Monday’s Stock Market Report featuring India, Poundland, Rolls-Royce, Countrywide, Corac and Plastics Capital
The Markets
New official figures disclosed that the Indian Economy grew by 7.5% year-on-year for the quarter between October and December, but many analysts are struggling to make sense of a new formula that the Government used to determine the figures. The number has been revised sharply upwards from a prior estimate of 5.3%. Jyotinder Kaul, Principal Economist at HDFC Bank, commented that “there is clearly the need to look at the credibility associated with these numbers. Nothing on the ground has substantially changed to show that we are out of the trenches”.
Greek bank shares have fallen steeply today after Finance Minister Yanis Varoufakis warned this weekend that a Greek exit from the Euro would trigger the collapse of the currency union. In comments made to Italian broadcaster RAI, Mr Varoufakis said that the Euro would fall “like a house of cards” in such an event. Shares in the country’s four largest banks dropped by between 8.5% and 16% today.
At the London close the Dow Jones had decreased by 44.67 points to 17,779.62 and the Nasdaq had fallen by 5.05 points to 4,223.63.
In London the FTSE 100 closed down by 16.29 points at 6,837.15 and the FTSE 250 fell by 106.42 points to 16,579.21. The FTSE All-Share had decreased by 11.21 points to 3,670.27 while the FTSE AIM Index dropped by 1.71 points to 698.79.
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Broker Notes
Panmure Gordon reiterated its “buy” rating and 245p target price for veterinary pharmaceutical outfit Animalcare Group (ANCR) after the firm announced the appointment of George Gunn, the former head of Animal Health at Novartis, as a Non-Executive Director. The broker believes that whilst this will not have an immediate impact on trading, it adds credibility to the firm’s plans. The shares rose by 1p to 182.5p.
Niche component manufacturer Diploma (DPLM) received an “add” rating and a 787p target price from WH Ireland after headline sales grew by 7.1% over 2014. Margins fell due to adverse currency translation effects, but overall operating profits climbed 3.3% to 50.3 million pounds. The broker said that the company had achieved double-digit compound growth with margins tending to improve over time despite the recent setback. The shares dropped by 10.5p to 781.5p.
Beaufort Securities issued a “sell” rating and 413p target price for general merchandise retailer Poundland (PLND) after it announced a conditional purchase agreement for rival budget chain 99p Stores for an enterprise value of 55 million pounds which will be paid in cash and shares. The broker said that it was a good time to realise value after a share price spike on Friday. Poundland shares grew by 5.9p to 418.9p.
Blue Chips.
Exploration and development outfit Randgold Resources (RRS) increased production by 26% over the course of 2014 and took output over the 1 million ounces a year mark for the first time. Total cash costs fell, but the declining gold price caused a 12.2% drop in profits before taxation to 353 million dollars (231.77 million pounds). It has been proposed that the final cash dividend for the year be increased to 60 cents (40p). The shares climbed by 105p to 5,415p.
Engine manufacturer Rolls-Royce (RR.) has won 3 new contracts worth a combined 442 million dollars (290 million pounds) to produce and support an initial 17 units of its LiftSystems technology to be used in F-35B Lightning II planes. These deals represent a substantial reduction in price from the initial costs of the system after Rolls-Royce made progress with cost reductions. The shares fell by 10p to 902p.
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Mid Caps
Estate agency and property services group Countrywide (CWD) has agreed terms to expand its financing facilities from 150 million pounds to 250 million pounds under a new arrangement with its existing banking syndicate that will mature in March 2018. The costs of borrowing will continue to be based on leverage ratios and the extra capacity is justified by the firm’s increased scale and profitability. Countrywide shares rose by 4.5p to 506p.
Small Caps
After a review of its activities, antique books dealer Scholium (SCHO) has agreed terms for the disposal of its South Kensington operations for a cash consideration of 140,000 pounds which represents a premium of 15% over asset values at 31st December. The businesses in question are a contemporary art, architecture and photography book shop and a bespoke library compiler that have drifted away from Scholium’s core focus. The shares declined by 21.5p to 46.5p.
Engineering and technology outfit Corac Group (CRA) has bought Shaw Sheet Metal for a consideration of 0.8 million pounds which will be funded from the firm’s existing reserves and is expected to be recouped within 3 years. Shaw operates 2 facilities in the Manchester area providing laser cutting and specialist fabrication services that will provide synergies with Corac’s holdings in the region. The shares closed the day flat at 3.75p.
Niche manufacturer Plastics Capital (PLA) has traded in line with market expectations during the 3 months ended 31st December, with revenues showing a substantial improvement over the prior 6 months and demand for bearings recovering after a weak start to the financial year. The company’s profit margins are benefiting from low raw material costs in the current market. The shares grew by 2.13p to 35.75p.
Green power generation specialist Renewable Energy Generation (WIND) saw revenues for the 6 months ended 31st December drop to 5.1 million pounds from 5.7 million in 2013 due to the planned shutdown of St. Breock windfarm. The firm disposed of assets for net proceeds of 13.8 million pounds, of which one third have been recognised to date. A number of additional sites are being developed. The shares fell by 1.12p to 61.75p.
Agricultural bioscience company Plant Impact (PIM) reported that revenues for the 6 months ended 31st December were 2.5 million pounds, more than double what it turned over in the same period of the prior year. The firm believes that it will post a modest statutory profit after taxation of roughly 0.2 million pounds for the half year. Plant Impact shares rose by 1p to 102.50p.
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