FTSE dealt a blow, activist targets Barclays, major setback for Micro Focus and Accrol kicks up another stink

“The FTSE 100 has been dealt a blow at the start of the new trading week, falling more than 1% to 7,090. Weakness in miners and utilities is principally to blame,” says AJ Bell Investment Director Russ Mould.

Barclays

“Banking group Barclays has topped the FTSE 100 leader board this morning on news activist investor Sherborne has taken a 5%-plus stake in the business.

“The vehicle, backed by the respected Edward Bramson, has previously helped turn around several smaller businesses including promotional products firm 4imprint, chemicals outfit Elementis and telecoms testing specialist Spirent, though Barclays is in a different league.

“The bank says it is ‘engaging’ with Sherborne which has likely targeted the group due to the discount it trades relative to the rest of the sector. A historic price to book value of 0.6 times compares with one times at both Lloyds Banking and HSBC, for example.

“It will be interesting to see how this situation plays out given Barclays is arguably impacted by issues over which it has limited control, including an ongoing fraud investigation linked to a Qatari funding deal in 2008.”

Micro Focus

“The cracks in Micro Focus were clearly visible at its half year results in January and today’s warning confirms the problems have got worse.

“The recent interim results were the first to include a contribution from last year’s $8.8bn acquisition of HPE’s software assets. The contribution from the acquired assets and performance from older products was disappointing, hence why its shares experienced a big fall.

“Today the shares suffer another large decline as Micro Focus says its year-on-year revenue decline will be greater than expected.

“Large acquisitions are inherently risky as they come with integration challenges. Micro Focus appears to have underestimated these challenges and is now suffering.”

Accrol

“Investors who bailed out toilet paper group Accrol last year with a large cash injection will today be fuming at the company’s appalling trading update. Higher costs are to blame for the share price kicking up another stink and falling more than 50%.

“The shares are now trading at 12.5p which represents an 87.5% decline since the company joined the stock market in June 2016.

“Like drinks distributor Conviviality last week with its multitude of problems, Accrol is another example of a business where management don’t appear to have a grip on what’s really going on.

“Accrol’s trading update says the magnitude of cost escalation has only ‘very recently’ become fully apparent to the board of directors. However, the company has been aware of cost pressures for some time as that was a key reason behind last October’s major profit warning.

“Shareholders will clearly want to know why management now seem so surprised about cost issues.”

These articles are for information purposes only and are not a personal recommendation or advice.