Wednesday’s Stock Market report featuring JD Wetherspoon, SABMiller, Pets at Home and InternetQ

The Markets

UK job growth slowed over the three months to November, with a net movement of 58,000 people into employment, taking the unemployment rate to 5.8%. This was the slowest rate of improvement since mid 2013, with analysts suggesting that the European slowdown and uncertainty surrounding the General Election may be eating into firms’ confidence. There was also evidence that pay increases continued to outpace inflation, with average earnings excluding bonuses up by 1.8% from a year earlier

The Bank of England’s Monetary Policy Committee returned to unanimity after two rebel hawks returned to the fold this month and voted to keep interest rates at 0.5% following the larger than expected drop in inflation. Alastair McCaig, Analyst at IG, said that, “any expectation that rates might rise in 2015 has now been quashed” and that the first or second quarters of 2016 “appear much more likely timeframes”.

At the London close the Dow Jones had increased by 27.52 points to 17,542.75 and the Nasdaq rose by 26.69 points to 4,197.52.

In London the FTSE 100 closed up by 107.94 points at 6,728.04 and the FTSE 250 climbed by 126.75 points to 16,253.31. The FTSE All-Share increased by 51.74 points to 3,610.37 while the FTSE AIM Index rose by 1.19 points to 699.84.

ADVERTISEMENT

Broker Notes

Northland Capital has kept its “buy” rating on tungsten exploration outfit W Resources (WRES) but cut its target price to 1.1p after the firm raised 1.4 million pounds via a share placing with investors including board members and institutions. The proceeds will fund development at the La Parrilla project and provide working capital for the company. The reduced target reflects the dilution of the stock. W Shares dropped by 0.01p to 0.30p.

JD Wetherspoon (JDW) has kept its “hold” rating from Shore Capital despite the broker’s concerns about the slowing rate of like-for-like sales growth at the pub chain during the 12 weeks to 18th January and a 90 basis point drop in profit margins relative to the same period of the prior year. The broker expects to downgrade its expectations once more information is revealed. The shares fell by 18p to 801p.

Westhouse Securities has reiterated its “buy” rating and 200p target price on oil and gas exploration firm Faroe Petroleum (FPM) after the company won three new licences in the North Sea in areas around its current projects. The broker believes that the development is slightly positive as it expects drilling in the region to pick up over the course of the coming year. The shares declined by 0.25p to 68.25p.

Faroe expands further in North Sea

Blue Chips

Brewing giant SABMiller (SAB) raised group net producer revenues by 4% during the three months ended 31st December despite mixed local performances. Volumes and revenues fell in North America and Asia Pacific, but earnings per unit sold rose in all regions due to an improved brand mix and and global soft drink volumes increased by 4%. Shares in SABMiller rose by 99p to 3,442p.

Academic publisher Pearson (PSON) said that 2014 results should be in line with the guidance issued at the start of last year. Adjusted operating profits are expected to be in the region of 720 million pounds despite market conditions remaining difficult due to cyclical and policy pressures in the US and UK. The firm recorded growth in online services in North America and English language learning in China. The shares grew by 60p to 1,296p.

High street electronics retailer Dixons Carphone (DC.) saw group like-for-like sales increase by 7% in 2014, leading management to expect a full year profit before taxation of between 355 to 375 million pounds, ahead of market consensus. A strong customer response to Black Friday and Boxing Day deals helped drive the firm’s growth in the final months of the year. The shares dropped by 2.4p to 439.8p.

Dixons Carphone rings up improved sales

ADVERTISEMENT

Mid Caps

Management of newsagent WH Smith (SMWH) said that 2014 profits will be in line with plans, despite a 1% drop in sales. The firm’s travel outlets performed well in the year, with revenues up by 7% on the back of rapid growth at airport stores, but high street operations continued to struggle and revenues dropped by 5%. The company continues to focus on efficiency and margin improvements. The shares climbed by 8p to 1,354p.

Domestic animal food and accessories retailer Pets at Home (PETS) recorded like-for-like sales growth of 4.1% over the 12 weeks to 1st January due to strong results in advanced nutrition, hygiene and Christmas ranges. Overall revenues were up by 7.8% at 182.2 million pounds. Gross margins had also improved in line with the company’s previously issued guidance. Pets at Home shares grew by 5.3p to 208.2p.

Technical products and service provider Diploma (DPLM) saw group revenues rise for the quarter ended 31st December by 14% compared with the same period of the prior year. Recently acquired businesses contributed 12% of revenues and the firm’s seals arm saw particularly rapid expansion with sales up by 25%. The Controls business continues to face difficulties, but conditions are said to have improved since early December. The shares fell by 9p to 750p.

Seals add value to Diploma

Small Caps

Mobile marketing and digital entertainment outfit InternetQ (INTQ) increased revenues by 27% to over €130 million (99.7 million pounds) for the year ended 31st December, driven by income from B2B advertising. Margins improved in the second half of the year and as a result adjusted profits before tax for 2014 will be roughly €14 million (10.7 million pounds). Shares in InternetQ grew by 18p to 285p.

Content systems provider Publishing Technologies (PTO) said that its revenues for 2014 will be significantly below market expectations following a change in accounting procedures and the introduction of an accrued revenue adjustment. This will result in more income being recognised in 2015 and beyond, but will also cause a larger loss to be booked for 2014. The shares rose by 2.5p to 180p.

Identity and credential management software developer Intercede Group (IGP) expects revenues for the six months to 30th March will exceed those in the preceding period, but they will not meet market expectations following the significantly delayed release of new technical standards by third parties. As a result, management believe that the loss for its financial year will be in the region of 1 million pounds. The shares dropped by 19.5p to 114p.

Antibody and protein researcher Abcam (ABC) expects to meet revenue targets for its 2014/15 financial year after strong trading during the six months ended 31st December. Management said that sales for the period were around 16.7% higher than the comparable period of 2013. driven by primary antibodies and high demand in Chinese markets. Abcam also announced the acquisition of biomarker detection business Firefly BioWorks for 18.5 million pounds in cash. Shares in the company fell by 23.75p to 455.75p.

Payments and risk management solutions provider SafeCharge International (SCH) said that trading in the fourth quarter of 2014 was strong and that adjusted EBITDA for the year will be at least $24.5 million (16.21 million pounds). In addition, the firm made a number of operational advances including approvals from Mastercard for issuing activities. The shares rose by 7.5p to 252.5p.

Mastercard approval no issue for SafeCharge