Wednesday’s Stock Market report featuring Sky, Whitbread, Supergroup and Plus500

The Markets

More trouble for the banks as it emerged that RBS has suspended a further two employees as part of its investigation into the rigging of foreign exchange markets. Last month RBS was one of six banks fined a combined 2.6 billion pounds for failing to stop traders rigging the forex markets, it launching an internal review of more than 50 current and former traders. RBS, 80% owned by the government, will release results for 2014 tomorrow morning and investors will be particularly interested if any further provisions will be made for wrongdoings.

On a brighter note for the banks TSB, which spun off from Lloyds last year, announced a doubling of statutory pre-tax profits to 170.2 million pounds for 2014. The firm saw an 8.4% share of all new and switching bank accounts over the last 12 months, with almost 500,000 new accounts opened during the year. Elsewhere, TSB’s mortgage broker service was launched as planned, with over 300 million pounds of applications received to date. The shares closed at 259.6p, just below the June 2014 IPO price of 260p.

At the London close the Dow Jones had risen by 12.17 points to 18,221.36 and the Nasdaq was up by 1.87 points at 4,452.90.

In London the FTSE 100 was unable to post a second day of record highs, closing down by 14.25 at 6,935.38. The FTSE 250 fell by 13.64 points to 17,188.27, the FTSE All-Share slipped by 6.27 points to 3,736.31 and the FTSE AIM Index closed down by 3.06 at 708.58.

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Broker Notes

Sky (SKY) shares climbed by 31p to 1,005p after Citigroup retained a “buy” recommendation on the stock and promoted it to the bank’s “Focus List Europe”. The bank, which also raised its price target for Sky to 1,200p from 1,075p, said it believes that the market underestimates the significance of the group’s shift into proprietary content, which is something that in due course should lessen its reliance on third-party content and increase the attractiveness of the platform and the long-term growth and returns. It added that it thinks the valuation of the group screens attractively, especially on cash measures, with scope for strong growth, potential upside to earnings and a possible re-rating.

Investec hiked its target price for mining giant BHP Billiton (BLT) from 1,323p to 1,552p, albeit keeping its “hold” rating, after first-half results on Tuesday impressed the market. The bank said that the has gone some way to regaining market favour by delivering a solid set of interim results, reflecting still-robust cashflow and an increased progressive dividend. However, it added that the stock looks “fully priced” and its valuation multiples are much higher than others in the sector. Despite the improved outlook, and potential upside from an improving oil price, the broker still rates BHP as its “least preferred diversified major”. Shares in BHP Billiton finished down by 3.5p at 1,640p.

Blue Chips

Shares in valve maker Weir (WEIR) slumped by 163p to 1,700p after it reported a 2% fall in pre-tax profits to 409 million pounds for 2014 and said that the recent fall in oil prices would impact revenues in 2015. Revenue at the Glasgow-based company, which is heavily exposed to the energy and mining industries, was roughly flat at 2.44 billion pounds. Weir is undertaking cost reduction measures in response, but CEO Keith Cochrane warned that “it is clear that the group’s strategic progress and cost initiatives will only partly offset the impact of a substantial reduction in demand and the associated pricing pressure.”

Wealth manager St James’s Place (STJ) saw its shares rally by 38p to 930p as it announced a 1% increase in pre-tax profits to 182.9 million pounds for 2014 and a 17% increase in funds under management to 52 billion pounds. The results came as the firm announced a tie-up with Metro Bank, the challenger high street banking chain. The deal will see the two companies offer a money management account which is fully branded St James’s Place, but powered by Metro Bank and will offer a fully functional banking service. Clients will also benefit from an integrated secured overdraft facility, providing immediate access to short term funds, secured against the value of their St James’s Place investment portfolio.

Another strong performer was Premier Inn owner Whitbread (WTB), shares in which rose by 140p 5,245p after it told investors to expect full-year results to come in towards the top end of current expectations. The group posted a 5.8% rise in like-for-like sales in the fourth quarter covering the 11 weeks to 12th February, with Premier Inn and Costa Coffee recording growth of 8.6% and 6.9% respectively. Franchise sales at Costa rose 15.5% to 516.9 million pounds, and Whitbread said it plans to open 480 net new stores in the next year and a half.

British Land (BLND) has clinched a 485 million pound unsecured revolving credit facility (RCF), which replaces on better terms a facility that would have matured in May 2016. The facility is at an initial margin of 90 basis points and has been arranged with a syndicate of seven banks. “This facility extends the term of our strong and well diversified portfolio, whilst the 400 million pound cancellation reduces cost and is consistent with our policy of maintaining flexibility and not gearing up on yield shift,” commented Chief Financial Officer Lucinda Bell. Shares in the REIT finished down by 2.5p at 820p.

Mid Caps

Shares in fashion firm Supergroup (SGP) lost 39p to 975p after Chief Financial Officer Shaun Wills was forced to step down from his position due to personal bankruptcy. Nick Wharton, previous CEO of Dunelm Group and CFO of Halfords has been appointed as interim Chief Financial Officer with immediate effect. Supergroup added that trading remains in line with previous guidance and Wills’ bankruptcy is wholly unrelated to the financial position of the company. The firm has not had much luck with its finance staff, it having to issue a profits warning in April 2012, partly due to a plus sign being mistaken for a minus sign in management accounts. Wills’ departure also comes just two weeks after Susanne Given, Chief Operating Officer, stepped down, allegedly due to internal politics.

Elsewhere in the retail sector there wasn’t much luck for investors in AO World (AO.), which saw its shares crash by 89p to 192.8p. The online white goods retailer revealed that growth in revenue and adjusted EBITDA for the UK business for the current quarter will be lower than anticipated. Results for the year are now expected to be slightly below market forecasts. AO World blamed increased publicity around the firm in the second half of 2014, adverse effects of “Black Friday” promotions and the cost impact of driver legislation changes as being factors in finding it difficult to grow sales in the final quarter to March. The news comes after broker Panmure Gordon issued a note earlier this month calling the firm “grossly overvalued” and setting a 152p target price. Richard Gill, CFA of Spreadbet Magazine had the same opinion last June.

Support services business Carillion (CLLN) announced that its joint-venture business in the United Arab Emirates, Al Futtaim Carillion, has been selected as the preferred bidder for two contracts, together worth 380 million pounds. The deals are for a 225 million pound mixed-use development on the Dubai Creek waterfront and a 155 million pound contract for the construction of ‘La Mer’ at Jumeirah in Dubai, a mixture of top-end retail and public-facility buildings, together with 1km of beach-themed frontage. Carillion shares slipped by 0.8p to 365.9p.

Small Caps

Coms (COMS), the provider of communication, connectivity and business services, expects to report a loss for the year to January of at least several million pounds. This comes as a result of lower gross margins and an anticipated re-alignment of costs not being achieved. Coms is now undertaking a strategic review to improve returns. However, a board room bust up appears to have occurred, with Dave Breith, CEO, requesting a general meeting to remove directors Frank Beechinor and Diana Dyer Bartlett and replace them with his own preferred management team. In a further twist, Coms revealed that Breith only last week told the company that he bought 20,000 Coms shares in July last year and without the board’s permission. The fall from grace comes only 13 months after the shares, which tumbled by 1.37p to 0.95p, were trading at 11p.

Online trading platform operator Plus500 (PLUS) almost doubled revenues in 2014, to $228.9 million with net profits surging by 102.6% to $102.5 million. Driving the numbers were a 24% increase in active customers to 105,976 and a 17% rise in new customers to 66,553. The firm, which sponsors Atletico Madrid Football Club, now claims to be the second largest CFD provider in the UK. Plus500 will pay out a total of $92 million in dividends for the year (90% of net profit including a special payment) and has increased its payout policy to 60% of net earnings. The shares rose by 17p to 600p.

Solo Oil (SOLO), the hydrocarbons explorer, has received formal approval from the Tanzanian Authorities to acquire up to a 13% interest in Kiliwani North Development Licence (KNDL) from Aminex.  As such Solo has bought a 6.5% interest in the licence for $3.5 million, with it retaining the right to purchase an additional 6.5% stake on the same terms up to 30 days after the signing of a planned Gas Sales Agreement. Earlier in the month Aminex advised that a newly constructed gas export pipeline from the Songo Songo processing plant to the KN-1 gas well has been completed to within approximately 20 metres from the KN-1 production well-head. Solo Oil shares gained 0.02p, closing at 0.52p.

Silicon wafer reclaim services provider Pure Wafer (PUR) elaborated on the effects of an electrical fire that broke out at its Wafer Reclaim facility in Swansea just before Christmas. Pure Wafer flagged that the facility is fully and comprehensively insured, with extensive three year business interruption cover, but that it may take up to 12 months for full scale production to recommence. Interims to December will include an exceptional charge of approximately $15.3 million relating to the loss estimated to have been incurred as a result of the fire. In the meantime, some of Swansea’s production will be switched to the firm’s facility in Prescott, Arizona, from May onwards. Pure Wafer shares closed down by 0.5p at 40p.

Vmoto (VMT), the electric powered scooter manufacturer, grew revenues by 79% to $45.1 million in 2014, with underlying net profits soaring from $0.6 million to $3.2 million. Driving the numbers were expanded international brand awareness and distribution through the signing of new international distributorships, with higher margin units sold outside of China up 104% to 9,121. Vmoto also expanded its core Chinese distribution footprint to 16 retail stores and 15 distributors, with a total of 76,000 units sold in the year, up 21%. Vmoto shares surged by 0.23p to 1.85p.

Infection prevention and hygiene products manufacturer Tristel (TSTL) revealed another good set of results, reporting that underlying pre-tax profits grew by 57% to 1.1 million pounds in the six months to December. There was a particularly strong performance from International sales, which rose by 26% to 2.4 million pounds, along with UK sales rising by 11% to 5 million pounds. Net cash at the period end almost doubled, to 2.9 million pounds. As a result of the strong performance Tristel increased the interim dividend by 63% to 0.585p per share and hinted at further increases should strong cash generation continue. Tristel closed up by 1.5p at 78p.