Thursday’s Stock Market Report featuring Tesco, Shire, PZ Cussons and Solo Oil

The Markets

Surprise, surprise! The Bank of England’s Monetary Policy Committee has voted to keep interest rates at 0.5% for another month, a decision that the British Chamber of Commerce’s Chief Economist David Kern described as correct, “particularly at a time when inflation is down to zero and likely to fall into negative territory in the next few months“. The MPC did not make changes to the current scale of its quantitative easing programme.

At the London close the Dow Jones was down by 41.01 points at 17,861.50 and the Nasdaq was 30.90 points lower at 4,374.98.

In London the FTSE 100 closed up 77.95 points at 7,015.36 and the FTSE 250 climbed 154.07 points to 17,715.54. The FTSE All-Share advanced 39.86 points to 3,792.64 while the FTSE AIM Index rose 5.99 points to 731.51.

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Broker Notes

Westhouse Securities retained its “buy” rating for oil and gas firm Rockhopper Exploration (RKH), despite the latter posting a loss of $7.6 million (£5.15 million) for the 9 months ended 31st December. The broker said that the firm has sufficient cash reserves to see it through to 2016 and for the drilling of a 3rd well in the North Falklands Basin. The shares dropped by 2.25p to 63.25p.

Shore Capital reiterated its “hold” position on supermarket chain Tesco (TSCO), arguing that the significant improvements made since Dave Lewis took over as CEO are offset by the remaining challenges and questions surrounding the firm’s international operations. The broker singled out Tesco’s Korean arm as a vector for potential growth or deleveraging. The shares fell 0.05p to 246.8p.

Miner BHP Billiton (BHP) faced downgrades today, with Credit Suisse moving the firm from a “hold to a “sell”, and Investec Securities dropping its rating to “underperform” from “hold”. Both brokers aggressively cut their forecasts for commodity prices, which impacted their valuations for the miner. BHP shares dropped by 16p to 1,453p.

Blue Chips

Pharmaceutical outfit Shire (SHP) announced that its treatment for pediatric Alagille syndrome failed a phase II clinical trial conducted in the UK. The drug in question failed to deliver statistically significant improvements over a placebo in either the primary or secondary targets of the test, whilst causing adverse side effects at greater frequency. The shares dropped by 65p to 5,420p.

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Mid Caps

Consumer goods manufacturer PZ Cussons (PZC) performed in line with expectations between 28th January and 8th April, with the firm’s substantial Nigerian arm being only slightly disrupted by presidential elections. Management has reiterated its full year guidance and will publish its next update in June. PZ Cussons’ share price declined by 4.2p to 346p.

Polymer developer Victrex (VCT) recorded revenues of £130.3 million during the six months ended 31st March, a 9% improvement over the prior year driven by a 28% rise in sales volumes. Consumer Electronics made a positive contribution to this shift, while the Invibio and Oil & Gas arms saw lower sales and adverse currency movements impact trading. The shares rose by 2p to 2,042p.

Steam and pump technology specialist Spirax Sarco Engineering (SPX) announced the acquisition of ASEPCO, a California-based manufacturer of valves and magnetic mixers for the biopharmaceutical industry, for a consideration of £7 million on a cash and debt free basis. The deal is expected to be earnings enhancing from 2015 onwards. Spirax Sarco shares grew by 16p to 3,500p.

Small Caps

Explorer Solo Oil (SOLO) revealed the discovery of a significant discovery at the Horse Hill site, in which it holds a 6.5% interest. Technical analysis indicates 653 feet of aggregate net pay in addition to previously announced findings which would add roughly 158 million barrels per square mile to reserves. Further news will be released as analysis continues. The shares rose by 0.14p to 0.72p.

Fashion house Mulberry (MUL) has seen retail trading improve following the introduction of its Spring/Summer 2015 lines and management said that revenues for the year ended 31st March will be in line with expectations at around £148 million. Wholesale incomes continued to fall during the period. Mulberry shares dropped by 6p to 869p.

Interactive gaming firm NetPlay TV (NPT) saw revenues decline to £27.4 million in 2014 despite increased player numbers. The company has worked to streamline its cost structure, but EBITDA and pre-tax profits dropped precipitously. Management have nevertheless recommended that the total dividend for the year be increased by 10% to 0.55p. The shares fell by 0.5p to 9.13p.

Gas sector equipment outfit Greka Engineering & Technology (GEL) increased its revenues by 41% to $5.2 million (£3.5 million), despite sales of certain key lines falling substantially. Comprehensive losses narrowed to $1.7 million (£1.15 million). Management are focused on diversification in the coming year. Greka shares closed flat at 1.88p.