Tolent's share price takes hefty tumble

Jun 26 2008 by Graeme King, The Journal

SHARES in construction company Tolent have tumbled by a third inside 48 hours after the business reported tough trading and that two bad debts would hit its half-year results.

The Gateshead company closed yesterday valued at under £12m – down from around £18m on Tuesday morning.

But the business’s finance director and its advisers moved quickly to say the drop in price was probably more to do with City fears about the construction sector, rather than Tolent in particular.

Tolent was trading at a reasonably healthy 137p on Tuesday morning, but then a trading statement was issued saying the first four months of 2008 had been “disappointing” due to economic conditions.

The company also said it had put aside £950,000 to cover a debt owed by a housebuilder, and an accounting adjustment.

However, Tolent says it has an order book of £120m lined up, with another £40m close to being signed. Shares fell by 35p (25%) on Tuesday to close at 102.5p, and then a further 10.5p (8%) yesterday to close at 92p – though that represented a rally from a low of 77p during the day.

Andy Clark, Tolent finance director, said relatively few shares had been traded but these had been enough to take the company’s price down.

He said: “The trades are only 600 shares here, 1,000 there, through a few investors. Obviously it’s not just us, and certainly we are doing better than the likes of the companies who are just in housebuilding.

“We are certainly not panicking. We would like to be in a slightly better position, but a lot of it is driven by the banks turning off the funding tap. They will gradually turn it back on as, if they are not lending to anybody, they are not making money. Hopefully towards the back end of this year, the tap will be turned back on, and that will feed its way back into the market in 2009.”

Andrew Emmott, director of corporate finance for Brewin Dolphin, who advise Tolent, said: “It’s not uncommon for small companies to find themselves overly punished in this sort of market for the faintest hint of bad news. Small stocks are suffering disproportionately to large stocks, and construction is also suffering disproportionately, so if you are at the wrong end of both those equations, you can see what happens.”

Michael Parkinson, director of research at Brewin Dolphin in Newcastle, has downgraded his pre-tax profit forecasts for Tolent’s performance. For 2008, he has cut from £5.6m to just £3m, and for 2009, from £5.8m down to £3.4m. He added: “Investors are pretty scared of most things associated with the construction sector. It’s a pretty harsh market we are in at the moment.”

For further reports on the performance of the region’s construction and housebuilding companies visit nebusiness.co.uk