Wave of cash shells miss LSE deadline

Three AIM-listed cash shell companies were suspended on the first day of trading this year, just three months before the deadline for cash shells to complete acquisitions.

The stocks of mining investment groups Uranium Resources and Sino-Asia Mining & Resources, as well as HHK – the shell run by former CLS Holdings CEO Glyn Hirsch – were suspended after the groups failed to meet the deadline for filing their accounts.

The combined market capital-isation of the suspended shell companies was only £8.8m, and they were all confident of filing accounts shortly, but the suspensions came at an awkward time for AIM and cash shells.

The fall out from Langbar International, the AIM cash shell that became embroiled in an SFO investigation after failing to confirm the existence of a £365m bank deposit in Brazil, is still lingering, and time is running out for other shells to complete deals by the end of March.

It is estimated that there are 70 cash shells, worth around £100m, that will have to meet the deadline set by the London Stock Exchange.

The LSE has given cash shells that raised less than £3m and joined the market before April 2005 one year to do a deal. Those that fail could be expelled from the market, costing investors millions of pounds.

However, David Wilkinson, partner in mid-market services at Ernst & Young, said the cash shell suspensions that greeted the market on the year’s first day of trading were highly unlikely to undermine investor confidence in AIM.

‘The reason all these suspensions came at once was because there was a deadline for filing accounts at the end of December. So information like this was always going to come in lumps,’ Wilkinson said.

Corporate finance director at HB Corporate Finance, David Newton, said there was a risk that some cash shells would fail to complete deals by April, but added that the LSE was likely to take a ‘sensible’ approach to suspensions.

‘Technically cash shells that miss the deal deadline will be suspended and given a period of six months to sort out their affairs, but the exchange is likely to treat each one on a case-by-case basis.

‘Those that have made no effort to invest will be treated harshly, but the shells that have genuinely attempted deals will be given more flexibility,’ Newton said.

COMPANY REPORTS

JJB Sports and George Wimpey both report profits lower than expectations, as Aviva FD cashes in

FTSE100
Aviva group finance director Andrew Moss has banked £66,983 this year, after selling 9,486 of his Aviva shares at a price of 706.12p per share. The insurers’ share price has climbed from 645.5p to over 700p this year, hitting the 726p level shortly after Moss completed his share sale. In its latest set of results, Aviva reported interim operating profits for the six months leading up to the end of June 2006 of £1.3bn, 21% up on the previous period.

GUS, which updates the market on current trading today is expected to provide more detail on its plans to merge credit-checking arm Experian. GUS is in the midst of restructuring and any news on Experian will follow GUS’ demerger of fashion group Burberry in December 2005. In its interims for the six months to the end of September 2005, GUS’ profits were £348m, down from the £365m from the previous six month period.

FTSE250
Sportswear manufacturer JJB Sports has warned that profitsfor the year ended 29 January,2006 are likely to come in below expectations. The group saidpre-tax earnings would come in between £32m and £36m. These figures include the benefits of a change to the way the group calculates depreciation on property, plant and equipment. When JJB released interim results in October for the half year ended June 2005, its operating profits came in £4.3m higher at £17.6m because of the accounting change.

George Wimpey, the house builder, said that it is expecting a squeeze on margins going into the New Year after a decision to strengthen its forward order book. As a result, the group said it expected earnings for the year ended 31 December, 2005 to come in at the bottom of expectations, but added that the focus on its forward order book would provide it with additional flexibility. Reacting to the news, Merrill Lynch upped its price target on the stock because the company’s market was anticipated to firm up over the coming months.

FTSE ALL-SHARE
Mail and postal company DX Services said last week that a combination of lower revenues and increased costs would see interim operating profits drop by 12% when compared to the previous period.