Thursday’s Stock Market Report featuring Tesco, easyJet, Ted Baker and Audioboom

The Markets

Mortgage lender Halifax said that UK house prices rose by just under 8% in 2014, with the average home costing 14,600 pounds more than at the start of last year. Prices rose by a modest 0.3% in the last quarter, a considerable slowdown from the peak of 10.2% year-on-year cost increases seen in July. Howard Archer from IHS Global Insight said that he suspected, “that the weakening of buyer interest in houses may be close to bottoming out and we see it picking up to a limited extent in 2015 from current levels”.

A surprise 2.4% drop in November German factory orders has helped to drag the Euro to a fresh nine year low against the dollar. It was speculated that yesterday’s discussions of additional stimulus action from the European Central Bank and the upcoming Greek elections also played a role. The Euro dipped below $1.176 before a weak recovery. Michael Hewson from CMC Markets said that, “the biggest concern is that the markets are getting slightly ahead of themselves”.

At the London close the Dow Jones had increased by 284.13 points to 17,868.65 and the Nasdaq rose by 75.03 points to 4,235.03.

In London the FTSE 100 closed up by 150.13 points at 6,569.96 and the FTSE 250 rose by 233.85 points to 16,085.54. The FTSE All-Share increased by 74.69 points to 3,535.47 while the FTSE AIM Index grew by 5.48 points to 699.61.

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Broker Notes

Credit Suisse downgraded estate agency Foxtons (FOXT) to a “neutral” rating and a 181p target price after the broker reduced its 2015 earnings forecasts by 10%. The bank said that a slowdown in recent market activity and the upcoming UK General Election were behind its decisions, commenting that the coming year looked less positive for the sector as a whole. The shares fell by 9.75p to 164.25p.

Westhouse Securities has rated Eland Oil & Gas (ELA) as a “buy” after the exploration outfit finalised terms for a $75 million (46.6 million pounds) RBL facility with Standard Chartered. The broker said that this funding would allow Eland to fund upcoming development work and increased production in 2015. The target price of 118p has been maintained on the shares, which closed the day flat at 68p.

Beaufort Securities has put a “buy” rating on budget airline easyJet (EZJ) after the firm posted a 3.2% year-on-year increase in December passenger numbers and a 50 basis point load factor improvement. Beaufort said that, “easyJet has shown consistent improvement in the passenger traffic and the seat occupancy rate that remains above its peers”. The shares dropped by 28p to 1,616p.

Blue Chips.

Despite seeing a recovery in trading over the Christmas period, troubled supermarket giant Tesco (TSCO) said that it will shut 43 unprofitable stores across the UK, with the majority of closures being among its Local brand convenience stores. For the 19 weeks ended 3rd January like-for-like sales were down by 2.9%, recovering from a fall of 5.4% in Q2.  The firm will also cut an additional 250 million pounds of costs and aims to drop overheads by 30%. In addition, Tesco’s Blinkbox and Tesco Broadband subsidiaries will be sold to TalkTalk and there will be no final dividend for the current financial year. The shares grew by 30.4p to 209.25p.

Also in the supermarket sector, food sales in the 13 weeks ended 27th December were 2.8% higher than the same period of 2013 at high street retailer Marks and Spencer (MKS) with a 17% boost in the key week before Christmas. However, the firm’s clothing arm suffered from the unseasonably warm weather in October and November and disruption at a distribution centre in December causing like-for-like sales dropped by 5.8% relative to last year. The shares fell by 16.3p to 446.9p.

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Mid Caps

Recruitment consultancy Hays (HAS) recorded a strong performance in the three months ended 31st December with net fee income 11% higher than in the same period of 2014. The performance was driven by higher numbers of permanent placements arranged. Management said that the firm had seen improved demand in professional fields including accounting and IT, as well as for property and construction roles. The shares climbed by 5.7p to 147.7p.

Fashion house Ted Baker (TED) increased sales in the eight weeks to 3rd January by 22%, with gross margins broadly in line with the prior year. Management also said that sales after Christmas had been good and that the firm expected to end its financial year with a clean stock position. The improvement in online sales was particularly positive, with a 65.7% rise in purchases from the firm’s online platform. Shares in Ted Baker grew by 124p to 2,384p.

Specialist healthcare outfit BTG (BTG) has acquired interventional pulmonology business PneumRx for an initial cash consideration of 147 million pounds and up to 156 million pounds in conditional payments. The completion of the deal remains reliant on the early termination of the Hart-Scott-Rodino waiting period in the United States. Management said that the acquisition complemented BTG’s existing portfolio. The shares rose by 16p to 828p.

Small Caps

Life science research tools firm Horizon Discovery Group (HZD) has bought Haplogen Genomics for an initial consideration of 6 million pounds, payable in cash and newly issued ordinary shares, and future earn-out payments of up to 3.9 million pounds in ordinary shares. The acquisition gives Horizon a high throughput cell line generation platform, allowing it to significantly increase output in the first quarter of 2015. The shares ended the day even at 206.5p.

Digital audio platform developer Audioboom (BOOM) has signed a deal with African mobile content aggregator Cloud Africa to deliver its platform, music and advertising services to around 100 million mobile devices across the continent. Financial details of the arrangement have not been released but management said that revenues would be based mixture of shared earnings from data packages purchased by mobile subscribers to use the service and various advertising and branding opportunities. The shares rose by 0.25p to 10.25p.

Advanced technology and engineering outfit Corac Group (CRA) has won two contracts for submarine atmosphere management systems worth a combined 2.6 million pounds. Both orders are from overseas naval fleets and the equipment should be delivered during 2016. Management said that the wins demonstrate the firm’s leading position in this segment of the defense industry. The shares climbed by 0.125p to 4.5p.