The Markets
The US economy grew at an annualised rate of 3.9% between July and September according to the latest figures from the Bureau of Economic Analysis. This was an upgrade from the 3.5% level that the government body had initially estimated. The largest driver of the improvement was consumer spending, which grew 40 basis point faster than had been initially believed and contributes 70% to US GDP. While future prospects remain uncertain, the US has shaken off its slow start to 2014 and produced its best two consecutive quarters in the last ten years.
The Organisation for Economic Cooperation and Development has said that the UK’s economic recovery will continue into 2015 and 2016. The thinktank believes that consumer spending and private investment will continue to improve as uncertainties diminish, although the OECD did warn that the rate is likely to fall over that period and that “robust productivity is an essential condition for strong and sustainable growth, and uncertainty over its recovery is a major risk to the projection. Labour market pressures could disconnect real wage growth from productivity and lead to cost-push inflation”.
At the London close the Dow Jones had increased by 8.51 points to 17,826.41 and the Nasdaq had risen by 41.98 points to 4,293.30.
In London the FTSE 100 closed up by 1.35 points at 6,731.14 and the FTSE 250 rose by 121.49 points to 15,831.55. The FTSE All-Share increased by 4.92 points to 3,595.91 while the FTSE AIM Index grew by 2.35 points to 729.84.
Broker Notes
Northland Capital has reiterated that it views AdEPT Telecom (ADT) as a “buy” after the company won its first NHS Trust contract. The broker says that acquiring more public sector business has been one of the firm’s core aims in the last year and the firm has brought more than 20 councils onboard, with the NHS representing an exciting new growth opportunity. The shares, on which Northland has a 175p target, fell by 1p to 130p.
Life sciences firm Horizon Discovery (HZD) has kept its “speculative buy” rating from Beaufort Securities after it entered into a licensing and distribution deal with Adarza Biosystems to supply new immunoassay technology. The broker believes this set of products will be attractive to researchers and complement Horizon’s existing range. helping to maintain recent upbeat financial developments. The shares ended the day flat at 153.5p.
Sparkling stone miner Petra Diamonds (PDL) has had its “buy” rating reiterated by Westhouse Securities after its successfully refinanced loans related to its purchase of two mines from DeBeers, under new terms that will allow the loan to be settled 3-4 years earlier than under the prior arrangement. Westhouse feels that this materially strengthens Petra’s balance sheet and will allow the commencement of dividends within the current financial year. Petra Diamonds shares grew by 11.7p to 206.3p.
Broker says case for Petra still crystal
Blue Chips
Utilities firm Severn Trent (SVT) increased revenues by 2.7% to 947.6 million pounds for the six months ended 30th September despite having the lowest combined average bill in the UK. Profits before taxation dropped from 191.2 million pounds to 138.2 million, due to movements in financial instruments held by the firm, but underlying profits rose by 10.3% to 155.8 million pounds. The shares fell by 7p to 2,055p.
Difficult conditions in French markets and foreign exchange have restricted profits at Kingfisher (KGF), whose retail earnings posted an 11.8% decline to 225 million pounds in the quarter to 1st November. Volume sales rose in other overseas markets but this growth was outweighed by rising development costs and the stronger pound. Management retain a cautious outlook and are focused on improving margins and the implementation of cost initiatives. The shares fell by 12.5p to 291.3p.
Is Kingfisher about to dive?
Mid Caps
Consumer finance provider Paragon Group (PAG) recorded profits before taxation of 122.8 million pounds for the year ended 30th September, a 17.2% increase over the prior year caused by an 82.5% increase in Buy-to-Let completions and an increased range of operations at Paragon Bank. Management said that the company’s pipeline remains strong and that further diversification will underpin sustainable growth. The shares rose by 29p to 406.9p.
Online property portal Zoopla (ZPLA) saw revenues rise by 24% to 80.2 million pounds over the year ending 30th September after visitor numbers rose by a third to 513 million. The firm was bullish on its future prospects, despite the launch of a new rival platform backed by estate agent groups. Broader movements in the property market are also cause for concern, but management say that trading in the post-period to date has been encouraging. The shares dropped by 11.4p to 178.6p.
Pub and restaurant operator Mitchells & Butlers (MAB) increased revenues for the year ended 27th September by 4% to 1.97 billion pounds, as it returned to growth in food after the prior year’s volume decline. The firm also increased its site count via new openings and the 173 pubs purchased from Orchid Group. Management are pleased with the current performance and the firm’s market leading position, but believe that there is additional room for growth. The share price increased by 27.1p to 376.1p.
Cheering results for Mitchells and Butlers
Small Caps
Shares in Chamberlin (CMH) edged up by 2.5p to 107.5p after the engineering firm reported a return to profit for the six months to September. Underlying pre-tax profits for the year were 0.4 million pounds, up from a 0.6 million loss. This came after revenues grew by 8.2% to 21.1 million pounds and as management took action to address the cost base. The firm expects full year results to be in line with expectations. Further good news has been seen following the period end with Chamberlin signing a €6.7 million, four year deal with a leading European automotive business for the supply of turbo charger bearing housings. Last week a similar but larger €26 million, eight year contract was announced. Broker Charles Stanley has a 120p target price on the shares.
Indian online retailer Koovs (KOOV) doubled its sales to INR 95.4 million (0.98 million pounds over the six months ended 30th September by adding more, well-known international brands to its platform while improving its own label offerings. However, the loss before taxation deepened to INR 359.5 million (4.08 million pounds) as costs of sales rocketed upwards by more that 800%. The shares climbed up by 9p to 160p.
IT security outfit Accumuli (ACM) saw its statutory loss before taxation for the six months to 30th September widen to 0.48 million pounds from 0.21 million pounds in the prior year despite posting substantial improvement to revenues, due to costs and provisions involved in the acquisition of information risk management firm ArmstrongAdams in June. Management expect revenues to strengthen further in the next six months and is confident of a good outcome for the full year to March. Shares in Accumuli fell by 0.625p to 23.5p.
Adhesive and bonding manufacturer Scapa (SCPA) increased revenues by 2.8% to 114.7 million pounds in the six months to September despite the impact of the strong pound on international sales. North American income was up by 14.8% in local currency terms due to strong sales of industrial products and destocking of consumer-targeted products, such as hockey tape, during the prior period. Shares in the company rose by 3.5p to 131.75p.
Metal coating specialist Hardide (HDD) made record revenues of 3.03 million pounds over the year ended 30th September after the company won a major contract with General Electric worth a minimum of $1.3 million (0.83 million pounds) for each of the next two years. While the uncertain global economic outlook is a cause for concern, management report that they have seen no softening of demand in current trading. The shares grew by 0.1p to 1.75p.
Revenues at quarrying and concrete specialist Breedon Aggregates (BREE) have beaten forecasts and increased by 10% to 226 million pounds for the 10 months to 31st October. If weather conditions for the remainder of the year are favourable, then Breedon’s full year results are likely to exceed current market expectations as EBITDA margins have also improved in both English and Scottish operations. The shares rose by 1.75p to 43.25p.
Gravel firm remains on track to beat forecasts