Tuesday’s Stock Market Report featuring Bunzl, Ferrexpo, Churchill China and Cloudbuy

The Markets

The UK service sector lost momentum at the tail end of 2014 according to fresh PMI figures, which showed a sharp downturn in the industry’s growth rate. The UK’s services PMI fell to 55.8 in December, its lowest for 19 months, down from 58.6 in November. Sentiment remained strong among firms however, with most companies saying that market conditions were favourable. Chris Williamson, Chief Economist at Markit, said that, “the latest PMI reading is still strong, merely down from unusually high levels earlier in the year and in line with the average seen in the years leading up to the financial crisis”.

The oil price continues to fall, with Brent crude hitting a five and a half year low of $51.45 (33.89 pounds) a barrel today on the back of concerns over global growth and oil exporters fighting over market share. Peter Rosenstreich, head of market strategy at Swissquote, said that, “given the current oversupply and speculation of the US using crude as geopolitical weapon, it will take more than a minor price increase to reverse oil’s collapse, so we remains negative on oil currency in the near term”.

At the London close the Dow Jones had decreased by 127.99 points to 17,373.66 and the Nasdaq was down by 32.34 points at 4,128.62.

In London the FTSE 100 closed down by 50.65 points at 6,366.51 and the FTSE 250 dropped by 143.03 points to 15,778.65. The FTSE All-Share decreased by 27.66 points to 3,434.73 while the FTSE AIM Index shrank by 4.92 points to 700.07.

Blue Chips.

Design and manufacturing outfit Meggitt (MGGT) has bought Precision Engine Controls Corporation for a cash consideration of $44.2 million (29.09 million pounds) which will be paid from existing resources. PECC primarily produces valves and actuation systems for small gas turbines, a range that complements Meggitt’s existing outputs. Management say that the deal will immediately add to underlying EPS. The shares closed down by 4.5p at 509p.

Also making an acquisition was distribution and outsourcing firm Bunzl (BNZL), which has agreed to acquire US safety equipment manufacturer Blake H Brown for an undisclosed consideration. Bunzl believes that Blake H Brown generated sales of $100 million (65.8 million pounds) during the year ended 31st December 2014. The company added that committed acquisition spend in respect of businesses acquired or agreed to be acquired during 2014 is approximately 210 million pounds and that the current environment for acquisitions continues to be positive. The shares slipped by 6p to 1,746p.

Bunzl buys Blake Brown

Mid Caps

Real estate investment trust LondonMetric (LMP) has bought the Tesco.com distribution centre in Croydon from CBRE Global Investors for a consideration of 21.1 million pounds, which represents an initial yield of 5.5%. The site is under contract for the next 5.8 years at a rent of 6.70 pounds a square foot, with a rent revision due in October 2015. Management believe that this is a strategically viable acquisition. The shares fell by 0.7p to 151.1p.

Mining and iron processing firm Ferrexpo (FXPO) recorded record production of 11.0 mt for 2014, a 2% increase over the volume of pellets produced during the previous year. This is despite the loss of around 144kt of productive capacity due to an electricity shortfall in December. The average grade of the company’s output also rose. The shares were a rare riser, gaining 1.25p on the day to close at 56.75p.

Film and television content rights outfit Entertainment One (ETO) has entered into an agreement to buy a 51% stake in The Mark Gordon Company, creating a joint venture that will produce and finance programming for US network television and international distribution. The Mark Gordon Company has previously had hits including Grey’s Anatomy, Criminal Minds and Saving Private Ryan. Investors liked the deal, sending the shares up by 2.9p to 310.5p.

Peppa Pig owner continues to expand

Small Caps

Textile services and facility management outfit Johnson Service Group (JSG) also said that its results for 2014 will be ahead of expectations, but only slightly, driven by strong performances in the textile rental sector and the successful acquisition of Bourne early in the year. High street conditions remained challenging in the UK dry cleaning market, but management are working in partnership with supermarket Waitrose to develop a more convenient network of locations. The shares gained 2.5p, closing at 63.5p.

Security equipment firm IndigoVision (IND) reported that revenues during the 17 months ended 31st December were 10% higher than the preceding equivalent period. Growth was driven by North American and EMEA markets, but sales in Latin America dropped by 20% after a number of positive years. Full results will be published at the end of February. The shares closed down by 7p at 357.5p.

Procurement and e-commerce software provider Cloudbuy (CBUY) has signed a deal with an industrial association in Singapore to provide it with a branded eCommerce marketplace and ecommerce websites for its 7,000 members. The contract could be worth up to 8 million pounds per annum according to the the firm’s projections, assuming a 60% take up rate from the provision of websites only. Cloudbuy will also receive a percentage share of the association’s sales made through its platform and management believe that Singapore’s status as a regional trading hub means the deal significantly enhances the company’s position in Asia Pacific. The shares finished up by 1.25p at 28.25p.

Specialised unconventional oil & gas drilling firm Greka Drilling (GDL) has received a new work order from its long-standing partner, Green Dragon Gas, for 30 new wells in the Shizhuang South block in China. The programme will commence this month and the firm says that the value of this order in the region of $45 million (29.61 million pounds). Despite the news the shares remained flat at 11.25p.

Water purification and dispensation equipment manufacturer Waterlogic (WTL) has announced that the scheme for its planned acquisition by Poseidon Bidco was approved at a court hearing on the 5th of January and as a result, the purchase will be effected today at a price of 151 pence per share. The stock will cease trading on AIM at 7am tomorrow morning.

Shares in ceramics manufacturer Churchill China (CHH), jumped by 35p to 590p after the firm said that sales in the hospitality sector had exceeded expectations in the fourth quarter of 2014, with trading particularly strong in December. In a brief update the firm added that as a consequence of the strong trading it expects overall results for the year to be significantly ahead of current market expectations.

Pots of cash for Churchill