The current year was not very successful for some British companies and their investors. It has appeared that their shares have been down in a price for about 52 weeks. It is also still not clear if they are to recover next year. This is about Drax Group plc, Aberdeen Asset Management plc and Lonmin plc.
Drax loses incomes due to governmental policy
According to new climate goals of the United Kingdom, Drax Group started to convert its units from coal to biomass. However, in December 2015, the Department of Energy and Climate Change (DECC) announced that governmental support for biomass- and co-fired power plants would be slashed in the nearest future. This claim has caused the fall of Drax's shares immediately. Consequently, trader started to sell them and have already lost £290 million.
Commenting this situation, Angelos Anastasiou, analyst at Whitman Howard, said that the announcement of the UK government would by no means make any negative impact on those Drax units, which had already been switched from coal to biomass. This is about three of six turbines. Nevertheless, this announcement challenges the conversion of the fourth unit, which is probably to happen in 2016-2017. A spokesperson for Drax adds that the company should definitely take into account the change in governmental policy touching subsidies for biomass industry, though the conversion of the fourth turbine was planned.
In addition, Drax is about to lose its revenues in the nearest future since the wholesale prices for electricity are falling, which causes the outflow of investors' cash. Therefore, it is estimated that earnings per share are to fall by 52 per cent. What is more, dividend are expected to fall to 5.6p per share in 2016, while in 2015 this number equated 11.9p.
In case that the government does not change its decision and cuts subsidies for biomass industry, the further fall of shares will be unavoidable. Thus, the likelihood of Drax's recovery is quite low.
Aberdeen remains profitable notwithstanding the fall of share prices
Aberdeen Asset Management also faced the fall of its shares in 2015. However, it is not that critical if compared to Drax or Lonmin. This number reached 34 per cent, while fund outflows were more than 10 per cent of total assets under management.
In accordance with recent data, Aberdeen's total assets under management equated £283.7 billion this year, which is 12.5 per cent less in comparison with the previous year. Consequently, this figure was estimated £324.4 billion in 2014. Martin Gilbert, Aberdeen's chief executive, said that the main reason is economic decline in emerging markets and in China in particular, as company specializes in them. Since investors are pulling money out of these countries, the shares of Aberdeen are falling.
Nevertheless, company remains profitable. Notwithstanding the fall of earnings per share by 5 per cent in 2015, which equates 30.6 p per share, Aberdeen is still getting revenue of 42.7 per cent. As the company was previously dedicated to the Asian markets, which are in decline at present, the strategy of diversifying by products and geography was developed. Due to this strategy, Aberdeen has an opportunity to reduce its prepaid incomes.
As for forecasts, they are quite ambiguous. On the one hand, company is about to win back its previous earnings due to the strategy mentioned. However, on the other hand, negative trends in emerging markets development are still existing. That is why investor should be cautious, as the recovery of Aberdeen in 2016 is not guaranteed.
Lonmin faced disastrous fall of share prices
Lonmin experienced the worst situation in 2015. This company, which produces platinum group metals, has lost 99 per cent of its shares value during last 52 weeks. It is believed that the prices for platinum, which hit its record low this year, are the main reason.
However, the fall of Lonmin's share prices started in 2012. The workers of the biggest company's mine in South Africa were fired by the police during a strike. As a result, 43 workers were killed and Lonmin started to lose its incomes immediately. The second large fall of share prices was caused by another workers' strike two years after. Since that time, they kept falling to disastrously low level. The current one is 0.76p per share.
Labour conflicts as well as the fall of prices for platinum contribute to huge financial losses of Lonmin. There are some opinions that the company is able to achieve 20 per cent rise of its share prices in medium long term due to the predicted increase of platinum price. However, it seems hardly possible, as Lonmin is to cut its costs and reduce its staff. Therefore, it is obvious that there will be no recovery in 2016.
In summary, Drax Group, Aberdeen Asset Management and Lonmin faced some hardships in 2015. It is connected with the fall of their share prices during the current year. There are different reasons for that: Drax loses its costs because of changes in governmental policy; Aberdeen's difficulties are connected with economic decline in emerging markets, while Lonmin is experiencing a crisis due to labour conflicts and the fall of prices for platinum. Furthermore, there are different forecasts for companies' recovery in 2016: while Aberdeen's chances are estimated as medium, the share prices of Drax and Lonmin are not likely to rise next year.
