Friday’s Stock Market report featuring Tesco, Old Mutual, SSP and Shanta Gold

The Markets

The Office for National Statistics released fresh data showing a drop in UK construction and industrial output in November, with the drop in industrial production principally focused in the oil and gas industry. The ONS reported that construction sector output fell by 2% month-on-month in November, with the industrial sector down by 0.1%, driven mainly by a 5.5% fall in oil and gas output. Chris Williamson, Chief Economist at Markit, said that, “disappointing official data are adding to survey evidence which indicate that the rate of UK economic growth slowed towards the end of last year”.

The US economy added 252,000 new jobs in December, dropping the unemployment rate to 5.6%. The improvement in non-farm pay rolls exceeded economists’ expectations, with December the best month for new jobs since 1999. Over 2014 as a whole, an average of 246,000 new jobs were added to the economy each month, a figure more than 50,000 higher than the 2013 rate of improvement. Policymakers will be watching the results and Peter Cecchini, Chief Market Strategist at Cantor Fitzgerald, said that, “this is probably a good enough number to allow the Fed to stay on course in terms of adjusting policy”.

At the London close the Dow Jones had decreased by 152.49 points to 17,755.38 and the Nasdaq was down by 28.41 points at 4,212.14.

In London the FTSE 100 closed down by 68.82 points at 6,501.14 and the FTSE 250 fell by 74.58 points to 16,010.96. The FTSE All Share increased by 32.99 points to 3,502.48 while the FTSE AIM Index Index grew by 2.76 points to 702.98.

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Broker Notes

Shore Capital has rated Tesco (TSCO) as a “hold” with a target price of 209p after Moody’s downgraded the troubled supermarket chain’s credit rating to junk status. The broker said that the move had been something that management have been prepared for and that Tesco has no immediate requirements to re-finance in the near future. Shore Capital said that the firm is making good steps toward de-levering. The shares dropped by 5.15p to 204.1p.

Marine industry services provider James Fisher (FSJ) has been labelled “add” by WH Ireland with a 1,137p target price after the firm announced that revenues in the first half of its financial year were up by 8% to 216 million pounds. Organic revenue growth continued to be solid and operating margins improved by around 20 basis points. The broker believes that the current price represents a good entry point but the shares fell by 5p to 1,135p.

Iconic high street retailer Marks & Spencer (MKS) has received a “hold” rating from Beaufort Securities after releasing what the broker called a “dismal” set of interim results for the general merchandise division. However, there were positive developments in food, with the company managing to maintain prices and margins despite heavy pressure from the discount section and the ongoing price war among UK supermarkets. The shares rose by 1.1p to 448p.

Blue Chips.

Financial services outfit Old Mutual (OML) has bought a 23.2% stake in UAP Holdings for a cash consideration of KES 8.88 billion (0.06 billion pounds) in a deal that management say will significantly expand Old Mutual’s operational capacity in Kenya and Uganda. UAP has more than half a million customers in Kenya and Old Mutual believe it to be highly complementary to its existing offerings. The shares declined by 4.8p to 189.1p.

Mid Caps

Hospitality operator Restaurant Group (RTN) said that turnover in the 52 weeks ended 28th December was up by 9.6% over the prior year, with a 2.8% like-for-like improvement. For the key Christmas period, like-for-like growth was at 5% year-on-year. Management said that the outlook for 2015 was positive and that the company expects to open an additional 42 to 50 locations in 2015. The shares grew by 17p to 702p.

Food and beverage concessions firm SSP Group (SSPG) traded well over the three months to 31st December, despite difficult currency conditions leading to a 0.1% drop in revenues relative to last year. On a constant currency basis, sales were up by 2.9% driven by strong performances in the UK, North America and Asia Pacific. However, the firm’s operations in Continental Europe continued to suffer. The shares dropped by 6.1p to 263.9p.

Electronic components manufacturer Laird (LRD) believes that full year results for 2014 will meet market expectations after trading remained positive in the fourth quarter. Management said that the outlook for 2015 was encouraging and that it had made significant progress in the implementation of its strategy. Final results will be published in March. Laird shares fell by 30.1p to 301.6p.

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Small Caps

Location software and equipment provider ServicePower Technologies (SVR) expects that revenues for the year ended 31st December will be around 12.7 million pounds, a drop from the 14 million pounds earned last year. Management attributed the lower sales to the firm’s shift in focus towards winning long-term software as a service contracts and a number of delayed major license sales. The forecast net loss for the year is 0.9 million pounds. The shares sank by 0.25p to 5.87p.

Exploration and mining outfit Shanta Gold (SHG) announced that there was a fire at its New Luika Gold Mine in south western Tanzania. Two workers suffered minor injuries but were able to return to work later in their shift and the necessary repair works should not effect this quarter’s gold output as the firm had a secondary crusher to which production can revert. The shares fell by 0.25p to 9.13p.

Cadmium-free quantum dot specialist Nanoco (NANO) announced that LG has signed a partnering agreement with Dow Chemical Company to use Nanoco’s products in LG’s ultra HD range of televisions that were launched at the CES show in Las Vegas this week. Management said that this represented a major milestone for the firm, being the first commercial product to use Nanoco’s quantum dot products. The shares dropped by 0.5p to 116p.

Exploration and development firm Circle Oil (COP) has received a special payment of $15 million from the Egyptian Government as part of the recent transfers to oil companies operating in the country. The cash has significantly reduced Circle’s outstanding debt. Management said that this was a positive development and that they were looking forward to advancing the firm’s position in Egypt. The shares rose by 0.5p to 13.125p.

Fellow spherically named business Circle Holdings (CIRC) determined that it cannot sustain its franchise to operate the Hinchingbrooke Health Care NHS Trust under the current terms of its deal and has entered into discussions with the NHS Trust Development Authority to effect an orderly withdrawal. The healthcare facility operations firm has the right to terminate the contract if it is forced to make payments of 5 million pounds to the Trust and it has paid 4.84 million pounds to date. The shares declined by 16.75p to 50p.

African low-cost airline Fastjet (FJET) has received Phase 1 Approval in its application for an Air Operating Certificate from the Zambian Civil Aviation Authority. The next stage is for the authorities to approve the firm’s planned structure in the country and its operational plans, Management hope to open the company’s second base in Zambia for routes in East and Southern Africa. The shares rose by 0.18p to 0.9p.