted by hopes Wolseley will pay a series of special dividends in the next five years.
“We believe there is potential to see substantial capital returns to shareholders over coming years,” analysts at Credit Suisse (NYSE: CS – news) told clients. “Specifically we see a capital return of £14 a share over the next five years, a sum equal to c.40pc of [the] current market cap and implying an annualised average yield of 9pc.”
Given the company presently has a market value of approximately £9.1bn, that would imply returns totalling about £3.6bn. Wolseley paid a £300m special dividend last year and the Credit Suisse analysts said there would be further “material-sized” payments.
“We assume the group will pay a £325m 117p a share special dividend this year, and growing every year thereafter for at least the next four years.”
Buoyed by the prospect of bumper payouts, Wolseley outperformed the FTSE 100, which finished a directionless session by closing down 7.02 points at 6,674.74. There was a raft of corporate updates for investors to digest. Associated British Foods was the biggest blue-chip riser, boosted 240p, or 8.8pc, to £29.62 by impressive half-year results from its Primark business and news that the clothing chain would make its debut in the US.
It was the same in the FTSE 250, where Spirent Communications (Other OTC: SPMYY – news) , up 7.4, or 7.7pc, at 104p, topped the mid-cap leaderboard after first-quarter numbers that showed a 16pc jump in revenues to $ 111.9m (£66.7m) and a 9pc increase in operating profit to $ 8.3m. As Spirent suffered a 63.8pc drop in annual profits and a 12.5pc slide in revenues last year, the results pleased. Similarly, encouraging first-half numbers from Fenner , the maker of industrials conveyor belts, sent its shares 25 higher to 415p.
Hammerson , the shopping centre owner, advanced 6½ to 580½p after reporting that since the start of the year, UK and French leases were agreed at 8pc and 1pc above estimated rental value (ERV) respectively, and that “there has been evidence of ERV growth in selected units”. Jefferies analysts said the return of selective ERV growth was the “key comment” from the statement.
Other updates did not receive such warm welcomes. Moneysupermarket.com Group lost 7.2 to 179.4p after saying is had seen 5pc EBITDA growth in the first quarter, lagging the 8pc rise in revenues. Steve Liechti, analyst at Investec (LSE: INVP.L – news) , noted that profit growth had been “held back by the timing of marketing campaigns”. Indeed, marketing costs jumped about 20pc during the period.
Reed Elsevier (Frankfurt: RDEB.F – news) , the owner of the LexisNexis database, dipped 11 to 874p following first quarter numbers that Numis said had harboured “no surprises”.
Staying with the day’s fallers, Drax Group (LSE: DRX.L – news) brought up the rear in the FTSE 250, slumping 90.1, or 11.9pc, to 657½p accounting for the fact it was trading ex-dividend after the Government unexpectedly said that one of the power group’s coal units was not eligible for a subsidy to support its conversion to biomass.
Gulf Keystone Petroleum , known for its loyal fanbase of private investors, fell 5¾ to 86p its lowest since July 2010 on no news, but heavier-than-normal trading volume. Unnerved by the decline, punters took to the bulletin boards to call on Todd Kozel, the explorer’s chief executive, to buy shares as a show of confidence.
Elsewhere in the oil and gas sector, deal-making drew attention to South-East Asia-focused explorer Salamander Energy (Other OTC: SALDF – news) , which closed 7¾ higher at 112¾p after PTT Exploration & Production (PTTEP) bought Hess Corp’s stakes in the Sinphuhorm and Pailin fields in Thailand for $ 1bn. The transaction is of interest to Salamander shareholders, as the London-listed explorer has a 9.5pc stake in Sinphuhorm. Lucas Herrmann, analyst at Deutsche Bank (Xetra: DBK.DE – news) , told clients that “commentary from the PTTEP CEO suggests expanding the gas business was the main rationale for the acquisition, which bodes well for a more active work programme at Sinphuhorm”.
Centamin , the gold miner embroiled in a legal dispute in Egypt, was another riser, gaining 3.05 to 55.95p amid speculation that legislation will be passed that will aid the company’s cause. Finally, Thomas Cook (Xetra: A0MR3W – news) was lifted 4.4 to 178p by Barclays (LSE: BARC.L – news) analysts, who said they expected tour group to resume dividend payments in 2016.
= Iofina (Frankfurt: IF7.F – news) investors suffer second day of heavy losses =
Traders betting on a recovery in Iofina ’s share price had their fingers burnt on Wednesday.
The group, which produces iodine from waste water generated by oil companies, plunged 33, or 59.2pc, to 22¾p after warning that production would be “materially below current market expectations” following a reduction in its brine supply.
The share price drop followed a 15.5pc tumble on Tuesday, when Iofina’s Montana water rights application was rejected, hitting its planned project to supply water to the fracking industry.
One dealer, who described Iofina as “the horror story of the day”, questioned why the bad news was not released in one go, rather than over two days. A spokesman could not be reached for comment on the matter. Stop-loss orders and margin calls were thought to have exacerbated today’s fall.