FTSE 250 movers: Wood Group up on Jefferies upgrade, Home REIT down again

FTSE 250: 18,790.81, down 0.66% at 1453.

Jefferies upgraded Wood Group on Monday to ‘buy’ from ‘hold’ and hiked the price target to 190p from 150p, bosting the share price.

This marked the first upgrade to buy in more than five years.

"Improved medium-term cashflow outlook sees our discount cash flow valuation almost double, and we view the weak market reaction and analyst downgrades since the capital markets day as an opportunity," the bank said.

Jefferies said it finally has confidence that the years of cash exceptionals since the Amec Foster Wheeler deal are under control and recommended that investors "see the positive Wood through the Trees".

"We have confidence in WG's guidance on cash exceptional outflows given at its 29 Nov 2022 CMD and therefore finally see a route to reducing cash exceptionals which, in parallel to other CMD guidance on revenue & EBITDA margin, means the balance sheet will remain in its target range of 0.5 - 1.5x (albeit at the top end of the range) and Wood will be able to focus on delivering growth and returns in its target markets," the bank said.

Jefferies said it continues to see headcount as a limiting factor in revenue growth for a reimbursable business which is why inorganic bolt-on M&A is important. However, in the absence of M&A, it sees revenue growth targets given at the CMD as achievable and therefore overall sees the stock trading at an attractive discount to peers.

Home REIT shares fell after the company said it was carrying out enhanced audit procedures, which include a detailed review of the material allegations made against the company and its advisers by short sellers.

The company on Monday said continues to "work constructively" with its auditor to ensure that the full year results for the period to August 31 can be published as soon as practically possible and expects this to be no later than the end of next January.

It also pledged to strengthen its management team and bring in independent pre-purchase valuers as part of several changes to boost shareholder confidence after a number of allegations in recent weeks. The company will also appoint a new non-executive director and hire a firm to carry out property management services on its portfolio.

Home REIT said its portfolio continued to operate effectively, with rents flowing from tenants. It also declared an interim dividend of 1.38p a share for the three months to August 31.

The sheltered housing investment trust last week faced new allegations that it misled shareholders and owes them redress for “significant losses”.

Law firm Harcus Parker, which specialises in mounting class actions, said it was considering suing Home REIT on behalf of investors after its research allegedly found that the trust had “used investors’ money in a way which runs contrary to what investors were told”.

Home REIT went public in October 2020 and then tapped investors for £850m, which it spent on a portfolio of almost 12,000 beds in houses and small blocks of flats let to the homeless.

Last month it was attacked by Viceroy Research over the viability of its portfolio, while activist investor The Boatman Capital also weighed in, demanding the resignation of Home REIT's chairwoman Lynne Fennah and Marlene Wood, the chairwoman of its audit committee.

Boatman Capital accused the company of being “over-optimistic in its assumptions” on the value of its portfolio. The allegations meant that the company’s results, which were due two weeks ago, had to be delayed.

Viceroy published a report last month accusing the firm's properties of being run by "bad actors", prompting a slump in the share price.

Following the report, Home REIT on Monday said that besides hiring additional senior level investment professionals, it will appoint "an experienced and specialist national property management firm, to carry out a full suite of property management services, including rent invoicing and collection and tenant liaison and monitoring."

Further, it aims to recruit a non-executive director with a "particular focus on direct experience in property and environmental, social and corporate governance matters."

Online fashion retailer Asos and its lenders are reportedly discussing whether to hire a restructuring expert following the departure of its chief financial officer. The news sent the shares lower.

Bloomberg cited people familiar with the matter as saying that a number of turnaround professionals held informal talks about a role, which would sit below executive level, but no decision has been made.

Asos’s lenders include Barclays, HSBC and Lloyds Banking Group. The banks are being advised by AlixPartners and Clifford Chance.

Any appointment could potentially provide further support to Asos as it seeks to revive its fortunes after a steep drop in performance since the pandemic, Bloomberg said.

The talks with Asos’s lenders were prompted after Katy Mecklenburgh’s departure was announced, and continued into last week. Although the retailer successfully renegotiated the terms of its £350m revolving credit facility in October, the extension only lasts until 2024 and Asos will need to renew discussions with lenders on the loan again next year.

FTSE 250 - Risers

Volution Group (FAN) 377.50p 6.64%
Wood Group (John) (WG.) 130.80p 3.20%
Drax Group (DRX) 621.50p 2.90%
PureTech Health (PRTC) 287.00p 1.95%
NCC Group (NCC) 201.50p 1.77%
FDM Group (Holdings) (FDM) 759.00p 1.74%
The Renewables Infrastructure Group Limited (TRIG) 130.40p 1.72%
Coats Group (COA) 68.70p 1.63%
National Express Group (NEX) 155.60p 1.57%
Essentra (ESNT) 234.50p 1.52%

FTSE 250 - Fallers

Home Reit (HOME) 41.90p -9.70%
Mitchells & Butlers (MAB) 128.20p -6.56%
Aston Martin Lagonda Global Holdings (AML) 151.20p -5.77%
Currys (CURY) 66.10p -5.57%
Carnival (CCL) 619.80p -5.37%
ASOS (ASC) 556.00p -4.96%
888 Holdings (DI) (888) 91.80p -4.42%
International Distributions Services (IDS) 203.50p -4.28%
Marks & Spencer Group (MKS) 118.60p -3.62%
Synthomer (SYNT) 118.60p -3.58%