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Wednesday
Jul232014

Wednesday's Stock Market report featuring ITV, GlaxoSmithKline, TalkTalk, 32Red and Staffline

The Markets

New data from the Confederation of British Industry showed that retail sales exceeded expectations in July. Over 46% of surveyed businesses said that sales were better than in 2013, compared with 25% which experienced a decline on last year. The sectors with the strongest performances were food, clothing and furniture, as consumers took advantage of the summer weather. Barry Williams from the CBI said that, “retailers expect an even faster rise in sales volumes next month, and are stocking up in anticipation of growing demand”.

Minutes from the last meeting of the Bank of England’s Monetary Policy Committee show that the members agreed unanimously to hold rates at 0.5%, noting that while “employment had continued to increase robustly […] wage growth had been surprisingly weak”. The Institute of Directors has criticised the decision as it believes that economic recovery is strong enough to begin movement towards interest rates of 3-4%, despite the Bank noting signs of potential weakness in the global recovery. However, Governor Mark Carney today said that, “the Bank is well aware that a prolonged period of historically low interest rates could encourage other risks to develop. In the UK, the biggest risks are associated with the housing market,”

At the London close the Dow Jones had declined by 16.99 points to 17,096.55 and the Nasdaq had grown by 26.78 points to 3,987.40.

In London the FTSE 100 closed up by 2.81 points at 6,798.15 and the FTSE 250 increased by 75.23 points to 15,725.96. The FTSE All-Share grew by 3.94 points to 3,623.13 while the FTSE AIM Index finished up by 0.82 points at 773.38.

Broker Notes

Panmure Gordon increased its target price on Provident Financial Group (PFG) from 1,700p to 2,000p after the lender announced first half profits were higher than had been anticipated. The broker believes the home credit division’s performance will be fairly flat in the near future, whilst the provision of credit cards to subprime borrowers will continue to provide strong growth. The shares rose by 11p to 2,084p.

Westhouse Securities reiterated its “buy” rating and 220p target for ITV (ITV) ahead of the publication of the broadcaster’s interim results. These are likely to deliver a year-on-year improvement in performance, despite disappointing fall in the firm’s share of viewers. However, the broker believes that Liberty Global’s recent move to take a position in the company indicates its strategic value and that the fundamentals of the stock justify a price higher than the current market level. The shares fell by 0.6p to 206.8p.

Chariot Oil & Gas (CHAR) has been rated as a “speculative buy”, with a target price of 16p by analysts at Beaufort Securities. This is on the basis of the firm’s diverse range of licences in proximity to major firm operations and the company’s track record of farm-down success. Rival broker Northland Capital reiterated its “buy” rating on the shares but cut its target price from 40.5p to 28p. The shares closed flat at 15.5p.

Beaufort thinks Chariot is worth a bet

Blue Chips

Chemicals firm Johnson Matthey (JMAT) had flat sales of 749 million pounds excluding precious metals sales over the quarter ended 30th June. This compared with 745 million pounds in the same period last year. The ongoing currency climate meant that underlying pre-tax profits were 10% lower than in 2013, but management believe that the business is sufficiently robust to leave full year expectations unchanged. The shares fell by 37p to 3,022p.


Capita
(CPI) increased revenues for continuing business by 13.9% over the six months ended 30th June, with organic revenue growth of 11%. Over 1.3 billion pounds in new contracts have been acquired through the sales pipeline, with a success rate on major bids of more than 66%. Pre-tax profits grew by 16% to 238 million pounds and management are confident that the support services outfit will hit its full year targets and continue to trade strongly through 2015. The shares rose by 55p to 1,210p.

GlaxoSmithKline (GSK) saw turnover fall to 5.56 billion pounds over the six months to 30th June, a drop of 16% in sterling terms against the pharmaceutical firm’s performance in the same period last year. Operating profits declined by a quarter to 1.13 billion pounds as new products are launching at lower prices than earlier comparables and key drugs are facing stronger than anticipated competition from generic rivals. The shares declined by 73.5p to 1,481p.

GSK facing a tough prescription?

Mid Caps

Telecoms operator TalkTalk (TALK) recorded year-on-year revenue growth of 3.1% during the quarter ended 30th June, with continued growth in customer numbers for broadband and TV offerings. Revenues from data products grew by 54%. Management expect this revenue growth to be supported by an overhead reduction campaign to increase returns. The shares fell by 3.2p to 316.8p.


Healthcare services provider Synergy Health (SYR) reported revenues over the three months ended 29th June that were 1,1% lower than the same period last year due to negative currency effects. On an underlying basis, revenues grew 2.6% as sales in the sterilisation techniques division rose by 13.6%, despite hospital sterilisation sales and healthcare solutions falling. Operating margins declined slightly due to increased research spending. The shares fell by 6p to 1,360p.

Renishaw (RSW) had it’s strongest sales yet over the year ended 30th June, with total revenues of 355.5 million pounds and a particularly strong performance in the 1st quarter. The metrology firm launched a number of new products through the year and received FDA approval to enter the US market with some existing product lines. Profits before tax increased by 17% to 96.4 million pounds. The shares rose by 331p to 1,801p.

Renishaw achieving measured success?

Small Caps

The emerging markets focused media company Mobile Streams (MOS) saw revenues fall from 53.9 million pounds to 47 million pounds over the year ended 30th June, with 84% being generated from Argentina. EBITDA also fell due to changes in the currency markets, but remained positive and cash generative. The company is looking to expand its business in Africa and Asia to provide fresh growth. The shares fell by 1.625p to 18.125p.

Recruitment firm Staffline (STAF) increased revenues by 11.1% to 208 million pounds over the six months ended 30th June. Pre-tax profits were 1.9 million pounds, which is a significant drop from the 3.4 million pound profit in the same period last year due to investment costs as the firm opened a number of new divisions. The board believe that their offering continues to outperform the sector and remains committed to a substantial divided increase this year. The shares rose by 50p to 1,010p.

Oil exploration outfit Tangiers Petroleum (TPET) commenced drilling in the Tarfaya offshore block, with the cost of the well fully covered by the firm’s current agreements and resources. The well is testing for two potential stacked objectives, with there being the possibility of deepening the well to look for a 3rd possible deposit contingent on results. The shares grew by 0.25p to 12.25p.

Revenues at EKF Diagnostics (EKF) over the six months ended 30th June were 12% ahead of the same period last year as the medical firm integrated three acquisitions. Sales in June were 5.4 million pounds, the highest ever in a single month, and the firm is confident that it will meet full year expectations. The has been particularly strong performance in the Diabetes and Haemoglobin units following regulatory approval for a number of products in Asian markets. The shares fell by 1.25p to 26p.

Waste management firm Augean (AUG) saw revenues rise by 6% to 24.9 million over the six months ended 30th June. All five major divisions increased sales, with the Energy & Construction departments performing particularly well. During the period the firm also completed two transactions: the sale of its former Waste Network assets and the purchase of the East Kent site. Management said that “the Group continues to trade in line with market expectations for the full year”. The shares closed flat at 26p.

The shares in online gaming firm 32Red (TTR) moved up by 0.25p to 52p after the company reported gross gaming revenues of 22.6 million pounds for the six months ended 30th June. The Italian operation more than doubled its gross revenue to 1 million pounds compared with the same period in the prior year. Given the strong performance in the first half of the year, the board intend to commit further resources to strategic marketing in order to maintain momentum through the second half.

32Red on a winning streak in Italy

Tuesday
Jul222014

Tuesday's Stock Market report featuring HSBC, QinetiQ, Royal Mail, Ideagen and Informa

The Markets

UK public finances were worse than anticipated in June, with borrowing exceeding targets. The Treasury had a deficit of 11.38 billion pounds for the month, well above the forecast 10.65 billion pounds. Once the effects of cash transfers from the Bank of England are removed, the deficit for the fiscal year to date is 7.3% higher than at the same point in 2013 in absolute terms. However, the ONS said that the first quarter would not be representative of borrowing across the full year. The British Chamber of Commerce said, “since the financial crisis, weaknesses in the financial sector and structural changes in the rest of the economy have created a major shortfall in the UK’s ability to generate tax revenues, even as economic growth returns to normal”.

Data from HM Revenue and Customs showed that there were 109,580 house sales in June, the highest monthly figure since 2007. This comes after very low numbers for mortgage approvals in May. Notably, the number of sellers aged under 30 was at its lowest since records began, with the newly implemented Mortgage Market Review legislation increasing barriers to enter the property market via increased deposits and a requirement to provide evidence of ability to meet repayments in the future. The National Association of Estate Agents said that, “things are getting even tougher for first-time buyers”.

At the London close the Dow Jones had increased by 66.59 points to 17,118.29 and the Nasdaq had grown by 28.19 points to 3,962.22

In London the FTSE 100 closed up by 66.90 points at 6,795.34 and the FTSE 250 increased by 164.63 points to 15,650.73. The FTSE All-Share grew by 35.13 points to 3,619.19 while the FTSE AIM Index was up by 3.22 points at 772.56.

Broker Notes

Analysts from N+1 Singer increased their target price for Abcam (ABC) from 346p to 352p, but reiterated their “sell” rating. The broker feels that the antibodies producer is generating good cash, but the fundamentals of the firm do not justify the premium price at which it is currently trading. The broker also believes that Abcam remains exposed to unfavourable currency markets and with growth normalising, pricing should return to normal levels. The shares rose by 27.75 to 387p.

Hummingbird Resources (HUM) had its “buy” rating reiterated by Cantor Fitzgerald, with a target price of 115p, after the gold exploration firm appointed SENET to engineer the production facilities on the Yanfolia gold project. The broker believes that the agreement should provide Hummingbird with a bank of regional expertise to bring the project to production in late 2015 as planned. The shares grew by 0.5p to 51.5p.

Westhouse Securities maintained an “add” rating for academic publishing and conference outfit Informa (INF), putting the broker at odds with rival Liberum, which continues to advocate a “sell”. The group has announced steady, if unspectacular, growth results from its global events and publishing divisions, but the business intelligence segment has continued to face a challenging market in recent times. Westhouse’s analysts “see scope for an external approach”. The shares closed flat at 492p.

Which broker has the right answer on Informa?

Blue Chips

Microprocessor designer ARM Holdings (ARM) recorded revenues of 187.1 million pounds for the three months ended 30th June, an increase of 9% over the prior year. The firm generated net cash of 86.7 million pounds and licencing revenues increased by 36% in sterling terms. Management feel that improving market conditions should strengthen the firm’s performance in the second half of the year. The shares grew by 47.5p to 881p.

Banking group HSBC Holdings (HSBA) announced results for its subsidiary in Oman. Net profits over the six months ended 30th June were RO5.7m (8.67 million pounds), a fall of 38.7% against the same period in the prior year, as operating expenses rose 4.7% and revenues rose 2.7%. Customer deposits fell by 8.7%, largely from corporate clients. The group’s shares closed up by 7.8p at 604.9p.

Royal Mail (RMG) saw low single figure revenue growth over the three months ended 29th June. A decline in the number of letters being sent has not been as steep as expected, but increasingly intense competition in the parcel delivery business has meant the performance was weaker than anticipated. Management believe that revenues for the year will be below expectations, but that cost controls will allow the company to minimise the impact on profits. The shares fell by 16p to 450p.

Can Royal Mail post positive results?

Mid Caps

Spreadbetting firm IG Group (IGG) increased its pre-tax profits by 1.3% to 194.7 million pounds over the year ended 31st May. The company’s trading revenues increased to 370 million pounds as the online trading platform continued applying for licences in new territories. The board has recommended a final dividend of 22.4p per share, taking the full year payments to 28.15p. The shares grew by 44.5p to 619.5p.

Insurance and reinsurance outfit Beazley (BEZ) made pre-tax profits of $132.9 million (77.89 million pounds) over the six months ended 30th June, which compares favourably with the $82.3 million (48.23 million pounds) from the same period of the prior year. This increase was driven by vastly improved investment returns and a change in the ratios for proportional reinsurance. The shares increased by 11p to 260p.

QinetiQ (QQ) met expectations in its EMEA division over the three months since 31st March, with particularly strong results in the Weapons and Maritime departments. however, Global Services have continued to be negatively effected by the reduction in the US forces’ operations outside of the country. The US services division was sold on 27th May and the proceed paid down debt and contributed to the pension fund. The shares rose by 8.5p to 215.5p.

QinetiQ maintains forward momentum, despite setbacks in global services

Small Caps


Specialist software developer Brady (BRY) traded in line with expectations over the six months ended 30th June, with a number of new contracts agreed and a reduction in costs in its energy division. There remains a substantial revenue backlog in the commodities unit. Management believe that the sales pipeline and that the group will be able to grow organically over the year. Analysts at Panmure Gordon reiterated a “buy” rating on Brady after the update. The shares rose by 0.5p to 77p.

Radiation imaging systems outfit Kromek (KMK) has won a contract worth $620,000 (363,348 pounds) to provide equipment to scan bottles at a number of Asian airports. Kromek’s bottle scanner makes use of multispectral x-ray technology to scan liquid, aerosol and gel containers being taken on to aeroplanes for the presence of dangerous liquids. Management said this initial contract win is in a new geographical market with considerable scope for future growth. Panmure Gordon maintain a “hold” rating on the shares, which closed flat at 55.5p.

Ideagen (IDEA) increased revenues by 38% to 9 million pounds over the year ended 30th April, with organic growth of 13% across the period. Recurring revenues have hit 5.1 million pounds and pre-tax profits rose by 36% to 2.6 million pounds. The board say that current trading remains strong and they look to the future with confidence. The shares fell by 2p to 33.25p.

Leni Gas & Oil (LGO) has intersected 187 feet of net oil pay at its latest drill site in the Goudron oil field in Trinidad, The drill is currently halfway to the target depth and the oil has been encountered earlier than the management had expected, meaning that there are most likely further deposits. Once the drilling is finished, the well will be prepared for production. The shares fell by 0.125p to 3.2p.

KBC Advanced Technologies (KBC) has acquired FEESA, a specialist software provider for the oil and gas industries, for a cash consideration of 10 million pounds and shares in KBC with a value of 11.2 million pounds. The costs of the acquisition will be funded from the proceeds of KBC’s recent equity placement and the purchase will speed up the firm’s entry into new markets. KBC shares rose by 1.5p to 124.5p.

Recruiter Hydrogen Group (HYDG) has not been able to place as many staff as it had anticipated over the six months ended 30th June. As a result revenues are below expectations. Furthermore, the firm has been negatively affected by currency movements and will pay 1.8 million pounds of exceptional restructuring costs as it re-models the business to increase long-term profitability. Management believe that full year profits before these exceptional costs can meet expectations and added that the business currently remains cash generative. The shares fell by 4.5p to 78p.

Hydrogen results may prove heavy reading for investors

 

 

Monday
Jul212014

Monday's Stock Market report featuring Avanti Communications, Tesco, Sage, Ultra Electronics and Netcall 

The Markets

UK GDP will most likely have exceeded its pre-crash peak this week when the Office for National Statistics publishes its figures for the second quarter on Friday. A Reuters survey of economists suggests that growth will maintain its pace from the 1st quarter, at around 0.8%, which would put total GDP 0.2% above its previous peak. This is despite recent disappointing figures from the manufacturing and constructions sectors. As a result of those figures, analysts from Scotiabank feel that any surprises are more likely to be on the downside than the upside.

Data from Rightmove.co.uk shows that house prices throughout the UK fell by 0.8% over the last month, reducing the average house price to 270,159 pounds. Despite falling prices, market liquidity appeared to increase, with the average time required to sell decreasing to 65 days from 75 in the prior year. It had been expected that the market would cool after the implementation of the mortgage market review legislation and as other indicators, such as mortgage approvals, had fallen in recent weeks. .

At the London close the Dow Jones had decreased by 62.65 points to 17,037.53 and the Nasdaq had fallen by 15.31 points to 3,924.58..

In London the FTSE 100 was down by 21.01 points at 6,728.44 and the FTSE 250 dropped by 70.74 points to 15,486.10. The FTSE All-Share declined by 11.91 points to 3,584.06 while the FTSE AIM Index was up by 1.08 points at 769.34.

Broker Notes

Panmure Gordon reiterated its “buy” rating on StatPro (SOG), but reduced its target price from 119p to 108p after the portfolio analytics company won a multi-year contract worth $1.1 million (0.64 million pounds). Recent trading has provided some evidence that a move towards increasing recurring revenues is paying off, with annualised recurring revenues up 28% over the prior year. But the strength of the pound is expected to cause problems along the way. The shares fell by 0.5p to 85.5p.

Avanti Communications (AVN) has been downgraded to a “hold” rating by analysts at Jefferies Group, who have cut their target price from 580p to 250p. Meanwhile, Beaufort Securities maintained their “speculative buy” rating on the satellite communications provider. Analysts from Beaufort said that “given a competitive positioning, a growing customer base and a strong financial backing, the future outlook for Avanti looks bright”. The shares dropped by 24.5p to 194.5p.

Speciality chemicals outfit Synthomer (SYNT) has had its “hold” rating re-iterated by N+1 Singer, which maintained its target price of 225p. This is despite a lack of progress from the firm since 2010 and a lowering of forecasts for 2014 in the face of intense competition in Asian rubber glove markets. However, there is potential for capital returns to shareholders as the firm prepares to dispose of some Malaysian land holdings, which may allow for a special dividend to be paid. The shares fell by 1.2p to 212.8p.

Asian Rubber Gloves Market Too Tight For Synthomer?

Blue Chips

Business software provider Sage Group (SGE) has acquired Exact Software Deutschland for a cash consideration of €16.25 million (12.87 million pounds). The purchase brings Sage’s payroll revenue in Germany to €30 million (23.77 million pounds) and establishes Sage as one of the top two firms in the segment by market share. The transaction is subject to regulatory approval. The shares rose by 0.9p to 379.2p.

Babcock International (BAB) has seen a positive start to trading in the current financial year, with a number of major contracts now scheduled to begin generating revenues during the period. The current bid pipeline contains 16 billion pounds of potential projects and 3 billion pounds of work where the engineering firm is currently the preferred bidder. Management are confident that results for the year will meet expectations and feel the integration of recent acquisitions has proceeded smoothly. The shares rose by 8p to 1,108p.

Weak market conditions and ongoing investment efforts have lead Tesco (TSCO) to warn that its first half sales and profits will not meet market expectations. The retailer also announced that CEO Philip Clarke will leave the firm next January. This follows a number of profit warnings from the retailer as it struggles to face up to competition from the likes of discount supermarkets Lidl and Aldi. Tesco has appointed Dave Lewis, currently President of Personal Care at Unilever, as its new CEO with effect from 1st October. The board feels that his experience in the international consumer goods market will help maintain Tesco’s market position. On the back of the change in management Tesco shares rose by 3.65p to 288.65p.

Can a new CEO deliver profits for Tesco?

Mid Caps

Mining and exploration group Vedanta Resources (VED) announced results for its Indian mining subsidiary Hindustan Zinc, which increased total sales over the three months ended 30th June by 1% compared with the same period last year, despite reduced production. Management is looking to invest in order to expand output and capitalise on rising zinc prices. The shares rose by 6p to 1,111p.

HellermannTyton Group (HTY) announced that the Managing Directors of its Asian and South American arms will be stepping down. The cabling firm has promoted both of their successors from within the company. These changes are now effective and management felt that the new appointees’ experience made them the best choices for the available positions. The shares fell by 2.9p to 309.3p.

Ultra Electronics (ULE) has won a contract worth 9.9 million pounds to design Sonar-based torpedo defense systems for the New Zealand Navy’s frigate upgrade programme. The specialist electronics firm will deliver two units able to detect, track and counteract incoming torpedoes. Management feel that this contract shows that there is continued growth in the maritime sector, justifying the company’s expansion of the division. The shares fell by 9p to 1,778p.

Ultra Detects a Market For Its Military Sonar Technology

Small Caps


Specialist software provider Netcall (NET) performed well through the second half of the year ended 30th June and the board believes that full year results will meet expectations. There has been double digit sales growth for the company’s flagship product and full results for the year will be published on 23rd September. The shares rose by 1.5p to 61p.

W.H. Ireland (WHI) increased revenues by 12.6% to 14.69 million pounds over the six months ended 31st May and profits before tax increased from 59,000 pounds to 203,000 pounds despite substantial restructuring expenses. The broker and private wealth manager is planning to cease operations in the less profitable third party administration business. The shares rose by 1p to 112p.

Frenkel Topping Group (FEN) increased its pre-tax profits by 11.6% to 652,745 pounds for the six months ended 30th June, against the prior year. The specialist financial advice firm also increased revenues by 4% against the same period in 2013 to 2.7 million pounds. Management believe that continued success depends on the UK legal environment, but remain optimistic for this year and the future. The shares remained at 39.75p.

Gold miner Shanta Gold (SHG) increased gold production to 21,940 ounces over the three months ended 30th June, which is 8% higher than the prior quarter. The mining company had a positive operational cash flow of $7 million (4.1 million pounds) as it sold 22,400 ounces of gold at an average price of $1,307 per ounces. The outlook for the remainder of the year is positive, as new processing equipment has been successfully installed and the commencement of project to extend the life of the mine. The shares rose by 0.375p to 14.25p.

Allocate Software (ALL) made a pre-tax profit of 2.9 million pounds in the year ended 31st May, successfully turning around from its loss of 2.4 million pounds over the prior year. Healthcare revenues organically grew 18% to 34.7 million pounds and bookings exceeded sales which bodes well for the current financial year. Management believes that they are carrying positive momentum in to 2015 and are looking overseas for additional growth options. The shares fell by 0.5p to 116.5p.

Solo Oil (SOLO) announced that the transfer of 65% of the rights to Licence PEDL 137 from Magellan Petroleum to Horse Hill Developments Ltd has been approved by the UK Government and that Horse Hill Developments has been appointed as the Exploration Operator of the Licence. Solo has a binding agreement to own 10% of Horse Hill Developments and the management are pleased with the progress being made on the path to drilling. The shares ended the day flat at 0.32p.

Nodding donkeys soon to arrive at Horse Hill?

Friday
Jul182014

Friday's Stock Market report featuring Barratt Developments, SABMiller, SIG, Avanti Communications & 4D Pharma

The Markets

The Competition and Markets Authority (CMA) has provisionally recommended a full competition inquiry in to the behaviour of UK banks. The CMA believes that there is little clear distinction between the services available at different banks and that the opacity surrounding overdraft fees made it difficult for consumers to understand the market, whilst new banks found it prohibitively hard to enter the market. The British Bankers’ Association has said it will cooperate with any eventual investigation.

UK mortgage lending was 17.5 billion pounds in June according to figures from the Council of Mortgage Lenders. This is a 17% increase over the figures for the same period last year and represents the highest level for eight months. However, it was again raised that the recent tightening of mortgage regulation via the Mortgage Market Review legislation and Bank of England recommendations could dampen lending in the coming months. The CML’s Chief Economist said that, “the macro-prudential interventions announced by the FPC in late June are finely calibrated and precautionary, but could nevertheless tip the UK towards a more conservative lending environment”.

At the London close the Dow Jones had decreased by 56.87 points to 17,081.33 and the Nasdaq had fallen by 45.24 points to 4,382.02.

In London the FTSE 100 closed up by 11.13 points at 6,749.45 and the FTSE 250 increased by 2.83 points to 15,556.84. The FTSE All-Share rose by 4.6 points to 3,595.97 while the FTSE AIM Index was down by 1.98 points at 767.63.

Broker Notes

Analysts from Goldman Sachs have upgraded Hikma Pharmaceuticals (HIK) from a “neutral” rating to a “buy” following Hikma’s acquisition of Bedford Labs. The researchers said that current pricing did not “fully reflect this long-term growth potential and ability to create value from Bedford and future M&A”, The target price was increased from 18 pounds to 22.50 pounds. Hikma shares rose by 10p to 1,719p.

Citigroup reduced its target price for shares in Lloyds Banking Group (LLOY) from 83p to 80p and reiterated its “neutral” rating, whilst Credit Suisse stuck to their target price of 68p. The analysts from Citi feel that the banking group is decreasingly able to grow profits through margin increases. Lloyds shares rose by 0.25p to 73.42p.

Barratt Developments (BDEV) was downgraded to a “hold” rating by Liberum Capital and the broker reduced its target price from 468p to 387p. While the broker was broadly positive on the sector for the current year, as it believes that the market is overstating the likelihood of a near-term interest rate rise, it reduced its targets on a number of stocks and singled Barratt out for special treatment. The shares ended the day at 363.6p.

Liberium Capital knock Barratt Developments

Blue Chips

Pharmaceutical group Shire (SHP) saw its shares rise by 190p to 4,996p after the company recorded a 22% increase in product sales to $1.47 billion (0.86 billion pounds) over the quarter to 30th June against the same period in the prior year. Management believe that this performance is a result of the group’s focus on high growth sub-sectors of the pharmaceutical market. The boards of Shire and AbbVie have recently agreed on recommended terms for the integration of the two companies.

Liberty Global has denied speculation that it will attempt a takeover of ITV (ITV) after the American cable television firm bought a 6.4% stake in the broadcaster from BSkyB for 481 million pounds. Liberty Global recently bought Virgin Media and there would be clear synergies between ITV’s archival content and Virgin Media’s distribution channels. ITV shares rose by 7.4p to 202.50p.

SABMiller (SAB) has sold over 293 million shares in Tsogo Sun holdings for a total 7.6 billion South African rand (0.42 billion pounds). The brewer will also make available a further 7 million shares for purchase by Tsogo Sun’s management team subject to shareholder approvals. Management said that they were happy with the level of interest from the investment community and that they would invest the net proceeds of the disposal in developing its core beverage businesses. The shares rose by 53p to 3,393p.

Investors enjoy SAB’s African offering

Mid Caps


DCC
(DCC) has traded in line with its budget over the three months to 30th June 2014, but DCC Energy, which is the group’s largest division, traded behind the same period last year due to the prior year’s unusually cold weather. The technology and healthcare segments of the company have grown and the management expect that full year profits and EPS will be 10-12% ahead of last year. The shares fell by 2p to 3,495p.

Building maintenance firm Homeserve (HSV) has traded in line with the management’s expectations over the period from 1st April to today. The company expects to hit its target of 0.3 million new customers in the UK over the course of the financial year and the US division has signed contracts to provide water supply support services to a number of cities. However, trading activity has historically been weighted towards the second half of the year due to the seasonality of the services the firm provides. The shares rose by 6.4p to 309.4p.

Construction suppliers SIG (SHI) has acquired Sodimat SAS, a French flat roofing products distributor, for €4.4 million (3.48 million pounds) in cash. Sodimat made pre-tax profit of €0.55 million (0.43 million pounds) over the year ended 31st December 2013. The purchase complements SIG’s existing roofing business in the South of France and in Flat Roofing, which the management of SIG believe to be an attractive market segment. The shares fell by 2.5p to 167.10p.

SIG rained on by markets despite roofing extension

Small Caps

Shares in Avanti Communications Group (AVN) fell by 11p to 219p after the firm announced that profits before tax for the year would be below consensus estimates. Approximately half of the variance is said to have resulted from bond refinancing costs of $7 million and the balance attributed to exchange rate changes, year end provisioning and set up costs on large new projects. Revenues are within the anticipated range and should be around $65 million (37.99 million pounds) in the group’s preliminary results which will be published on 17th September.

Brain health company IXICO (IXI) expects its revenues for the 16 months to September to comfortably meet market expectations after positive trading in the clinical trials and experimental medicine portions of the business. Furthermore, income from grants is expected to exceed anticipated levels, whilst spending for the period will be lower. As a result of these factors, operating losses should be lower than current expectations and the management believe that the current contract pipeline gives them confidence for 2015. The shares rose by 4.5p to 52.5p

Bowling centre operator Essenden (ESS) increased like-for-like sales by 6.1% over the 26 week period ended 29th June and, despite the World Cup, has continued to trade well through the summer to date. As a result, EBITDA for the first half of 2014 should be significantly ahead of market expectations and management believe that the results present a firm foundation for future growth. The shares rose by 7.5p to 74p.

Armour Group (AMR) has announced plans to sell its Home and Hong Kong subsidiaries to AHE 100, a new company set up by the Group’s CEO and Armour Home’s management, in exchange for a 25% stake in the new outfit and on the condition that 3.5 million pounds of external group debt is assumed by AHE 100. Following the sale, the group will be debt-free and will reposition itself as a technology investment company. The shares closed for the weekend flat at 4.875p.

PME African Infrastructure Opportunities (PMEA) has resumed trading on AIM following its re-admission. The company has initiated the purchase of Sheltam Holdings, which constitutes a reverse takeover under Rule 14 of the AIM regulations. Once the takeover is complete, PME will cease to be an investment company and will become a holding company and, pending shareholder and regulatory approval, will change it’s name to Sheltam PLC. The shares rose by $0.03 (2p) to $0.23 (13p).

The Microbiota Company has been acquired by 4D Pharma (DDDD) for a consideration of 0.96 million pounds payable in shares and a loan of 1.08 million pounds. Microbiota is a new company that was formed to acquire and develop a patented bacteria aimed at treating irritable bowel syndrome and related symptoms, which was developed by the French National Institute for Agricultural Research. Management believe that the acquisition complements their existing research projects. The shares rose 20p to 210p.

4D eschews organic growth with new purchase

Thursday
Jul172014

Thursday's Stock Market report featuring Barclays, Sports Direct, Xaar, Judges Scientific and Finsbury Foods

The Markets

The Russian stock market has fallen steeply following the intensification of sanctions by the US and EU over the ongoing conflict in Ukraine. The RTS index fell more than 4% after Rosneft, Novatech, Gazprombank, Kalashnikov Concern and Vnesheconombank were targeted by the US government and prevented from engaging in trade with US-based entities and individuals. These sanctions had knock-on effects on the UK markets, with BP shares falling due to the effect the sanctions will have on the value of its 20% interest in Russia based Rosneft.

Technology giant Microsoft will cut 18,000 jobs over the next six months as it commits to reducing annual costs by $600 million (350 million pounds). This is as the firm prepares to shift its revenue sources away from software sales and towards online services. The majority of these jobs will be at Nokia, which was acquired in April. CEO Satya Nadella described the measure as “difficult, but necessary”.

At the London close the Dow Jones had decreased by 56.87 points to 17,081.33 and the Nasdaq had fallen by 45.24 points to 4,382.02.

In London the FTSE 100 closed down by 46.35 points at 6,738.32 and the FTSE 250 dropped by 46.22 points to 15,554.01. The FTSE All-Share declined 22.18 points to 3,591.37 while the FTSE AIM Index was down by 4.71 points at 770.69.

Broker Notes

EMIS Group (EMIS) has been upgraded by N+1 Singer following it’s acquisition of the clinical messaging firm Indigo 4. The broker raised its target price for the healthcare software developer by 10p to 830p and reiterated its “buy” rating. The broker believes that Indigo 4 represents good value at 3.2 million pounds and said that it should add around 0.9% growth to EPS in the current year and 2% thereafter. The shares rose by 37.5p to 715p.

Barclays (BARC) has had its “neutral” rating re-iterated by Exane BNP Paribas but its target price cut from 280p to 225p. The analysts’ view was informed by more difficult trading conditions, with particular note given to the harsh fines being handed out to banks by courts in the United States. The broker has reduced its forecasts for profit margins of the bank’s core business over the next three years to 20%. The shares fell by 5.95p to 210.05p.

Panmure Gordon re-iterated its “buy” rating for Optos (OPTS), with a target price of 235p, following the publication of strong results for the last quarter. The retinal imaging outfit’s revenues were ahead of expectations and this has led to the broker increasing its full year EPS forecast by 3.5%. However, Panmure warns that investors should not over-react at this point, as the next quarter has historically been the most important to the firm’s full year results. The shares rose by 12.75p to 187.75p.

Panmure Gordon is keeping an eye on Optos

Blue Chips


Power supplier SSE (SSE) lost 0.11 million retail customer accounts over the year ended 30th June and consumption in the retail sector fell from 920kWh in the second quarter of 2013 to 853kWh this year. The power supplier’s management have blamed the highly competitive nature of the industry for this drop. The firm has started a programme of asset disposals and is looking to secure operational efficiencies throughout the business. The shares fell by 22p to 1,521p

Land Securities (LAND) has continued to reshape its portfolio, disposing of assets, such as The Bridges in Sunderland, that fail to fit the group’s current strategy. The firm has also been acquiring new retail centres in key markets during the three months ended 30th June. Land Securities will now be delivering 1.6 million new square feet of retail and office space to the London market, where demand remains strong, with significant pre-letting activity being seen. The shares fell by 4p to 1,024p.

Sports Direct International (SPD) increased group revenues by 23.8% to 2.7 billion pounds over the year ended 27th April, with strong growth in the core sports retail and lifestyle segment. The retailer accelerated its European expansion plans, with acquisitions in Austria and the Baltic states, and like-for-like sales of sporting goods increased by 10.5%. Pre-tax profits rose by 15.6% to 239.5 million pounds. The shares fell by 21.5p to 692p.

Sports Direct scores a solid set of results

Mid Caps

Shares in Computacenter (CCC) fell by 2.5p to 621p after the company announced that group revenues increased by 2% over the first half of the year. Revenues from the UK increased by 14%, with particularly strong growth in the supply chain segment but revenues from Germany fell by 10%, largely due to a single major order in the prior year not being repeated this year. Management remain confident of the group’s long term prospects.

The Templeton Emerging Markets Investment Trust (TEM) increased it’s value by 6.5% over the three months to 30th June, outperforming the MSCI Emerging Markets index, which gained 3% over the period. The fund has benefitted from volatile markets and has seen most of its gains come from the Turkish market, with other strong performances in India, Russia, Taiwan and Thailand. The shares fell by 3.5p to 569p.

Xaar (XAR) has traded in line with expectations over the first half of the year and expects to report revenues for the period of 60 million pounds, The digital printing firm believes that activity in the second half of the year will be higher due to established seasonal trading patterns and full year revenues should reach 130 million pounds. The firm’s cash reserves decreased over the period due to investment in manufacturing and development. Xaar closed up by 1.5p at 549.5p.

Will Xaar be printing money?

Small Caps


Shares in healthcare and consumer strategic marketing group Cello (CLL) rose by 4p to 92p after announcing that it expects to at least meet current full year market expectations. At the group level, like-for-like gross profit growth excluding acquisitions was higher than 10% for the period to June. In the Cello Health business margins exceeded 20% and the recently acquired iS Health business is being integrated as planned. In the Cello Signal business “very strong” gross profit growth was driven by strong client spend. Broker N+1 Singer retained its “buy” recommendation and 126p target on the shares after the update.

The Colefax Group (CFX) saw sales increase by 11% to 78 million pounds over the year ended 30th April, with the furnishing designer’s pre-tax profit rising by 38% to 4.89 million pounds. This was after the company’s decorating division posted a particularly strong performance following the completion of delayed projects from the prior financial year. Trading in the US and UK markets has recovered, but European markets remain challenging. The strength of sterling has also had a dampening effect on the firm’s performance. The shares fell by 22.5p to 350p.

Judges Scientific (JDG) has faced difficult trading conditions in the first half of the year and therefore organic revenue growth, excluding the effects of the scientific equipment manufacturer’s acquisition of Scientifica, is expected to be 3.2%. Like-for-like order intake was 4.8% below the same period last year and total intake was 11% below the level required to meet the firm’s sales targets for the year. The shares fell by 267.5p to 1,470p.

Nighthawk Energy (HAWK) has announced that exploratory drilling near it’s Snow King discovery has encountered a blockage in the well, possibly due to faulting, and appraisal logs suggest that there is limited potential for additional production at the site. The company will drill a further appraisal well in August. Discussions to arrange a new lending facility are also taking longer than anticipated. The shares fell by 2p to 11.25p.

Corero Network Security (CNS) increased sales over the six months ended 30th June, with orders up by 7% and large orders in excess of $100,000 (58,441 pounds) growing from 7 to 12. However, the company believes that revenues realised in the first half of the year may fall below last year’s levels due to the extension of pre-sale trial and testing periods, and a restructuring of the internet security provider’s contracts. However, full year revenues and EBITDA should be in line with market expectations. The shares increased by 0.375p to 23.875p.

Finsbury Food Group (FIF) believes profits for the year ended 28th June will exceed prior expectations after the baked good specialist increased market activity in the second half of the year and reduced overheads. UK bakery revenues reversed their decline in the second half of the year and were therefore flat for the year at 153 million pounds, while group sales fell by 0.9 million pounds to 175.7 million pounds. The shares rose by 5p to 59.5p.

Finsbury Food Group has more dough than expected