Tuesday’s Stock Market Report featuring UK Industrial Output, BT, Babcock International, Catlin and Sabien Technology

The Markets

UK industrial output dropped by 0.2% in December, according to the latest figures from the Office for National Statistics, as production declined at North Sea oil and gas rigs. Year-on-year, the figures were up by 1.7% and monthly manufacturing growth of 0.1% exceeded analysts expectations. The ONS said that the drop in oil prices had not yet fully filtered through to the wider economy.

HM Revenue & Customs has said that it was prevented from sharing data implicating HSBC in facilitating tax evasion with the Financial Conduct Authority due to the terms of an agreement with France under which it received the information. MPs said that the FCA could not operate without the full facts on institutions’ activities, but the deal meant the use of data provided could only be used to chase tax evasion.

At the London close the Dow Jones had increased by 62.00 points to 17,791.28 and the Nasdaq had risen by 36.42 points to 4,252.51.

In London the FTSE 100 closed down by 10.21 points at 6,826.94 and the FTSE 250 rose by 79.53 points to 16,658.74. The FTSE All-Share decreased by 2.02 points to 3,668.25 while the FTSE AIM Index dropped by 0.26 points to 698.97.

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Broker Notes

Westhouse Securities issued an “add” rating on exploration and development outfit Sound Oil (SOU) with an 11.4p target price for the shares, after the firm received technical approval for its Environmental Assessment Plan for its Nerveso project from the Veneto Regional Government. Sound expects to generate 4 million euros (2.97 million pounds) in annual revenues when production begins later this year. The shares grew by 0.5p to 11.38p.

Deutsche Bank downgraded mining firm Randgold Resources (RRS) to a “hold” after the firm posted reduced quarterly revenues and profits yesterday morning. The bank raised concerns around the volatility of the gold price and the company’s expense levels, with the report indicating that Deutsche expect the price to drop further in early 2015. Randgold shares dropped by 190p to 5,225p.

Telecommunications provider BT (BT.A) had its “accumulate” rating reiterated by Charles Stanley, who said that the approach to buy EE has come at a time when there is room for upward movement in the share price in the short to medium term. Berenberg Bank and Oriel Securities both repeated their positive positions on the stock, whilst Deutsche Bank suggest a more neutral stance. The shares climbed by 7.2p to 443.8p.

BT makes good connection with broker

Blue Chips

Travel operator TUI AG (TUI) recorded revenues of 3.54 billion euros (2,62 billion pounds) in the quarter ended 31st December, a 5.4% improvement over the same period of 2013, driven by strong performances in the Hotels, Resorts and Cruises arms of the business. The underlying operating loss narrowed by 33 million euros (24.46 million pounds) to 108 million euros (80.04 million pounds). The shares sunk by 7p to 1,140p.

Engineering support services provider Babcock International (BAB) has said that trading since 1st October has continued strongly and experienced strong demand for its services from existing clients and new interest. Management are confident that the firm will meet full year performance expectations and said Babcock entered the final quarter of the year with an order book of 20 billion pounds. The shares rose by 26p to 1,054p.

Wheels turning faster at Babcock

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Mid Caps

Specialist property and casualty insurance outfit Catlin Group (CGL) recorded profits before taxation of 488 million dollars during 2014. representing a 13% increase over the previous year. Gross written premiums rose to 5.97 billion dollars (3.92 billion pounds) with non-London hubs contributing a larger share. The board recently recommended that a 2.79 billion pound offer for the acquisition of the company by XL Group be accepted. The shares ended the day flat at 703p.

Housebuilder Bellway (BWY) completed 3,754 unit sales in the 6 months to 31st January, 15.7% more than in the comparative period, and the value of the forward sales book rose by 24.5% to 975 million pounds. Operating margins are expected to be around 20%, which would be a substantial improvement on last year’s level of 15.6%. Management believe Bellway is well positioned for further growth. The shares grew by 41p to 1,870p.

Bellway builds good results

Small Caps

Glazing and insulation firm Entu (ENTU) earned revenues of 119 million pounds over the year ended 31st October and posted growth across all of its business segments, but saw particularly strong performances in Home Improvements and Insulation. Profits before tax rose by 47.9% to 9 million pounds and management believe that the company will maintain its momentum. The shares rose by 7.5p to 122p.

Independent advice provider AFH Financial (AFHP) has acquired Kidderminster-based K.L. Plester Financial Services for an initial cash consideration of 745,200 pounds with up to 972,000 pounds in potential additional payments depending on performance. The firm’s existing cash reserves will be used to meet these requirements. The purchase will add around 0.6 million pounds in annual recurring revenues. AFH shares closed steady at 150.5p.

Hardware and software development outfit Spectra Systems (SPSY) has entered in to an arrangement with an Asian hologram and foil manufacturer worth at least $1 million (0.66 million pound) over the next 5 years. Under the terms of the deal, Spectra would supply portable readers and related technologies. Management said that the contract reflects the value of the firm’s acquisition of Inksure in 2014. The shares increased by 0.5p to 18.5p.

Energy saving equipment firm Sabien Technology Group (SNT) saw sales for the six months ended 31st December decline to 0.54 million pounds from 0.92 million in the prior year and losses before taxation widened to 0.52 million pounds despite margins being maintained. The firm believes that 2 million pounds worth of orders will be delivered by the end of the financial year. Sabien shares dropped by 0.5p to 18p.

Metals trading services company Ambrian (AMBR) has repeated its statement from September that conditions in its markets were worsening. This trend has continued and affected all participants due to the high volatility in forward spreads and tight credit in a number of key countries. The board expects that results for the second half of 2014 will be around 30% lower than the first. Ambrian shares fell by 1.5p to 6p.

Metals trader weighed down by market conditions