Insurer reveals cost of integrating IT systems and outsourcing some back office work
As markets head lower again amid a combination of concerns, insurer Resolution is one of the biggest fallers.
The company, set up to buy underperforming life businesses, has lost 9p to 230.5p after it revealed some £65m of costs related to updating its IT systems and outsourcing some of its administrative functions. Around £35m is related to adapting computer systems at businesses it bought from Axa, with another charge "in the low tens of millions" expected after a review of other IT programmes. On top of that comes an additional £30m charge for cancelling and transfering existing outsourcing contracts.
It said the extra costs would not affect its ability to meet its financial targets or have an impact on its dividends. The shares - which rose earlier this month as analysts made positive noises about possible payouts to shareholders - have dropped 7.5p to 232p. Kevin Ryan at Investec said:
[The update included} what we view as the disappointing news that the integration of the Axa acquisition would cost around 18% more than estimated. In addition, the group outsourcing deal is going to cost 12% more than originally budgeted. All this illustrates, we believe, that the recovery process is far from assured and shareholders may have to endure further cost hikes. The statement contained no update on the proposed revised corporate structure. The host of uncertainties facing Resolution leads us to retain our sell recommendation and sum of the parts-based target price [of 147p].
Elsewhere, a number of companies have been affected by talk they could be deleted from the MSCI global standard indices this month, which are used by tracker funds and other investors.
Wood Group, the oil services business, is down 51p to 789p on speculation it may not join the index as had been anticipated, while hedge fund group Man has lost 3.2p to 75p in the expectation it would be deleted. Analysts at Societe Generale estimated selling pressure on Man of 86.5m shares, according to Reuters, equivalent to 5.5 days trading volume.
Overall the FTSE 100 has fallen 28.28 points to 5693.73, with worries about the eurozone economy, the anti-austerity protests across the continent, the US fiscal cliff, and growing tensions in the Middle East unnerving investors. A sell-off on Wall Street on Wednesday night has been followed by European markets. Markus Huber at ETX Capital said:
Stocks are being hit at the moment by a double whammy. There is the European financial crisis which is threatening to flare up again especially with Spain still not having asked for help and it is still not clear how to raise the additional funds needed for Greece, and the US where the threat of the fiscal cliff is basically overshadowing everything else.
Miners are mixed as analysts attempt to understand the leadership changes in China, and how they could affect the country's economy.
Antofagasta has fallen 25p to £12.18 despite a rise in nine month revenues, but Kazakhmys has climbed 9p to 670p and Xstrata is up 10.8p at 958.5p.
Anglo American has lost 16p to £17.09 despite news that its platinum subsidiary in South Africa had settled a long running and often violent wave of strikes.
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