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Jax Daily Record Monday, Jun. 22, 201512:00 PM EST

APR Energy plc stock takes another plunge

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by: Mark Basch Contributing Writer

APR Energy plc’s stock plunged again last week after the Jacksonville-based company said, again, that earnings will be “significantly below market expectations.”

This follows a sharp drop in late 2014 after the company warned that last year’s results would be below expectations because of a pullout from its operations in Libya.

APR provides interim power plants around the world, including some risky situations like Libya. After writing off its operations in Libya because of turmoil there, APR reported an operating loss of $702.5 million last year.

In a statement last week, APR said one reason for its lower expectations for 2015 earnings is “demobilization costs in Libya that have been higher than expected despite the significant progress made to date in extracting the majority of assets.”

The company, which didn’t give any numbers for its projections, also said earnings are being impacted by unfavorable foreign exchange rates, a situation that is affecting all U.S. companies that do business overseas.

However, the biggest issue is “delayed negotiations and long lead times associated with projects the company is pursuing,” APR said.

“The company’s guidance at the beginning of the year was predicated on an expectation that contracts being pursued would have a financial impact by the fourth quarter of 2015. While those opportunities still exist, and the market for interim power solutions remains strong — particularly in Asia Pacific and Africa — customer decisions about deals in the pipeline have been pushed out until later in the year,” it said.

APR said it is in compliance with covenants of its bank loans but delays in revenue could cause it to miss certain covenants later in the year.

Jefferies analyst Will Kirkness said in a research note last week that there is a “realistic possibility” that APR could breach its loan covenants by the fourth quarter.

“The company will now have to renegotiate with the banks (again), absorbing further management time,” said Kirkness, who has an “underperform” rating on APR’s stock.

Kirkness also expressed concern about a second announcement made by APR Tuesday that Chief Operating Officer Brian Rich is resigning for “personal reasons.” Rich joined the company in 2012 and was promoted to COO in May 2014.

“We are concerned that disruption in the business development team at this key point will be unhelpful, especially as no replacement has yet been announced,” Kirkness said.

Although APR is headquartered in Jacksonville, its shares trade on the London Stock Exchange. The stock dropped 89.25 pence to 259.25p (which is $4.11 as of Monday morning) Tuesday after the announcements, a 25.6 percent fall.

The stock continued to drop in the days after the announcement and fell as low as 181.51p on Thursday.

The shares had traded above 1000p at the beginning of 2014.

 

Analysts rate Black Knight stock at ‘overweight’

After its initial public offering last month, Black Knight Financial Services Inc. received its first analyst coverage last week.

Analysts at Barclays Capital and Piper Jaffray both issued “overweight” ratings on Black Knight’s stock.

Black Knight is a mortgage technology and analytics company that was spun off from Jacksonville-based Fidelity National Financial Inc. Fidelity still retains a majority voting control of the company after the IPO.

Barclays analyst Mark DeVries said in his research report that Black Knight provides a “mission critical” mortgage servicing platform used by financial institutions to service more than half of all U.S. mortgage loans.

“Revenue should grow at a low-to-mid single digit pace in a vacuum but we see additional growth opportunities over the next few years,” he said.

DeVries sees opportunities for Black Knight to grow revenue by cross selling services.

“In addition to cross selling current offerings to existing customers, we expect Black Knight will be an active acquirer of other, smaller mortgage technology firms to either deepen penetration of its current offerings or acquire new products that Black Knight has not yet developed or acquired,” he said.

DeVries said because of regulatory scrutiny of the mortgage servicing process, banks will be looking to “reduce the number of outsource partners,” which will benefit a large mortgage technology provider like Black Knight.

Black Knight’s shares sold for $24.50 in the IPO last month and the stock has been rising since, reaching a high of $30.55 last week. DeVries has a $33 price target for the shares.

 

EverBank facing mortgage servicing restrictions

Speaking of regulatory scrutiny of the mortgage servicing process, the U.S. Office of the Comptroller of the Currency placed some restrictions on Jacksonville-based EverBank Financial Corp. last week.

The restrictions go back to a 2011 consent order affecting EverBank and a number of large U.S. banks in which they agreed to improve their foreclosure procedures.

According to a news release from the comptroller’s office, EverBank and five other banks have not met all of the requirements of the consent order, so the national bank regulator put restrictions on their ability to expand their mortgage servicing businesses.

EverBank said in a news release it is working to resolve the remaining issues with the comptroller, and it doesn’t expect the new regulatory order to affect its business.

“Under EverBank’s amended consent order, the company is not prohibited, but has agreed to seek regulatory non-objection for certain mortgage servicing and subservicing-related activities and transactions until the termination of its consent order. EverBank does not anticipate that it will need to seek non-objection from any of these restrictions because it is not presently engaged and does not plan to engage in such activities,” it said.

EverBank CEO Robert Clements said in the news release “we’re pleased with the substantial progress EverBank has made remediating 91 of the 95 actionable items identified under the 2011 consent order, and we look forward to remediating the final four items still open under the consent order.”

 

Ryland and Standard Pacific homebuilders announce merger

The Ryland Group Inc. pulled out of the Jacksonville market in 2011, but it will be making a return to the area because of a merger with another major homebuilding company.

Ryland and Standard Pacific Corp., both headquartered in California, announced plans last week to merge and form the nation’s fourth-largest homebuilding company.

The combined company, which has not yet been named, built more than 12,600 homes and produced revenue of $5.1 billion in the 12 months ended March 31.

The companies described the deal as a merger of equals, but current Standard Pacific stockholders will own about 59 percent of the company and Ryland shareholders will own 41 percent after the merger.

Standard Pacific does operate in the Jacksonville market.

In an FAQ posted by the companies, they said regions like Jacksonville that only have one office combined between the two companies should see little change after the merger, “except for potential improvements in processes and procedures that are determined to be best practices during the integration of both companies.”

According to The Associated Press, the three homebuilders that will be larger than the merged company are D.R. Horton, Lennar Corp. and PulteGroup.

 

Shoe Carnival plans smaller stores

Shoe Carnival Inc. is the latest retailer looking to augment its store network and reach new markets with small stores.

The Indiana-based footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver announced it will be opening small-market stores with about 5,000 square feet of space, about half the size of its typical stores.

“We believe there is a tremendous, untapped opportunity to expand into new and fill-in existing markets with a complementary, smaller store concept. This will provide consumers in local communities with a convenient shopping experience that builds upon Shoe Carnival’s strong track record of delivering moderately priced, branded footwear for the entire family,” CEO Cliff Sifford said in a news release.

Shoe Carnival currently operates 402 stores in 34 states and Puerto Rico. The company said it hopes to begin opening the small-market stores in six to nine months.

Weaver is chairman of the company and its largest shareholder. Along with his wife, Delores, Weaver controls 24.6 percent of Shoe Carnival’s stock.

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