LGO Energy
LGO Energy‘s (LSE: LGO) operational update confirmed the presence of recoverable hydrocarbons at its latest development well, GY-676, in its Goudron Field development in Trinidad. As some wells near depletion, group oil production in the second quarter of 2015 fell to an average of just 951 barrels of oil per day (bopd), down from 1,550 bopd in the preceding quarter. But this decline in production should be temporary, as new wells are currently being drilled and three new wells have already been started production in June. Shares in LGO Energy fell 9% to 1.60 pence at the time of writing.
Shares in LGO Energy have already benefited from a series of positive news flows concerning its production outlook and its low cost of production, and it seems that much of this anticipated production growth has already been priced into its share price. With so much optimism surrounding the stock, I cannot help but worry about what further production delays would do to its share price.
Premier Farnell
Shares in electronics group Premier Farnell (LSE: PFL) fell 15% to 141 pence at the time of writing, following the announcement of a downbeat trading update today. Year-on-year sales growth in the second quarter of 2015 is expected to have slowed to just 1.2%, down from 5.4% in the first quarter. Supply constraints for the Raspberry Pi were cited as a major factor for the slowing revenues, but there also seems to be a slowdown in its core North American and the UK markets.
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Management now expects adjusted operating profit in the first half of 2015 will be approximately 10% lower than the previous year. Analysts had previously expected Premier Farnell would turnaround its trend of stagnant revenues and declining profitability by this year, but it appears that the company’s recovery has not yet taken hold. Unless there are signs that the recovery could be sustained, investors will probably be better off avoiding Premier Farnell’s shares.
St James’s Place
St James’s Place‘s (LSE: STJ) half-yearly report seemed to confirm that the momentum of growing client funds is continuing. It saw strong net inflows of funds under management of £2.7 billion in the first half of 2015. The asset manager also announced today that it had agreed to buy Bristol private wealth manager and broker Rowan Dartington for £34 million.
On a more downbeat note, its half-year pre-tax profits fell 6.9% to £72.9 million. Much of this was due to the unexpected increase in the Financial Services Compensation Scheme levy, which took out an additional £13.1 million from its operating profits.
As the trend of cash net inflows is more important to the company’s long-term financial health than the temporary dip in earnings, St James’s Place could still be worth a buy as a long-term holding.
Lancashire Holdings
Shares in Lancashire Holdings (LSE: LRE) fell 4.6% to 640 pence by morning trading, as investors became concerned about intensifying competition in the specialty insurance markets. Lancashire benefited from a paucity of major catastrophe losses, but it suffered some substantial losses in the offshore energy, aviation and space lines of insurance. The insurer’s combined ratio fell from 70.6% in the same period last year to 75.1% in the first half of 2015.
As a conservative underwriter, Lancashire has been willing to see its net premiums written fall 43% to £284.3 million. But despite underwriting so much less risk and suffering from some unexpected insurance claims, Lancashire is still very profitable and continues to have an industry leading combined ratio. Adjusted EPS for the first half of 2015 fell just 15% to $0.46. With a forward P/E of 11.8, shares in Lancashire Holdings are still very attractive.
