Friday’s Stock Market Report featuring Rio Tinto, Rolls Royce, RPS Group and Utilitywise

4 mins. to read

The Markets

The Eurozone economy recorded accelerating GDP growth of 0.3% during the final 3 months of 2014, driven by Germany exceeding expectations with growth of 0.7%. Analysts had forecast that the currency union’s largest economy would grow by around 0.3%. News from elsewhere was less positive, as France expanded by just 0.1% and Italy stagnated. Andreas Rees from Unicredit said that the German figures were particularly encouraging as it was principally generated by domestic activity.

Meanwhile, UK construction output dropped by 2.1% in the final quarter of last year due a dramatic drop in housebuilding activity, according to new figures from the Office for National Statistics. The ONS has previously suggested that the decline would be in the region of 1.8%. Howard Archer, Economist at IHS Global Insight, said that “the outlook seems largely decent for the construction sector in 2015, although it will likely expand at a slower rate than in 2014”.

At the London close the Dow Jones was up by 29.78 points at 18,002.16 and the Nasdaq had risen by 12.22 points to 4,360.20.

In London the FTSE 100 closed up by 45.41 points at 6,873.52 and the FTSE 250 climbed by 38.36 points to 16,847.78. The FTSE All-Share increased by 21.89 points to 3,696.47 while the FTSE AIM Index fell by 2.00 points to 700.05.




Broker Notes

Beaufort Securities slapped a “buy” stance on mineral extraction giant Rio Tinto (RIO), in what was a reiteration of its position after the firm posted results that the broker described as positive given the current market for commodities. Beaufort were also encouraged by the increase in dividend payments and plans for a share repurchase scheme. Meanwhile, Credit Suisse downgraded its stance for the company to a “neutral” rating. Rio Tinto shares rose by 112p to 3,151.5p.

Insurance and financial service provider Jardine Lloyd Thomas (JLT) was rated as “neutral” by Westhouse Securities following the announcement that Ardian had agreed to buy the firm’s stake in one of its French businesses under terms that would generate a net gain of around 21 million pounds. The funds would be used to pay down outstanding borrowings. The shares dropped by 1.5p to 958p.

WH Ireland rated flow control equipment manufacturer Rotork (ROR) an “add” with a target price of 2,343p despite disappointing operating profits in the first half of the firm’s financial year. The broker thinks that there is space for the company to grow substantially over the long term by capitalising on emerging trends in urban growth and infrastructure improvements. Rotork shares climbed by 24p to 2,382p.

Blue Chips.

Water company Severn Trent (SVT) confirmed that it is on track to meet full year expectations after mild weather conditions in the period since October increased demand relative to the previous year. Operating expenses will be slightly higher due to inflation and quasi-taxes. Bad debts remain broadly flat against the prior year and interest on the group’s borrowings will be lower than anticipated. The shares declined by 38p to 2,019p.

Mining outfit Anglo American (AAL) met its operational commitments for 2014 and output rose on a volume basis, but falling commodities prices meant that the business made a pre-tax loss for the year of 259 million dollars (168.2 million pounds). The board are focused on efficiency in its mining operations for 2015 to turn around performance. Anglo American shares grew by 39p to 1,204.5p.

Engine manufacturer Rolls-Royce (RR.) ended last year with a record order book of 73.7 billion pounds, but revenues dropped by 6% to 13.7 billion pounds. Reported profits before taxation plummeted 96% to 67 million pounds after defence customers cut spending and macroeconomic uncertainty caused delays to purchases. The shares rose by 39.5p to 944.5p. To read the full investment case for Rolls Royce CLICK HERE

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Mid Caps

Independent Oil and gas consultancy RPS Group (RPS) has acquired Klotz Associates, an engineering and environmental specialist based in Texas, for an initial cash consideration of 16.9 million dollars (11.1 million pounds) with further performance based payments of 7.2 million dollars (4.8 million pounds) payable over the next two years subject to certain conditions being met. The shares grew by 21.5p to 248.4p.

Small Caps

Energy cost management outfit Utilitywise (UTW) performed in line with management expectations for the 6 months ended 31st January. The firm’s focus during the period was on securing renewals and extensions with existing customers in order to fix their prices at the current low levels. The visible sales pipeline was reduced as a result of this change in strategy. The shares dropped by 4.25p to 215.5p.

PR consultancy Aeorema Communications (AEO) earned profits before taxation of 0.1 million pounds over the 6 months ended 31st December with turnover of 1.6 million pounds. Management believe that the second half of the financial year will be stronger than the first due to a number of recent customer wins and high levels of repeat business. Aeorema Communications shares fell by 12.5p to 36p.

Health technologies specialist Fitbug Holdings (FITB) recorded a 310% increase in full year sales over the course of 2014, driven by an exceptionally strong second half performance and new retail deals with chains including Amazon and Argos. However, losses are expected to be in the region of 3.6 million pounds due to increased development expenses. Fitbug Holdings shares rose by 0.25p to 6p.

Financial services provider Fiske (FKE) lost 165,000 pounds before tax during the 6 months to 30th November 2014, as work to improve the company’s technological systems distracted from day to day operations. Revenues also suffered from declining institutional commission rates and the loss of an investment team. Management believe that market conditions will be unstable in the coming months. The shares closed steady at 57.5p.

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