Friday’s Stock Market report featuring RBS, Lloyds, William Hill and Fyffes

7 mins. to read

The Markets

At the London close the Dow Jones had slipped by 20.26 points to 18,194.16 and the Nasdaq was down by 3.78 points at 4,458.49.

In London the FTSE 100 closed down by 3.07 points at 6,946.66 but the FTSE 250 rose by 24.02 to 17,273.82. The FTSE All-Share slipped by 0.30 points to 3,744.26 and the FTSE AIM Index closed up by 0.76 at 713.59.


Big Four Banks Reporting Imminently

The major UK banks all report results over the next two weeks. This guide takes an in-depth look at how to trade on and around results day – a period during which share price moves can be particularly attractive.

It also looks at the highest and lowest price targets for each of the banks over the last 2 months, their 5 year historical performance and how their US counterparts fared in January. If you are looking to trade or invest in UK Banks, this guide is a must.

We operate on an execution only basis and this should not be taken as advice. If in doubt, please seek independent financial advice.

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Broker Notes

Shares in RBS (RBS) were knocked back by 19.4p to 367.2p after JPMorgan Cazenove cut its price target on the stock from 400p to 385p. The broker, which retained a “neutral” rating on the shares, said upside was limited with the stock trading in line with its tangible net asset value (TNAV). “Overall, we believe that management have chosen a strategy that provides a clear path to returning cash to shareholders over time,” argued the broker, albeit adding that “this is discounted at current levels (1x price/TNAV) with litigation risk.” The investment bank added that the restructuring will transform RBS into a significantly smaller bank but with higher return on equity and cash returns.

Westhouse maintained its “add” rating on Premier Oil (PMO) following yesterday’s 2014 results and raised its target price to 200p (from 171p) to reflect a more resilient pricing environment in Indonesia and a better medium-term production outlook in Indonesia and Vietnam. “While operating efficiency has improved and Premier Oil is now exceeding production guidance, some UK North Sea assets are proving to be a challenge and we believe that further upside is contingent on a successful exploration campaign in the Falklands in coming months,” commented Westhouse. Premier Oil shares finished up by 1.2p at 168.5p.

Blue Chips

Penguin owner Pearson (PSON) said its two-year restructuring programme is starting to bear fruit, as it announced an 8% rise in adjusted operating profit to 720 million pounds for 2014, on revenues up by 2% at 4.9 billion pounds. The 171-year-old company, which also owns the Financial Times, said it expects a return to earnings growth in 2015, for which it reiterated its earnings guidance of 75-80p per share. “As I said when we started this process two years ago,” commented CEO John Fallon, “we would emerge a faster growing, more cash generative and leaner company, and I feel more confident of that than ever.” Pearson shares rose by 24p to 1,420p.

Lloyds Banking Group (LLOY) hailed a return to the dividend list for the first time since the financial crisis in 2008, it revealing a payment of 0.75p per share for 2014. The announcement came alongside the firm’s 2014 results, which saw the bank record statutory profits of 1.8 billion pounds, with underlying profits even better at 7.8 billion pounds. Lloyds is now 23.9% state-owned after the government sold another parcel of shares in the bank earlier this week, raising 500 million pounds. The return to the dividend list opens up Lloyds to a potential wave of new investment from institutions where the payment of a dividend is a key prerequisite for investment. Shares in Lloyds finished up by 0.5p at 79p.

Shares in International Consolidated Airlines (IAG) gained 20.5p to 580p after the British Airways owner raised its 2015 profit forecast by more than 20% to 2.2 billion euros, mostly on the back of good cost control and a better performance at its Iberia subsidiary. This came alongside 2014 results, which showed operating profit up 81% at 1.39 billion euros and revenue up 8% at 20.17 billion euros. Already the biggest European airline by market capitalisation, IAG is looking for further growth through the potential acquisition of Aer Lingus, but its 1.36 billion euro approach is yet to get the backing from the Irish government.

Anglo-South African insurer Old Mutual (OML) said adjusted operating pre-tax profit for 2014 rose by 16% to 1.6 billion pounds on a constant currency basis, against a forecast of 1.56 billion pounds in a poll provided by the company. Net client cash flow came in at 4.9 billion pounds, with funds under management rising by 6% to 319 billion pounds. The firm, which went on something of a hiring and spending spree last year, said it is now keen to focus on extracting value from its existing businesses. Shares in Old Mutual finished up by 1.9p at 225.1p.

Mid Caps

Bookmaker William Hill (WMH) saw pre-tax profits slip by 9% to 233.9 million pounds in 2014, despite revenues growing by 8%. The bookmaker was hit by significant exceptional costs relating to store closures and brand amortisation but enjoyed a record breaking World Cup and saw online gaming revenues rising by 17%. HIlls has increased the dividend for the year by 5% to 12.2p per share. However, the firm flagged that a significant loss making week in the current year leaves it behind internal expectations for the the first quarter of 2015. The shares fell by 12.8p to 377.7p.

Rightmove (RMW), the online property portal, grew underlying earnings by 24% after seeing revenues grow by 19% to 167 million pounds in the year to December. Driving the numbers were a 10% rise in traffic growth to 15.4 billion pages, leads up by 19% to 42.8 million and average revenue per advertiser rising by 13% to 684 pounds per month. Rightmove further pleased investors with a 25% increase in the dividend to 35p per share. Trading has continued to be strong in the current year with a record 100 million visits and 1.5 billion pages of property viewed in January. Rightmove shares surged by 357p to 3,029p.

Final results from The Restaurant Group (RTN) showed pre-tax profits up by 7% at 78.1 million pounds in the 52 weeks to 28th December, boosted by 40 new sites being opened during the year. The owner of Frankie & Benny’s and Chiquito saw revenues rise above 600 million pounds for the first time in the year and increased its portfolio to over 470 sites. Restaurant Group added that it has seen a strong start to the new financial year, with total sales up by 9.5% and like-for-like sales up 2.5% for the eight weeks to 22nd February. The full year dividend will be increased by 10% 15.4p per share. Restaurant Group shares moved up by 9.5p to 738.5p.

Small Caps

Fruit business Fyffes (FFY) saw its shares stay flat at 87.5p despite announcing its sixth consecutive year of earnings growth. Earnings grew by 26.6% in 2014 on the back of EBIT rising by 28.1% to €40.1 million, with the full year dividend up by 10%. Revenues benefitted in the year from organic volume growth in the pineapple and melon categories, offset by price deflation in bananas and pineapples. The firm’s target EBIT for 2015 is in the range of €36-€42 million, with it pursuing necessary increases in selling prices in response to the significant strengthening of the US dollar against the euro and sterling.

In a brief statement the residential and urban regeneration specialist Sigma Capital (SGM) announced that the first tenants are moving into the first completed new homes under its Private Rented Sector joint venture with Gatehouse Bank. The initial units are part of a 100 million pound development of 927 new homes, with additional developments expected to create one of the first large scale PRS platforms in the UK. Sigma shares were flat at 61p.

Everyman Media Group (EMAN), the cinema operator, announced the opening of a new venue, Everyman Mailbox in Birmingham. The luxury cinema is a three screen 12,000 sq ft venue and the group’s first in the Midlands. Everyman now operates 11 cinemas across London, the South East and Leeds and has confirmed new openings in Canary Wharf, Bristol, Harrogate and Cirencester. The shares remained flat at 83.5p.

Agricultural bioscience company Plant Impact (PIM) has raised 6.2 million pounds in a placing at 41.5p per share – a slight premium to yesterday’s closing price. The money will be used to invest in the development of new products and technologies to improve the yield and resilience of soy and wheat production. The firm added that it is trading in line with market expectations for its current financial year ending in July 2015. Plant Impact shares rose by 0.375p to 41.5p.

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