Why Are APR Energy PLC & Thomas Cook Group plc On The Move Today?

Shares in APR Energy (LSE: APR) and Thomas Cook Group (LSE: TCG) made big moves on Friday morning, following unscheduled updates from both companies.

In this article, I’ll explain what’s happened at each firm.

APR Energy

Shares in temporary power specialist APR fell by 20% when markets opened this morning, after the firm admitted that the loss of its Libya contract is likely to lead to a number of bad debts, which will result in full-year profits “significantly below current market expectations”.

However, this is a one-off problem. News that the firm is still in discussions with its lenders should perhaps be more of a concern for shareholders: APR warned in February that it could soon breach its banking covenants, and needed to negotiate amended lending terms.

I’m sure APR will succeed in these negotiations, but the revised terms are likely to reduce shareholder returns, in the medium term.

The problem is that Libya was by far the firm’s biggest project. Although APR has made good progress with renewals elsewhere in recent weeks, there has been very little new work announced to replace that lost in Libya.

This suggests that APR has a big chunk of equipment that’s not generating revenue — even though its debt payments remain unchanged.

Until we see APR’s full-year numbers, which are expected towards the end of March, I reckon it’s hard to put a value on APR shares, as visibility of 2015/16 earnings is very poor.

Thomas Cook Group

Shares in Thomas Cook Group rose by 14% during the first hour of trading this morning, after investors welcomed news that Chinese firm Fosun International Limited has agreed to invest £91.8m in the firm, through a placing of 73,135,777 new shares.

This equates to a share price of about 125p, which was the market price for Thomas Cook shares earlier this week — suggesting that Fosun is confident enough not to have demanded a discount on its investment.

Even better is news that Fosun intends to purchase more Thomas Cook shares from the market, in order to take its stake to 10%. This is good news for shareholders, as it’s the equivalent of a big share buyback, funded by a new investor.

Fosun recently purchased French resort firm Club Med. The investment in Thomas Cook is expected to drive new partnerships and help open up the Chinese market to Thomas Cook, as well as reduce the firm’s £1.1bn net debt.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.