The Markets
At the London close the Dow Jones had slipped by 4.31 points to 18,220.26 and the Nasdaq was up by 16.30 points at 4,456.89.
In London the FTSE 100 closed up by 14.35 points at 6,949.73 and he FTSE 250 gained 61.53 to 17,249.80, the FTSE All-Share was up by 8.25 points at 3,744.56 and the FTSE AIM Index closed up by 2.76 at 712.22.
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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.
Broker Notes
Investec retained its “underperform” rating on Standard Chartered (STAN), reiterating its view that the Asia-focused bank needs 6.9-11 billion dollars of capital to cover commodities provisioning and boost its common equity tier-one capital ratio to 11-12% by the end of 2015. “This would then require substantial overhauling of the strategy as the implied return profile would be an uninspiring 8-9%,” commented Investec. However, Standard Chartered shares finished up by 49.7p at 976p as it announced a board room shake-up that Investec said would be “well received”.
Ahead of full year results from ITV (ITV) next week, Westhouse reiterated its “neutral” rating for the shares, which it said had “run far enough”. The broker said it believed this rally “has produced a valuation (17.6x / 1.8% FY2015E P/E and DY ratios) that adequately reflects the group’s underlying attractions – unrivalled ability to deliver a large mass market audience, quality/consistency of management and strategy, attractive EPS and DPS growth and strong cash flow.” Shares in ITV finished down by 0.6p at 227.4p.
Blue Chips
Shares in RBS (RBS) tumbled by 16.7p to 386.6p as it released its results, which were overshadowed by revelations that its Coutts & Co Swiss bank subsidiary was under investigation for client tax evasion. RBS reported a loss of 3.5 billion pounds for 2014, down from a 9 billion pound loss the previous year. However, after one-off costs are stripped out, operating profits were 3.5 billion last year, the highest since 2010. The results reflected a 4 billion pound writedown on the sale of its US business, Citizens. CEO Ross McEwan confirmed he would not receive a bonus this year but RBS will still pay out bonuses from a pool of 421 million pounds, which is 21% lower than in 2013.
British American Tobacco (BATS) shares lit up after it said sales fell less than expected in 2014 and outperformed the industry as a whole. Annual 2014 revenue fell by 8.4% to 13.97 billion pounds, better than the average of analysts’ expectations of 13.89 billion. Cigarette volume, down 1.4%, was better than a 2.5% decline for the industry. It also said it expects sales to again outperform the market this year. The company proposed a 4% rise in the final dividend for 2014 and said it had the capacity to continue increasing it in 2015 and beyond, despite currency headwinds. Shares in the company drifted 64p higher to 3,795p.
In a bid to simplify its corporate structure, Reed Elsevier (REL) plans to combine the assets of its UK and Dutch parent companies into one group entity and rename itself RELX Group. The move was announced alongside the company’s results for 2014, which showed underlying revenues up 3% at 5.77 billion pounds but net profit down 14% to 995 million pounds. Reed said the upcoming changes would be “cost and profit neutral” and the structure would be fully implemented on 1st July, subject to shareholder approval. Shares in Reed finished down by 57p at 1,130p.
Former RBS CEO Stephen Hester has already made his mark on struggling insurance outfit RSA Insurance (RSA), which swung to a full year 2014 profit of 275 million pounds, from a 244 million pound loss a year earlier. Despite this, and a return to the dividend list with a 2p per share final payment, the shares fell by 21.2p to 429.1p , as profit was some way off analysts’ forecasts and many brokers remained unconvinced. Perhaps recognising this, Hester has raised the figure for cost cuts to 210 million pounds a year until 2016 and 250 million for 2017.
Mid Caps
Shares in Ladbrokes (LAD) rose by 6.8p to 121p after the bookmaker announced a 13.5% fall in pre-tax profits to 98 million pounds for 2014. While revenues grew by 3.8% the firm was hit by 74.5 million pounds worth of exceptional costs relating to shop closures and regulation and tax impairments. While the company said that it enjoyed a strong World Cup in the summer it took a hit of 8.1 million pounds on Boxing Day as football results went against it. Ladbrokes maintained its dividend at 8.9p per share but remained quiet on who would be replacing CEO Richard Glynn, with his departure being announced last December.
Domino’s Pizza Group (DOM) continued to grow in 2014, posting a 15% rise in pre-tax profits to 54.8 million pounds. The numbers were driven by a net 36 stores being opened in the period, which sent total system sales up by 14.6% to 766.6 million pounds. Online sales accounted for 69.4% of UK & Ireland sales in the period, with 44.2% of online orders taken through a mobile device. Domino’s increased the final dividend by 10.1% to 9.69p per share taking the the total dividend for the year to 17.5p. The shares rose by 37.5p to 730p.
Transport operator National Express (NEX) grew statutory pre-tax profits by 3% to 66.5 million pounds in 2014, prompting it to increase the total dividend by 3% to 10.3p per share. A strong second half performance more than offset one off headwinds and currency translation effects that hit the first half. Operational highlights included net debt being reduced by 80 million pounds, free cash flow of 190 million pounds being 40 million pounds ahead of target and the firm retaining the Essex Thameside (c2c) rail franchise, which secures its presence in UK rail through to 2029. National Express shares inched up by 2p to 274.9p.
Small Caps
Reach4Entertainment Enterprises (R4E) saw its shares plunge by 1.625p to 2.625p after revealing that results for 2015 will be lower than last year. Although results for 2014 are expected to be in line with expectations, a number of significant one-off projects completed by the firm’s New York based theatre and live entertainment business, Spot & Company of Manhattan, are not likely to be repeated this year. Investors also focussed on news that the company is in discussions with its lenders on how to restructure its current bank loan.
In a brief statement mobile payment business Monitise (MONI) announced two major multi-year contract wins. The first is with an un-named, top 10 US financial institution and is an extension and expansion of an existing relationship. The second is with a global partner to deploy Monitise’s digital banking capabilities in multiple countries for a major European financial institution. Monetise shares grew by 1.25p to 22p.
Sutton Harbour (SUH), the Plymouth based marina and property firm, has signed a new tenancy agreement for its 6,909 sq ft long term vacant Jamaica House premises at Guy’s Quay, a prime waterfront site in Plymouth. Tenant, Boston Tea Party, has signed a 15 year lease subject to planning consent, with the new restaurant venue expected to open in June 2015. Sutton Harbour commented that its letting occupancy rate will increase to 93.3% upon completion of the tenancy. The shares slipped by 0.5p to 35.5p.
ATTRAQT (ATQT), the eCommerce site search, merchandising and recommendation technology firm announced its first set of full year results since listing on AIM in August last year. Revenues grew by 32% to 2.09 million pounds in 2014, with the average value of new clients signed up by 45%. The firm added 36 new customers in the year, bringing the total to 87 with 110 live sites. While adjusted EBITDA losses were 0.74 million pounds, this was in line with management expectations after the firm invested in its Freestyle Merchandising platform and in its US operations. The shares grew by 3p to 59.5p, and are trading 19% ahead of the IPO admission price of 50p per share.
Shares in specialist information management business IDOX (IDOX) rose by 0.75p to 41.25p after the firm revealed that it has has a good start to the year and that trading is in line with management expectations. A number of major public sector contracts have been signed, including a 1.6 million pound extension of services to the Scottish government, a three year 1 million pound managed services contract with Watford Borough Council and an additional five local authority contracts worth another 1 million pounds. Elsewhere, the firm’s election management team continues to be actively engaged in supporting local authority customers in preparation for the UK General Election in May. It was also announced that Chairman Martin Brooks would be stepping down from his position by the year end after spending over ten years in the role.