Monday’s Stock Market Report featuring AstraZeneca, AFH Financial, TechFinancials and PureCircle

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12 mins. to read

The Markets

Accounting giant Grant Thornton is being sued by the Manchester Building Society (MBS) for a total of £49 million. It is claimed that Grant Thornton accountants exhibited negligence when auditing the society’s accounts between 2006 and 2013. In particular, it is alleged that Thornton had given poor advice on how to account for controversial interest rate swaps, a matter which forced MBS to restate its 2011 accounts and post a £22 million loss. A spokesman for Grant Thornton said, “As a large professional services firm, there are inevitably occasions where we become involved in legal claims”.

According to figures from The Local Data Company the number of UK high street shops plummeted in 2014. The numbers show 5,839 outlets closing in the year, with the net fall being 987 after openings are taken into account. The net figure was almost three times higher than that seen in 2013, with clothes and shoe shops seeing the highest rate of closures. Mobile phone shops were also hit hard following the administration of Phones4u.

At the London close the Dow Jones was up by 185.34 points at 17,934.65 and the Nasdaq 100 was ahead by 39.25 points at 4,354.15.

In London the FTSE 100 rose by 63.5 points to 6,804.08 but the FTSE 250 gained 97.71 points to 17,207.18. The FTSE All-Share closed up by 31.03 points at 3,679.27 and the FTSE AIM Index slipped back 1.96 points to 715.87.

Broker Notes

Allenby Capital has increased its fair value target for shares in AFH Financial Group (AFHP) from 119p to 225p. The broker commented on results for 2014 from the financial planning investment firm, which showed revenues up by 39% at £15 million, 4.1% ahead of forecasts. Forecasts have been adjusted marginally on the back of the numbers, with earnings predictions for 2015 and 2016 upped by 2.5% and 7.6% respectively. Allenby expects AFH to continue to move proactively in the consolidating IFA industry, completing larger acquisitions while maintaining an interest in acquiring one-man/small IFAs. The 225p target is based on a valuation analysis of the firm’s peer group. AFH Financial shares rose 2p to 150.5p.

Shore Capital issued a warning for investors in silver explorer Black Mountain Resources (BMZ). Results out today for the six months to December show that the company had just A$32,166 of cash at the period end, with current assets of A$80,530 against A$5.84 million of current liabilities (including A$1.6 million of payables). Black Mountain said that it “remains confident” it will be able to secure non-dilutive funding for the New Departure project in Montana by the end of the financial year in June. But if it doesn’t Shore Capital sees a very high likelihood of the company going bust. The shares finished flat at 1p.

Blue Chips

Technology firm Smiths Group (SMIN) saw its Smiths Detection business win a $125 million contract to provide a range of advanced detection equipment for Abu Dhabi Airport’s new terminal. Under the deal Smiths Detection will equip the terminal’s entire hold baggage and passenger screening checkpoints as part of the Midfield Terminal Building Project. Broker JP Morgan Cazenove has a 1,323p target on the shares, which ended the day 15.5p higher at 1,178.5p.

AstraZeneca (AZN) saw its shares rally 77.5p to 4,634.5p after announcing full results from its 21,000 patient study of heart drug Brilinta. The firm revealed that both 90mg and 60mg study doses of the drug with aspirin significantly reduced the primary endpoint of cardiovascular death, myocardial infarction or stroke compared to a placebo. Pending further analysis, AstraZeneca plans to file the study data with regulatory health authorities. It believes that Brilinta could bring in sales of $3.5 billion by 2023.

Mid Caps

Annual results from investor Fidelity European Values (FEV) showed net asset value up by 5.1% over 2014, outperforming the benchmark FTSE World Europe by 4.9 percentage points. Investors saw further gains as the discount on the company’s share price fell from 7.9% to 4.6% over the year. The final dividend was increased by 4.2% to 3.1p per share but the firm will also make a 0.54p special payment as a result of the return of £2.3 million of French withholding tax. Portfolio manager Sam Morse said that, “2015 should be a better year for earnings and dividend growth in continental Europe, given monetary easing, euro weakness and softening commodity prices.” Shares in the company finished 4.3p higher at 177.9p.

Small Caps

Responding to press speculation, investment vehicle Haversham Holdings (HAV) confirmed it was in “very advanced discussions” over a substantial acquisition. The Telegraph reports that the company is looking to complete the reverse takeover of British Car Auctions, the owner of webuyanycar.com, in a £1.2 billion deal. British Car Auctions, owned by private equity business Clayton Dubillier & Rice, cancelled a planned float last year on the back of difficult market conditions. Haversham’s advisor Cenkos Securities (CNKS) also commented on the news, saying that it would be supporting its client with the transaction’s fundraising and that it could have a material impact on its annual results. Shares in Haversham finished flat at 126p while those in Cenkos rose 6p to 171.5p.

Today saw the first day of dealings on AIM for TechFinancials (TECH), a software developer which supplies trading services to online brokers while also operating its own online brokerage. The firm raised £3.05 million on listing at a price of 27p per share, valuing the company at £18.4 million. TechFinancials is looking to grow its brand globally by investing in its regulatory compliant products for the US and Japanese markets, developing its services in the EU market and by upping marketing activities. Join ventures and acquisitions are also a possibility for the firm. The shares ended the day at 27p.

Clipper Logistics (CLG) has secured a ten year extension to its contract with department store Harvey Nichols. The new deal will see the logistics provider continue to provide warehousing, store delivery, e-fulfilment and returns management services, in addition to other value added services such as hamper fulfilment. The shares climbed 2.875p to 160.5p.

A trading update from IT managed services provider Redcentric (RCN) revealed that revenue and EBITDA for the year is expected to be comfortably in line with market expectations. Trading in the second half of the year was strong, with a good performance across the whole business, strong organic growth in recurring revenues and a continued expansion of EBITDA margins being seen. Net debt has also come down in line with expectations. Redcentric shares edged 0.25p higher to 143.75p.

Also announcing a trading update was South-east Asia focussed web hosting business RapdCloud International (RCI). The firm traded in line with expectations in 2014, with revenues up by 60% at RM18.25 million and net profits in line with market forecasts. The year saw the acquisition of Exxelnet in August, helping the business to fast-track expansion into Singapore, where strong demand is being seen. The total number of clients now exceeds 42,000, following the successful integration of RapidCloud Singapore. RapidCloud added that the current year has started well, with strong uptake of products and services seen to date. The shares jumped 3.5p to 35p.

Sweetener business PureCircle (PURE) reported that it grew revenues by 24% to $43.2 million in the six months to December and cut net losses by $1 million to $0.9 million. Were it not for $3 million of adverse currency movements the firm, which makes and sells the stevia sweetener, would have posted a statutory profit. In reaction the shares tumbled 48.5p to 494p. The year saw a number of high profile product launches using the stevia product, such as Coca-Cola Life and Pepsi True, into major markets such as the US, Mexico, UK, France and Japan. Into 2015 and $42 million will be spent on projects to increase production capacity of refined stevia sweeteners and provide additional investment in next generation stevia innovation.

 

The Markets

Accounting giant Grant Thornton is being sued by the Manchester Building Society (MBS) for a total of £49 million. It is claimed that Grant Thornton accountants exhibited negligence when auditing the society’s accounts between 2006 and 2013. In particular, it is alleged that Thornton had given poor advice on how to account for controversial interest rate swaps, a matter which forced MBS to restate its 2011 accounts and post a £22 million loss. A spokesman for Grant Thornton said, “As a large professional services firm, there are inevitably occasions where we become involved in legal claims”.

According to figures from The Local Data Company the number of UK high street shops plummeted in 2014. The numbers show 5,839 outlets closing in the year, with the net fall being 987 after openings are taken into account. The net figure was almost three times higher than that seen in 2013, with clothes and shoe shops seeing the highest rate of closures. Mobile phone shops were also hit hard following the administration of Phones4u.

At the London close the Dow Jones was up by 185.34 points at 17,934.65 and the Nasdaq 100 was ahead by 39.25 points at 4,354.15.

In London the FTSE 100 rose by 63.5 points to 6,804.08 but the FTSE 250 gained 97.71 points to 17,207.18. The FTSE All-Share closed up by 31.03 points at 3,679.27 and the FTSE AIM Index slipped back 1.96 points to 715.87.

Broker Notes

Allenby Capital has increased its fair value target for shares in AFH Financial Group (AFHP) from 119p to 225p. The broker commented on results for 2014 from the financial planning investment firm, which showed revenues up by 39% at £15 million, 4.1% ahead of forecasts. Forecasts have been adjusted marginally on the back of the numbers, with earnings predictions for 2015 and 2016 upped by 2.5% and 7.6% respectively. Allenby expects AFH to continue to move proactively in the consolidating IFA industry, completing larger acquisitions while maintaining an interest in acquiring one-man/small IFAs. The 225p target is based on a valuation analysis of the firm’s peer group. AFH Financial shares rose 2p to 150.5p.

Shore Capital issued a warning for investors in silver explorer Black Mountain Resources (BMZ). Results out today for the six months to December show that the company had just A$32,166 of cash at the period end, with current assets of A$80,530 against A$5.84 million of current liabilities (including A$1.6 million of payables). Black Mountain said that it “remains confident” it will be able to secure non-dilutive funding for the New Departure project in Montana by the end of the financial year in June. But if it doesn’t Shore Capital sees a very high likelihood of the company going bust. The shares finished flat at 1p.

Blue Chips

Technology firm Smiths Group (SMIN) saw its Smiths Detection business win a $125 million contract to provide a range of advanced detection equipment for Abu Dhabi Airport’s new terminal. Under the deal Smiths Detection will equip the terminal’s entire hold baggage and passenger screening checkpoints as part of the Midfield Terminal Building Project. Broker JP Morgan Cazenove has a 1,323p target on the shares, which ended the day 15.5p higher at 1,178.5p.

AstraZeneca (AZN) saw its shares rally 77.5p to 4,634.5p after announcing full results from its 21,000 patient study of heart drug Brilinta. The firm revealed that both 90mg and 60mg study doses of the drug with aspirin significantly reduced the primary endpoint of cardiovascular death, myocardial infarction or stroke compared to a placebo. Pending further analysis, AstraZeneca plans to file the study data with regulatory health authorities. It believes that Brilinta could bring in sales of $3.5 billion by 2023.

Mid Caps

Annual results from investor Fidelity European Values (FEV) showed net asset value up by 5.1% over 2014, outperforming the benchmark FTSE World Europe by 4.9 percentage points. Investors saw further gains as the discount on the company’s share price fell from 7.9% to 4.6% over the year. The final dividend was increased by 4.2% to 3.1p per share but the firm will also make a 0.54p special payment as a result of the return of £2.3 million of French withholding tax. Portfolio manager Sam Morse said that, “2015 should be a better year for earnings and dividend growth in continental Europe, given monetary easing, euro weakness and softening commodity prices.” Shares in the company finished 4.3p higher at 177.9p.

Small Caps

Responding to press speculation, investment vehicle Haversham Holdings (HAV) confirmed it was in “very advanced discussions” over a substantial acquisition. The Telegraph reports that the company is looking to complete the reverse takeover of British Car Auctions, the owner of webuyanycar.com, in a £1.2 billion deal. British Car Auctions, owned by private equity business Clayton Dubillier & Rice, cancelled a planned float last year on the back of difficult market conditions. Haversham’s advisor Cenkos Securities (CNKS) also commented on the news, saying that it would be supporting its client with the transaction’s fundraising and that it could have a material impact on its annual results. Shares in Haversham finished flat at 126p while those in Cenkos rose 6p to 171.5p.

Today saw the first day of dealings on AIM for TechFinancials (TECH), a software developer which supplies trading services to online brokers while also operating its own online brokerage. The firm raised £3.05 million on listing at a price of 27p per share, valuing the company at £18.4 million. TechFinancials is looking to grow its brand globally by investing in its regulatory compliant products for the US and Japanese markets, developing its services in the EU market and by upping marketing activities. Join ventures and acquisitions are also a possibility for the firm. The shares ended the day at 27p.

Clipper Logistics (CLG) has secured a ten year extension to its contract with department store Harvey Nichols. The new deal will see the logistics provider continue to provide warehousing, store delivery, e-fulfilment and returns management services, in addition to other value added services such as hamper fulfilment. The shares climbed 2.875p to 160.5p.

A trading update from IT managed services provider Redcentric (RCN) revealed that revenue and EBITDA for the year is expected to be comfortably in line with market expectations. Trading in the second half of the year was strong, with a good performance across the whole business, strong organic growth in recurring revenues and a continued expansion of EBITDA margins being seen. Net debt has also come down in line with expectations. Redcentric shares edged 0.25p higher to 143.75p.

Also announcing a trading update was South-east Asia focussed web hosting business RapdCloud International (RCI). The firm traded in line with expectations in 2014, with revenues up by 60% at RM18.25 million and net profits in line with market forecasts. The year saw the acquisition of Exxelnet in August, helping the business to fast-track expansion into Singapore, where strong demand is being seen. The total number of clients now exceeds 42,000, following the successful integration of RapidCloud Singapore. RapidCloud added that the current year has started well, with strong uptake of products and services seen to date. The shares jumped 3.5p to 35p.

Sweetener business PureCircle (PURE) reported that it grew revenues by 24% to $43.2 million in the six months to December and cut net losses by $1 million to $0.9 million. Were it not for $3 million of adverse currency movements the firm, which makes and sells the stevia sweetener, would have posted a statutory profit. In reaction the shares tumbled 48.5p to 494p. The year saw a number of high profile product launches using the stevia product, such as Coca-Cola Life and Pepsi True, into major markets such as the US, Mexico, UK, France and Japan. Into 2015 and $42 million will be spent on projects to increase production capacity of refined stevia sweeteners and provide additional investment in next generation stevia innovation.

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