Tuesday’s Stock Market report featuring record FTSE highs, HSBC, Persimmon, Genus and Audioboom

By Swen Lorenz 24 February 2015

21 mins. to read

The Markets

A strong performance from mining shares saw the FTSE 100 close at 6,949.63, a record high and the highest level since 30th December 1999. Investors have waited over 15 years to see the UK’s flagship index beat its previous record of 6,930.2, seen just before the dotcom bubble popped. Angus Campbell, Senior Analyst at FXPro, commented, “This does not mean that we won’t see the figure “7” in front of the index before long, but it looks as though the best gains have been made and further upside could be limited.”

US indices also did well, opening up strongly on the back of Federal Reserve Chairman Janet Yellen’s semi-annual Monetary Policy Report to the Congress. Yellen hinted that interest rate rises would not be made in the short-term given that, “inflation continues to run well below the Committee’s 2 percent objective, and that room for sustainable improvements in labor market conditions still remains.” Yellen added that, “the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings.”

At the London close the Dow Jones had risen by 78.10 points to 18,194.94 and the Nasdaq was up by 0.95 points at 4,450.44.

Elsewhere in London the FTSE 250 rose by 33.93 points to 117,201.9, the FTSE All-Share gained 17.73 points to 3,742.58 but the FTSE AIM Index closed down by 1.18 points at 711.87.

Broker Notes

UBS downgraded HSBC (HSBA) from ‘buy’ to ‘neutral’ after yesterday’s disappointing results, saying that it foresees “at least another two years of de-leveraging ahead”. The broker, which also slashed its target price for the shares from 730p to 590p, noted that HSBC delivered a common equity tier-one (CET1) capital ratio of just 11.1% by the year end, down 30 basis points over the final quarter. With regulators said to be demanding a CET1 of around 12-13%, the mid-point of this target range implies a requirement to build another 20 billion dollars of equity – a process that may take at least another two-three years – according to UBS. HSBC shares finished up by 4.4p at 581.6p.

Vodafone (VOD) shares tumbled by 6.2p to 226.5p after Bank of America Merrill Lynch told clients that the telecoms giant faces either a shotgun wedding or a slow decline into mediocrity. The investment bank argued that with BT and Sky expanding into mobile, Vodafone must act quickly to merge with Virgin Media owner Liberty Global. BoAML warned that if Vodafone doesn’t make a move very soon, it will have to pay more later as Vodafone’s relative value declines.

Blue Chips

Plunging commodity prices sent underlying profit for the half-year to December down by 31% to 5.35 billion dollars at mining giant BHP Billiton (BLT). However, the shares climbed by 100p to 1,647p on the news, as the fall in profits was less steep than analysts had expected, and the firm raised its interim dividend by 5% to 62 cents per share. It was able to do this due to additional cuts to its target for capital spending, and plans for cost savings of 4 billion dollars over the three years to 2017. CEO Andrew Mackenzie said he was confident that the firm can maintain its progressive dividend policy and continue to selectively invest in projects that offer compelling returns.

Aerospace & defence group Meggitt (MGGT) saw group revenues decline 5% to 1.55 billion pounds, mostly on the back of currency headwinds, though organic growth was still marginally negative as organic revenue growth of 6% in civil aerospace was offset by declines in military and energy. This resulted in a 13% fall in underlying profit before tax to 328.7 million pounds. CEO Stephen Young said the group expects organic revenue growth in 2015 of low- to mid-single digit percentage points, in line with guidance given in November. Shares in Meggitt descended by 34p to 537p.

Engineering stalwart GKN (GKN) predicted another year of growth, after pre-tax profits rose by 4% to 601 million pounds in 2014, boosted by a strong performance in its Driveline division. Sales declined by 2% to 7.46 billion pounds after a negative impact from currency movements; however, on an organic basis, the top line grew by 4%. Although the firm acknowledged that some markets remain challenging, it said that 2015 is expected to be a year of further growth. Beyond 2015, the group believes it is well positioned to outperform in its markets. GKN shares moved down by 12.4p at 373.6p.

Housebuilder Persimmon (PSN) announced it is to step-up cash returns to shareholders, after full year revenue rose by 23% to 2.6 billion pounds and profit before tax soared by 44% to 475 million pounds in 2014. The UK’s largest housebuilder said it experienced an encouraging start to 2015 and a solid opening period to the spring season with current total forward sales of 1.49 billion pounds, 5% ahead of the previous year. It added that the ongoing gradual improvement in the UK economy and increasing mortgage lender support provides “a supportive backdrop” for the new homes market. Shares in Persimmon closed the day down by 60p at 1,650p.

Mid Caps

Interim results from pig semen business Genus (GNS) reported adjusted pre-tax profits up by 20% for the six months to December, with the performance for the full year now ahead of original expectations. While profits from the Asia business fell by 21%, mainly due to lower activity in Russia, the firm’s porcine business, PIC, grew profits by 14%, with strong contributions from North America, Mexico and Brazil. Genus upped the interim dividend by 11% to 6.1p per share and in reaction the shares surged by 99p to 1,388p.

Also announcing interims was annuities and equity release business Just Retirement (JRG). The firm reported underlying operating profits before tax fell by 10% to 42.6 million pounds in the six months to December, due to lower new business volumes and margins. However, the shares surged by 22.8p to 166.3p after the firm announced that it was experiencing early signs of a return to growth in sales following a slump seen after pension reforms announced in the November 2014 Budget. An interim dividend of 1.1p per share will be paid for the first half.

Specialist emerging markets focussed asset manager Ashmore (ASHM) saw assets under management fall by 15% to $63.7 billion over the six months to December. This was mainly a result of a net $4.5 billion outflow from the firm’s funds and a $6.2 billion negative investment performance. However, statutory profit before tax increased by 37% to 110.7 million pounds as the firm derived higher performance fees, lowered costs and benefitted from a strong US dollar. The interim dividend was increased by 2.2% to 4.55p per share. Ashmore shares increased by 2p to 311p.

Small Caps

Mar City (MAR) revealed that non-executive Michael Brown had resigned his position less than a year after joining the troubled housebuilder. Last week the company announced a dramatic profits warning only weeks after confirming forecasts to the market, blaming a change in the application of accounting policies. While the shares remained flat at 47p on the day they have more than halved in the past week. The firm said that it will be strengthening its board in the near term with new appointments, both at the finance director and independent non-executive director levels.

Veterinary medicines business Animalcare (ANCR) grew pre-tax profits by 28% to 1.76 million pounds in the six months to December, prompting it to hike the interim dividend by 20% to 1.8p per share. Driving the numbers was strong revenue growth of 10.6% in the Licensed Veterinary Medicines business and an increase in margins. Cash generation was stronger than expected, with the firm ending the period with net cash of just over 5 million pounds. Broker Panmure Gordon has a 245p target on the shares, which rose by 7p to 192p.

Ideagen (IDEA), the information management software business, saw its shares rise by 0.75p to 37.25p after announcing several new contract wins in the aviation sector. Three firms, including a UK based regional airline, an African national airline and a Malaysian aviation services company, have placed contracts worth a combined 1 million pounds. The deals were won by recently acquired subsidiary company, Gael Limited, and are for the supply of integrated Compliance, Risk and Safety Management services.

Meat seller Crawshaw (CRAW) reported that like-for-like sales for the financial year ending January were up by 5%, after seeing 11% growth in the previous year. More significantly , results for the year are expected to be materially higher than market forecasts. This comes on the back of an increase in cash margins and despite investment in growth plans. A good backdrop then for new CEO and former Lidl executive Noel Collett, who will start in his position at Crawshaw next week. The shares increased by 7.25p to 45p.

Private investors’ favourite Audioboom (BOOM) will relaunch its Android app with an updated design and a host of new features tomorrow. The spoken-word audio platform operator currently has 3.4 million registered users around the world, and works with over 2,300 global content partners and broadcasters. To listen to the Master Investor Audioboom channel CLICK HERE

ValiRx (VAL), the cancer diagnostics business, has received successful results from a trial of its lead compound VAL201. An ongoing Phase I/II study is assessing the safety and tolerability of VAL201 in patients with locally advanced or metastatic prostate cancer and other advanced solid tumours. VAL201 selectively prevents tumour growth by specifically inhibiting the proliferation of tumour cells. First results suggested that VAL201 was safe and well tolerated at the doses tested. The trial will advance to the next elevation of dose, where further safety and tolerability testing will be undertaken. Shares in the company remained flat at 0.25p.

Digital marketing business dotDigital (DOTD) grew pre-tax profits by 17.4% to 2.54 million pounds in the six months to December as revenues grew by 32% to just under 10 million pounds. Driving the numbers were recurring monthly revenues from the dotmailer business’s Software as a Service based usage charges growing by 28% and email related creative and managed service revenues rising by 38%. dotDigital ended the period with 9.5 million of cash and will spend 3 million of this over the next two years on an accelerated investment plan. The shares fell by 2.75p to 34.5p.

The Markets
A strong performance from mining shares saw the FTSE 100 close at 6,949.63, a record high and the highest level since 30th December 1999. Investors have waited over 15 years to see the UK’s flagship index beat its previous record of 6,930.2, seen just before the dotcom bubble popped. Angus Campbell, Senior Analyst at FXPro, commented, "This does not mean that we won’t see the figure "7" in front of the index before long, but it looks as though the best gains have been made and further upside could be limited."
US indices also did well, opening up strongly on the back of Federal Reserve Chairman Janet Yellen’s semi-annual Monetary Policy Report to the Congress. Yellen hinted that interest rate rises would not be made in the short-term given that, "inflation continues to run well below the Committee’s 2 percent objective, and that room for sustainable improvements in labor market conditions still remains." Yellen added that, "the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings."
At the London close the Dow Jones had risen by 78.10 points to 18,194.94 and the Nasdaq was up by 0.95 points at 4,450.44.
Elsewhere in London the FTSE 250 rose by 33.93 points to 117,201.9, the FTSE All-Share gained 17.73 points to 3,742.58 but the FTSE AIM Index closed down by 1.18 points at 711.87.
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Broker Notes 
 
UBS downgraded HSBC (<a href=”http://www.bulletincentral.co.uk/?T=HSBA”>HSBA</a>) from ‘buy’ to ‘neutral’ after yesterday’s disappointing results, saying that it foresees "at least another two years of de-leveraging ahead". The broker, which also slashed its target price for the shares from 730p to 590p, noted that HSBC delivered a common equity tier-one (CET1) capital ratio of just 11.1% by the year end, down 30 basis points over the final quarter. With regulators said to be demanding a CET1 of around 12-13%, the mid-point of this target range implies a requirement to build another 20 billion dollars of equity – a process that may take at least another two-three years – according to UBS. HSBC shares finished up by 4.4p at 581.6p. 
 
Vodafone (<a href=”http://www.bulletincentral.co.uk/?T=VOD”>VOD</a>) shares tumbled by 6.2p to 226.5p after Bank of America Merrill Lynch told clients that the telecoms giant faces either a shotgun wedding or a slow decline into mediocrity. The investment bank argued that with BT and Sky expanding into mobile, Vodafone must act quickly to merge with Virgin Media owner Liberty Global. BoAML warned that if Vodafone doesn’t make a move very soon, it will have to pay more later as Vodafone’s relative value declines. 
Blue Chips
Plunging commodity prices sent underlying profit for the half-year to December down by 31% to 5.35 billion dollars at mining giant BHP Billiton (<a href=”http://www.bulletincentral.co.uk/?T=BLT”>BLT</a>). However, the shares climbed by 100p to 1,647p on the news, as the fall in profits was less steep than analysts had expected, and the firm raised its interim dividend by 5% to 62 cents per share. It was able to do this due to additional cuts to its target for capital spending, and plans for cost savings of 4 billion dollars over the three years to 2017. CEO Andrew Mackenzie said he was confident that the firm can maintain its progressive dividend policy and continue to selectively invest in projects that offer compelling returns. 
 
Aerospace & defence group Meggitt (<a href=”http://www.bulletincentral.co.uk/?T=MGGT”>MGGT</a>) saw group revenues decline 5% to 1.55 billion pounds, mostly on the back of currency headwinds, though organic growth was still marginally negative as organic revenue growth of 6% in civil aerospace was offset by declines in military and energy. This resulted in a 13% fall in underlying profit before tax to 328.7 million pounds. CEO Stephen Young said the group expects organic revenue growth in 2015 of low- to mid-single digit percentage points, in line with guidance given in November. Shares in Meggitt descended by 34p to 537p. 
 
Engineering stalwart GXN (<a href=”http://www.bulletincentral.co.uk/?T=GKN”>GKN</a>) predicted another year of growth, after pre-tax profits rose by 4% to 601 million pounds in 2014, boosted by a strong performance in its Driveline division. Sales declined by 2% to 7.46 billion pounds after a negative impact from currency movements; however, on an o
rganic basis, the top line grew by 4%. Although the firm acknowledged that some markets remain challenging, it said that 2015 is expected to be a year of further growth. Beyond 2015, the group believes it is well positioned to outperform in its markets. GKN shares moved down by 12.4p at 373.6p. 
 
Housebuilder Persimmon (<a href=”http://www.bulletincentral.co.uk/?T=PSN”>PSN</a>) announced it is to step-up cash returns to shareholders, after full year revenue rose by 23% to 2.6 billion pounds and profit before tax soared by 44% to 475 million pounds in 2014. The UK’s largest housebuilder said it experienced an encouraging start to 2015 and a solid opening period to the spring season with current total forward sales of 1.49 billion pounds, 5% ahead of the previous year. It added that the ongoing gradual improvement in the UK economy and increasing mortgage lender support provides "a supportive backdrop" for the new homes market. Shares in Persimmon closed the day down by 60p at 1,650p.
<a href=”http://t1ps.com/crm/tracking.php?id=10058”><img src=”http://s16.postimg.org/mj171zn9x/UK_Banks_Reporting_Banner.jpg” alt=”” width=”600” height=”120” /></a> 

Mid Caps
Interim results from pig semen business Genus (<a href=”http://www.bulletincentral.co.uk/?T=GNS”>GNS</a>) reported adjusted pre-tax profits up by 20% for the six months to December, with the performance for the full year now ahead of original expectations. While profits from the Asia business fell by 21%, mainly due to lower activity in Russia, the firm’s porcine business, PIC, grew profits by 14%, with strong contributions from North America, Mexico and Brazil. Genus upped the interim dividend by 11% to 6.1p per share and in reaction the shares surged by 99p to 1,388p.
Also announcing interims was annuities and equity release business Just Retirement (<a href=”http://www.bulletincentral.co.uk/?T=JRG”>JRG</a>). The firm reported underlying operating profits before tax fell by 10% to 42.6 million pounds in the six months to December, due to lower new business volumes and margins. However, the shares surged by 22.8p to 166.3p after the firm announced that it was experiencing early signs of a return to growth in sales following a slump seen after pension reforms announced in the November 2014 Budget. An interim dividend of 1.1p per share will be paid for the first half.
Specialist emerging markets focussed asset manager Ashmore (<a href=”http://www.bulletincentral.co.uk/?T=ASHM”>ASHM</a>) saw assets under management fall by 15% to $63.7 billion over the six months to December. This was mainly a result of a net $4.5 billion outflow from the firm’s funds and a $6.2 billion negative investment performance. However, statutory profit before tax increased by 37% to 110.7 million pounds as the firm derived higher performance fees, lowered costs and benefitted from a strong US dollar. The interim dividend was increased by 2.2% to 4.55p per share. Ashmore shares increased by 2p to 311p.
Small Caps
Mar City (<a href=”http://www.bulletincentral.co.uk/?T=MAR”>MAR</a>) revealed that non-executive Michael Brown had resigned his position less than a year after joining the troubled housebuilder. Last week the company announced a dramatic profits warning only weeks after confirming forecasts to the market, blaming a change in the application of accounting policies. While the shares remained flat at 47p on the day they have more than halved in the past week. The firm said that it will be strengthening its board in the near term with new appointments, both at the finance director and independent non-executive director levels.
 Veterinary medicines business Animalcare (<a href=”http://www.bulletincentral.co.uk/?T=ANCR”>ANCR</a>) grew pre-tax profits by 28% to 1.76 million pounds in the six months to December, prompting it to hike the interim dividend by 20% to 1.8p per share. Driving the numbers was strong revenue growth of 10.6% in the Licensed Veterinary Medicines business and an increase in margins. Cash generation was stronger than expected, with the firm ending the period with net cash of just over 5 million pounds. Broker Panmure Gordon has a 245p target on the shares, which rose by 7p to 192p.
Ideagen (<a href=”http://www.bulletincentral.co.uk/?T=IDEA”>IDEA</a>), the information management software business, saw its shares rise by 0.75p to 37.25p after announcing several new contract wins in the aviation sector. Three firms, including a UK based regional airline, an African national airline and a Malaysian aviation services company, have placed contracts worth a combined 1 million pounds. The deals were won by recently acquired subsidiary company, Gael Limited, and are for the supply of integrated Compliance, Risk and Safety Management services.
Meat seller Crawshaw (<a href=”http://www.bulletincentral.co.uk/?T=CRAW”>CRAW</a>) reported that like-for-like sales for the financial year ending January were up by 5%, after seeing 11% growth in the previous year. More significantly , results for the year are expected to be materially higher than market forecasts. This comes on the back of an increase in cash margins and despite investment in growth plans. A good backdrop then for new CEO and former Lidl executive Noel Collett, who will start in his position at Crawshaw next week. The shares increased by 7.25p to 45p.
 Private investors’ favourite Audioboom (<a href=”http://www.bulletincentral.co.uk/?T=BOOM”>BOOM</a>) will relaunch its Android app with an updated design and a host of new features tomorrow. The spoken-word audio platform operator currently has 3.4 million registered users around the world, and works with over 2,300 global content partners and broadcasters. To listen to the Master Investor Audioboom channel <a href=”https://audioboom.com/channel/masterinvestor”>CLICK HERE</a>
ValiRx (<a href=”http://www.bulletincentral.co.uk/?T=VAL”>VAL</a>), the cancer diagnostics business, has received successful results from a trial of its lead compound VAL201. An ongoing Phase I/II study is assessing the safety and tolerability of VAL201 in patients with locally advanced or metastatic prostate cancer and other advanced solid tumours. VAL201 selectively prevents tumour growth by specifically inhibiting the proliferation of tumour cells. First results suggested that VAL201 was safe and wel
l tolerated at the doses tested. The trial will advance to the next elevation of dose, where further safety and tolerability testing will be undertaken. Shares in the company remained flat at 0.25p. 
Digital marketing business dotDigital (<a href=”DOTD”>DOTD</a>) grew pre-tax profits by 17.4% to 2.54 million pounds in the six months to December as revenues grew by 32% to just under 10 million pounds. Driving the numbers were recurring monthly revenues from the dotmailer business’s Software as a Service based usage charges growing by 28% and email related creative and managed service revenues rising by 38%. dotDigital ended the period with 9.5 million of cash and will spend 3 million of this over the next two years on an accelerated investment plan. The shares fell by 2.75p to 34.5p.

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