Monday’s Stock Market report featuring Aviva, BT, Cranswick, Solid State and Eckoh

The Markets

In a new report examining employment trends in the UK private sector The British Chamber of Commerce has said that there is a shortage of local talent in the UK and that businesses believe that migrants have better work ethics. The BCC study found that 45% of UK businesses employ migrant workers, although in most cases they represented a small fraction of their workforce. John Longworth, Director General of the group, said that schools and businesses had to do more to promote training and skills among Britons.

The German economy has shown signs of recovery, as the IFO’s Business Climate Index posted its first rise in six months, increasing from 103.2 in October to 104.7. Consensus among analysts was that the survey would show further erosion of sentiment and drop to around 103. Firms remain more negative about the future outlook but the IFO’s Klaus Wohlrabe says that the weak Euro and falling oil price are helping companies for the time being.

At the London close the Dow Jones had fallen by 1.83 points to 17,808.23 and the Nasdaq had risen by 25.88 points to 4,277.20.

In London the FTSE 100 closed down by 20.97 points at 6,729.79 and the FTSE 250 rose by 18.44 points to 15,710.06. The FTSE All Share decreased by 8.12 points to 3,590.99, while the FTSE AIM Index grew by 3.64 points to 727.49.

Broker Notes

Explorer W Resources (WRES) has kept its “buy” rating from Northland Capital after the company begun a drilling and metallurgical programme at the Regua tungsten deposit in Northern Portugal. The first phase of the process is expected to complete in the first quarter of 2015 and is targeting an initial five ton chuck of ore which will be extracted, transported and analysed for data to inform future mining and processing operations. The shares dropped by 0.015p to 0.47p.

Westhouse Securities has reiterated its recommendation that investors “add” ITE Group (ITE) after the firm published a management statement saying that profits before taxation should surpass market expectations. However, the broker worries that the income levels booked so far for the current financial year suggest that the firm may be behind on meeting its targets given its historical distribution of income. The shares rose by 7.5p to 165.5p.

Shore Capital has stuck to its “sell” rating on Aviva (AV.) after the firm issued an all-share bid for Friends Life. The move has baffled the broker, which believes that it is at odds with the company’s plans to de-emphasise UK business and brings only a limited set of products in highly competitive sectors to the table. Other brokers disagree, with Jefferies saying “buy” on the stock and Credit Suisse expecting Aviva to “outperform. In addition, Panmure Gordon downgraded Aviva to a “hold” this morning. The shares rose by 13p to 1,560p.

Aviva in for a kicking?

Blue Chips

Oil and gas facilities specialist Petrofac (PFC) saw its shares plunge by 315.5p to 877.5p after the firm issued a profit warning. Management believes full year profits will be at lower end of forecasts for the current year and expects profits for 2015 to be around $190 million (120 million pounds) lower than prior analyst forecasts. The firm blamed falling oil prices, project timing problems and difficulties with a project in the Shetland Islands for the altered guidelines.

BT Group (BT.A) has noted recent press speculation regarding a potential transaction in Telefonica UK (O2). Management say that the firm is developing plans to expand its mobile services and that acquiring an existing mobile network has been considered as a component of such strategies. BT confirmed that it has received an expression of interest from O2, which it originally spun off in 2002, under which it would acquire its UK mobile business. Interest has also been received from another un-named UK mobile operator. All discussions are said to be at a highly preliminary stage. In reaction BT shares rose by 14.1p to 394.1p.

BT signals mobile interest

Mid Caps

Real estate investment trust LondonMetric (LMP) has sold the Bishop Auckland Shopping Park to Standard Life Investments for a consideration of 23.6 million pounds. The firm bought the site for 2.3 million pounds and invested 15.8 million pounds in developing it over the course of 2012-13. Management believe that this was a good opportunity to monetise its investment in what remains a highly competitive market. The shares fell 0.9p to 146.7p.

Food firm Cranswick (CWK) has benefited from plummeting pig prices during the six months ended 30th September, but revenues fell to 481.5 million pounds due to decreasing fresh pork sales. Statutory profits before tax were slightly below the equivalent period of last year due to a change in the valuation of the company’s biological assets and the release of certain provisions during 2013. Cranswick upped its dividend by 6% to 10.6p per share and in reaction the shares rose by 69p to 1,404p.

Is Cranswick a banger?

Small Caps

Elektron Technology (EKT) has maintained that results for the second half of 2014 will be in line with those for the first, despite sales in the third quarter dropping to 11.5 million pounds from 11.8 million pounds in the same period of 2013. The fall was due to weakening demand from European, Asian and Middle Eastern distributors as economic conditions stagnate and stock levels remain high. On the upside, net debt was 2 million pounds lower as at 31st October compared to three months earlier, at 2.7 million pounds. The shares fell by 0.375p to 4.5p.

Speech recognition and call centre services provider Eckoh (ECK) increased revenues for the six months to 30th September by 24% to 7.8 million pounds as the company’s recently opened US division gained momentum, winning three contracts since June. The company moved into profit, with pre-tax earnings of 0.1 million pounds, representing a significant turnaround from the 1.4 million pound loss posted for the same period last year. The shares rose by 1.25p to 43p.

Software service provider MoPowered (MPOW) has admitted that full year revenues will not meet market expectations of around 1.6 million pounds due to lower contract sizes and a reduction in the number of new clients brought onboard. While the firm has signed up 17 new mid-size customers, management had hoped to attract more and MoPowered has also experienced delays in receiving project fees. The shares declined by 1.75p to 5.5p.

Cloud telephony specialist Synety Group (SNTY) has won a contract with e-Careers that is expected to be worth over 200,000 pounds during an initial three year period. Under the deal, Synety will provide its CloudCall Contact Centre package for five of Synety’s sites to supplement existing CRM tools. The company had increased its end user count by 130% in the first nine months of 2014 and growth has continued to accelerate. The shares rose by 3.5p to 192.5p.

Production at the OML 40 field in Nigeria has reached a stable level of 3,500 barrels a day, with 1,575 of those attributable to Eland Oil and Gas (ELA). This level of consistent production is letting the firm access new funding sources and the explorer plans to arrange a $75 million (47.8 million pounds) debt facility with Standard Chartered Bank to fund further development without diluting existing owners. The shares rose by 5.5p to 77p.

Shares in specialist electronic components supplier Solid State (SOLI) surged upwards by 37.5p to 715p after the firm announced a bullish set of results for the six months to September. Pre-tax profits rose by 175% to 1.55 million pounds in the period as revenues grew by 39% to 17.13 million pounds. The business saw organic growth in all divisions, its Q-Par business perform ahead of expectations and ended the period with a record order book of 18.4 million pounds. In August Solid State secured a 34 million pound deal with the Ministry of Justice to supply monitoring hardware for GPS offender tagging, with the first major benefits expected to be felt in the next financial year. As a result of the strong numbers Solid State increased its interim dividend by 45% to 4p per share. Broker Charles Stanley has a 760p target price.

Justice deal helps Solid State track down profits