Thursday’s Stock Market report featuring Abcam, Centrica, Betfair, Balfour Beatty and IDOX

The Markets

The Confederation of British Industry has forecast that UK growth will slow in the second half of 2014 as the impact of confidence increases and good credit conditions begins to weaken. The organisation said that it believed the recovery to be on solid ground, but warned of potential political risks, including the upcoming Scottish referendum, that could introduce a great deal of uncertainty in to the economy. John Cridland, Director General of the CBI, said that, “overwhelmingly, British business believes that the UK should stay together”.

The Bank of England has once again held interest rates at 0.5% and has kept the size of the quantitate easing programme at 375 billion pounds. At this point it is not known how the committee voted and whether the two members who voted for a rate increase in August held their position. Some analysts continue to believe that a rate increase is likely to happen sooner rather than later, including Investec’s Chief Economist Phillip Shaw who believes the upcoming general election campaign to be a factor. He commented “there is typically a preference, if possible, to avoid monetary policy becoming a political football in an election campaign”

At the London close the Dow Jones had increased by 47.90 points to 17,126.18 and the Nasdaq had grown by 19.12 points to 4,090.08.

In London the FTSE 100 closed up by 4.39 points at 6,877.97 and the FTSE 250 rose by 3.89 points to 15,995.79. The FTSE All-Share had increased by 1.72 points to 3,669.21 while the FTSE AIM Index fell by 1.52 points to 777.38.

Broker Notes

N+1 Singer has reiterated its “buy” rating and raised its target price on pharmaceutical equipment manufacturer Consort Medical (CSRT) to 1,100p after the firm’s interim management statement indicated that it was performing in line with expectations. The firm has applied to HMRC for admission in the new patent box regime, which would cut effective tax rates from 20.5% to 16% and increase EPS by 5.7%. The broker believes there are potential further upsides from ongoing developments. The shares rose by 36.5p to 951.5p.

Procurement and e-commerce software provider Cloudbuy (CBUY) has kept its “buy” rating from Westhouse Securities after it appointed Jonny Holden, currently CEO of Cloudbuy’s EMEA business, as the new group Chief Operations Officer. The broker’s valuation is based on the firm reaching revenues of 50 million pounds. Westhouse is happy to retain its rating and 100p target price on the shares, which rose by 0.5p to 42.5p.

Cannacord Genuity has downgraded biological research products manufacturer Abcam (ABC) to a “hold” due to recent increases in the firm’s share price ahead of the publication of results next week. The shares have risen 17% since Abcam published an update in July and the broker has raised the target price to 425p at the same time as dropping its previous “buy” rating. The shares fell by 13.75p to 410.75p.

Abcam prognosis good, but fever broken

Blue Chips

Standard Life (SL) will sell its Canadian business to Manufacturers Life Insurance Company for a cash consideration of CA$4 billion (2.23 billion pounds). Following the transaction, the investment firm expects to return 1.75 billion pounds to shareholders. This disposal is in line with the group strategy of focusing on higher margin investment management and savings business. The deal is conditional on shareholder approval. The shares grew by 31.1p to 417.2p.

Advertising and public relations outfit WPP (WPP) has bought Cairos Usabilidade Eireli, a Brazilian digital user experience agency for an undisclosed consideration. The agency had revenues of R$2.5 million (0.68 million pounds) in the last year and will be formally acquired via WPP’s operating subsidiary JWT. This is the most recent of a number of acquisitions that WPP has made in emerging markets. WPP shares rose by 13p to 1,298p.

Energy company Centrica (CNA) has noted EDF’s statement regarding the status of the Heysham and Hartlepool nuclear reactors where Centrica has a 20% interest. EDF has said that its expect the reactors to remain offline until the end of October, with the possibility that they will not return to generation until late December. As a result, Centrica now expects full year earnings per share to be 0.6p to 0.9p lower than last year. The shares fell by 1.8p to 323.4p.

Centrica’s EPS forecast in meltdown

Mid Caps

Passenger transport operator Go-Ahead Group (GOG) increased profits before tax by 44.5% to 91.2 million pounds over the year ended 28th June. Revenues only rose by 5.1% to 2.7 billion pounds, but bus and rail operation saw strong improvements in operating margins. Trading in the current year has been in line with expectations, but there are a number of franchise renegotiations to carry out over the year. The shares rose by 72p to 2,345p.

Balfour Beatty (BBY) has sold its professional services division Parsons Brinckerhoff to WSP Global for a cash consideration of $1,352.5 million (820 million pounds), subject to shareholder approval. The deal is expected to complete in the fourth quarter and management said that 200 million pounds would be returned to shareholders, 85 million would close the deficit in the firm’s pension fund, and the remaining cash would be held to strengthen the balance sheet. Balfour Beatty shares grew by 2.5p to 243.6p.

Online gaming group Betfair (BET) saw revenues of 117 million pounds for the three months ended 31st July, 30% higher than those in 2013 as the World Cup helped build strong performances across all products. Growth from mobile apps was particularly noteworthy, with revenues from phones up by 162%. Management are confident that full year expectations will be met, despite challenges in some new and unregulated markets. The share price increased by 35p to 1,130p.

Betfair raking in revenues

Small Caps

Biopharmaceutical firm Scancell Holdings (SCLP) posted a loss of 2.2 million pounds for the year ended 30th April, up from a 1.9 million pound loss in the prior year. Clinical trials for the company’s melanoma treatment are ongoing, with no serious adverse events reported. The worsening loss is due to increased administrative costs associated with the patenting process and the costs of running clinical trials. The shares fell by 0.5p to 34.5p.

Plane rental firm Capital Lease Aviation (CLA) saw revenues from continuing operations rise by 14% to $12.3 million dollars (7.5 million pounds) over the year ended 30th June. Management are aggressively pursuing new aircraft options as it continues to pay off existing high cost debts. These acquisitions are expected to provide substantial economies of scale and improve the group’s long term profitability. The shares dropped by 1p to 17.25p.

Document management specialist IDOX (IDOX) has signed a multi-year deal to supply its McLaren Enterprise solution software package and off site energy services to a US energy firm. The contract is worth $4.08 million (2.48 million pounds) over its duration and management said that the arrangement confirmed IDOX’s offering a “Best in Class” for the oil and gas business. The shares closed flat at 43.25p.

Food and drink vending machine operator Snacktime (SNAK) expects sales to have been around 19 million pounds in the year ended 31st March, a slight drop from the prior year due to changes in the estimated cash and stock balances of machines and more prudent debt provisions. The group’s profits will also be affected by 6.6 million pounds of exceptional costs as intangible assets across the business are written down. The shares fell by 3.75p to 9.75p.

Legal industry-focus investment and risk management outfit Burford Capital (BUR) increased its profits before taxation for the six months ended 30th June by 89% to $18.2 million (11.06 million pounds), due to strongly improved performance in the group’s litigation portfolio as activity levels rise. Management believe that these results represent a major step towards the firm’s maturity. The shares rose by 2.75p to 122.75p.

Restaurant operator Tasty (TAST) recorded revenues of 13.79 million pounds in the six months to 29th June. a 26% increase over the same period of 2013. Profits before taxation rose by 24% to 973,000 pounds, as the firm continued to open additional locations. As a result of this continued expansion, there were capital expenditures of 1.96 million pounds during the first half of the year. Tasty shares rose by 7.5p to 111.5p.

Tasty offer appetising results