Friday’s Stock Market Report featuring GlaxoSmithKline, Tesco, TSB and CVS Group

The Markets

UK public finances improved in February as higher tax receipts lessened the need for government borrowing. Self assessed tax receipts were more than £2.4 billion higher than last February and new borrowing dropped by £3.5 billion to £6.9 billion. This means that the Government looks to be on course to meet it’s borrowing targets for 2015, despite failing to eliminate the deficit. Samuel Tombs from Capital Economics said that, “with one month of this fiscal year still to go, borrowing looks set to come in at about £89bn, nearly £10bn lower than last year and a touch below the OBR’s forecast of £90.2bn in the Budget”.

The FTSE 100 broke the 7,000 mark for the first time today as talks to keep Greece in the Euro progressed well and the US Federal Reserve indicated that credit prices may remain at historically low levels for some time yet. Elsewhere in Europe, the DAX Index reached record levels and exceeded 12,000 this afternoon.

At the London close the Dow Jones had increased by 207.83 points to 18,166.86 and the Nasdaq rose by 46.40 points to 4,473.22.

In London the FTSE 100 closed up by 60.19 points at 7,022.51 and the FTSE 250 rose by 99.47 points to 17,537.62. The FTSE All-Share increased by 30.17 points to 3,788.26 while the FTSE AIM Index grew by 0.63 points to 715.26.

Broker Notes

Westhouse Securities has reiterated its “buy” rating on Tullow Oil (TLW) after the firm negotiated an increase to its reserve-based lending facilities despite the current low price of oil. Tullow now has around $6.3 billion (£4.23 billion) in committed medium and long term debt arrangements. The broker believes that this will help support the business as it moves to ramp up production in the current year. Tullow shares rose by 10.7p to 320.3p.

Pharmaceutical giant GlaxoSmithKline (GSK) kept its “buy” rating from Shore Capital after the FDA’s Drugs Advisory Committee and Drug Safety and Risk Management Advisory Committee voted to approve the firm’s Breo product for use in the adult population, but not for those under 18. While this decision was slightly disappointing, the broker had expected it and the broader tone of the meeting was positive. The shares climbed by 5p to 1,635p.

Northland Capital has rated gold extraction specialist Hummingbird Resources (HUM) as a “buy” after the explorer announced that it was seeking $8-10 million (5.4-6.7 million pounds) of funding to bring its Yangfolio project to production. The broker has placed its forecasts and target price under review until details of the arrangement are confirmed, with due diligence expected to be finalised in the first quarter of 2015. Hummingbird shares dropped by 1p to 31.5p.

Blue Chips

Supermarket chain Tesco (TSCO) regained sole ownership of 21 stores today in a deal with British Land (BLND) where the latter relinquished it’s 50% share in the properties in exchange for a stake in two joint venture portfolios. The deal has been valued at around £733 million and both sides said that it was in line with current strategy. Shares in Tesco climbed by 2.05p to 244.85p and those in British Land were up by 5p at 867p.

TSB (TSB) has agreed to be taken over by Spanish banking giant Sabadell in a deal worth £1.7 billion, or 340p per share. The takeover is at a 29% premium to TSB’s share price the day before the deal was first announced and a 31% premium to last June’s IPO price. Majority shareholder Lloyds Banking Group (LLOY) has agreed to sell a 9.99% stake in TSB and has entered into a irrevocable undertaking to accept the same price for its remaining 40.01% holding. The sale is conditional on EU anti-trust clearance. Shares in TSB rose by 7p to 334p while those in Lloyds rose by 1.13p to 80.63p.

Mid Caps

Property development outfit Berkeley Group (BKG) said that demand in London and the South of England has remained strong in recent months despite the market cooling relative to the highs of 2013. The firm is currently debt free and maintaining a strong balance sheet, with £400 million pounds of cash held. The board reiterated earnings guidance for the next three years and in reaction the shares increased by 38p to 2,660p.

Small Caps

Exploration and development firm Chariot Oil & Gas (CHAR) lost $41.8 million (£28.05 million) after taxation during the year ended 31st December, a $31.3 million (£21.01 million) increase on the prior year’s loss. This was due to an impairment on previously capitalised costs in the Namibian Northern Blocks following the firm’s decision to relinquish its licence. Management said that the firm was fully funded for 2015 and beyond. The shares rose by 0.5p to 8.2p.

Vetinary services provider CVS Group (CVS) earned revenues of £81.9 million during the six months’ ended 31st December, 19% higher than in 2013 as the firm expanded its network of practices and like-for-like sales rose by 10%. Profits before tax grew to £5.2 million. The company expects growth to continue in the current period, but at a diminished rate due to poor weather conditions in the early part of the year. The shares climbed by 69p to 534p.

Oil and gas producer PetroNeft (PTR) expects its Licence 61 project to generate around 3,500-4,000 barrels of oil a day by the end of 2015 based on the current development programme and drilling results. A pipeline is currently being constructed to link the field to the Lineynoye processing facility 25km away. Current output is in the region of 2,000 barrels a day. PetroNeft shares grew by 0.2p to 4.63p.

Online marketing and customer acquisition specialists Digital Globe Services (DGS) lost $0.58 million (£0.39 million) during the six months ended 31st December as it expanded to meet anticipated increases in demand from its major clients that has not yet materialised due to delayed mergers and acquisitions. Other costs, including lead costs, also increased during the half year. Shares in the firm dropped by 81p to 49.5p.

Testing and measurement systems developer AB Dynamics (ABDP) said that results for the six months ended 28th February will meet expectations, with trading in line with market forecasts and strong cash generation being seen. The company is constructing a custom headquarters supported by the UK Regional Growth Fund. Shares in AB Dynamics rose by 6p to 176p.