Thursday’s Stock Market Report from UK-Analyst: featuring Mark Carney, the IMF, Tullow Oil, Rio Tinto, Zoopla, Circle Oil and eg Solutions
Mark Carney has hinted that the Bank of England may increase interest rates sooner than markets expect, despite the current risks of deflation in the UK. The Governor said that in Britain, inflation falling below zero would not lead to the same kind of negative spiral feared in the Eurozone. Vicky Redwood, Chief UK Economist at Capital Economics, said that “the Bank of England’s latest inflation report has confirmed that the MPC thinks that deflation is now on the horizon, but that this will be fairly short-lived”.
The International Monetary Fund has agreed a 17.5 billion dollar (11.38 billion pound) loan to the Ukrainian Government as part of a new economic package aimed at restoring growth and improving living standards in the troubled state. The programme also includes further multilateral funding arrangements worth roughly 40 billion dollars (26 billion pounds). IMF Director Christine Lagarde described it as a “turning point”.
At the London close the Dow Jones was 60.60 points higher at 17,922.74 and the Nasdaq was 35.57 points ahead at 4,332.86.
In London the FTSE 100 closed up by 9.94 points at 6,828.11 and the FTSE 250 rose by 176.82 points to 16,809.42. The FTSE All-Share decreased by 10.58 points to 3,674.58 while the FTSE AIM Index climbed by 0.32 points to 697.25.
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Broker Notes
Insurance and reinsurance outfit Lancashire Holdings (LRE) was been placed “under review” at Westhouse Securities after the firm’s results for 2014 exceeded expectations due to lower than forecast claims which suggests that the quality of the policy book is improving. The broker has concerns that certain income streams are not delivering as well as they could and stuck to a 618p target price. The shares rose by 23p to 635.5p.
Societe Generale has cut its rating on hydrocarbon giant Tullow Oil (TLW) to “hold” after yesterday’s results as part of a mass downgrade of energy industry shares. Other firms hit include BG Group, Cairn Energy and Premier Oil which were all lowered to a “Sell” rating, whilst Shell and BP saw their target prices sliced. Tullow Shares rose by 0.5p to 385.1p and BG shares rose by 19.7p to 934.4p.
Panmure Gordon has initiated coverage of music and audio products firm Focusrite (TUNE) with a “buy” rating and a 208p target price following the company’s IPO on the AIM market in December. This is the first rating by any broker for Focusrite, which aims to exploit technological developments within the industry to capture market share and is actively seeking acquisition targets. The shares ended the day flat at 143.5p.
Blue Chips.
Mineral extraction giant Rio Tinto (RIO) recorded a 9% decline in underlying earnings during 2014 as increased volumes failed to fully offset falling commodities prices. Management said that EBITDA margins remained constant at 39% on lower sales revenues of 47.7 billion dollars (31.3 billion pounds). The company raised its full year dividend by 12% to 215 cents (139p). Rio Tinto shares climbed by 68p to 3,039.5p.
Imperial Tobacco Group (IMT) saw 15% higher sales volumes in its Growth Brands arm in the final quarter of 2014 relative to the same period of the prior year, with Growth and Specialist goods now representing more than 60% of net revenues. However, revenues dropped by 2% to 1.48 billion pounds due to adverse currency exchange impacts and conditions in the Iraqi and US markets. The shares grew by 34p to 3,066p.
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Mid Caps
Business intelligence and events outfit Informa (INF) increased its full year revenues to 1.137 billion pounds during 2014, modestly ahead of its performance in the prior year despite declining interest in the firm’s business intelligence services and the closure of the conferences arm in certain regions. The company lost 31.2 million pounds before tax. Informa shares rose by 12.5p to 528p.
Business support services firm DCC (DCC) has said that its performance in the three months to 31st December was stronger than during the prior year despite mild weather conditions limiting results from the energy arm of the business. However, substantial improvements in the technology and healthcare wings more than offset this and the smaller environment, food and beverage divisions also grew. The shares grew by 98p to 3,795p.
Online residential information provider Zoopla Property (ZPLA) saw record visitor numbers in January with more than 50.5 million hits during January as the firm continued to invest in brand marketing and platform improvements. Leads per listing were also historically high and take-up of alternative offerings, including the firm’s mobile app, are proceeding well. Shares in Zoopla closed steady at 186p.
Small Caps
Engineering outfit Elektron Technologies (EKT) earned revenues of 44.5 million pounds over the 12 months to 31st January, a decline from the 46.3 million pounds earned in the prior year despite a second half performance that exceeded the board’s expectations. Management are focused on raising awareness of current brands and new product development. Elektron shares closed flat at 5.5p.
Exploration and development firm Circle Oil (COP) has weathered the recent fall in oil prices thanks to stable pricing for the output from its Moroccan gas assets. The company’s position is also helped by recent payments from the Egyptian Government, which is working to reduce its debts to the sector. The board are encouraged by good performance in the face of challenging market conditions. The shares dropped by 0.25p to 11.63p.
Chemical technology company Accsys (AXS) recorded a 41% increase in revenues over the 9 months ended 31st December to €32.4 million (24 million pounds) driven by improved sales volumes of Accoya wood products as well as price rises. This performance has given the board renewed confidence that Accsys will be cashflow positive in the final quarter of its financial year. The shares rose by 3p to 64p.
Back office optimisation software company eg solutions (EGS) has said that results for the year ended 31st January will be marginally ahead of market expectations after the positive momentum that the firm reported in December carried through to the end of the period. Revenues will be approximately 67% higher than last year and the company should return to profit. The shares grew by 0.5p to 75p.
Cardiac monitoring equipment manufacturer LiDCO (LID) expects to record revenues of 8.27 million pounds for the year ended 31st January and profits before taxation should be in line with market forecasts as stronger margins have offset a decline in revenues. Over the course of the year, the company paid off 0.175 million pounds in outstanding loans to become debt free. The shares rose by 1.37p to 6.75p.
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