Tuesday’s Stock Market Report featuring Vodafone, Friends Life, Taylor Wimpey, Adept Telecom and Central Rand Gold

The Markets

The British Retail Consortium has warned that unseasonable weather conditions has led to a build up of winter goods inventories across the UK. Overall sales in October were 1.4% higher than the same month last year, but taking into account the increase in shopping space there was no significant like-for-like improvement. David McCorquodale, Head of UK Retail at KPMG, said that, “most retailers will feel they were tricked rather than treated in October. Even the most experienced of shopkeepers could not have foreseen a heatwave at Halloween and most were left with sales which were flat at best”.

Mortgage lending to first time buyers dropped by 3% in September, which the Council of Mortgage Lenders believes signals decreased confidence among purchasers. This was the second consecutive monthly decline, with lending to those moving house also falling. Paul Smee, the Director General of the CML, commented that, “Fears that the market is going to keep on overheating have rather gone away. The market seems in a much more stable pattern at the moment. I think what a lot of people are thinking about is that the next move in interest rates is going to be up, so there is perhaps a bit of caution around about people overextending themselves”.

At the London close the Dow Jones had increased by 6.07 points to 17,619.85 and the Nasdaq had grown by 1.13 points to 4,177.08.

In London the FTSE 100 closed up by 16.15 points at 6,627.40 and the FTSE 250 rose by 34.46 points to 15,630.69. The FTSE All-Share had increased by 8.07 points to 3,543.53 while the FTSE AIM Index shrank by 1.86 points to 721.40.

Broker Notes

Pensions and investment manager Friends Life (FLG) has been rated “hold” by Shore Capital and given a target price of 322p after the company reported good levels of new business volume growth, but at declining margins. The broker believes the shares are trading at around an 18% discount to fair value but is concerned about forthcoming changes to UK pensions policy and the effects that this will have on the business. The shares rose by 4p to 326.4p.

Argentinian minerals producer Patagonia Gold (PGD) had its “buy” rating reiterated by Cantor Fitzgerald as the firm consolidated its position with a strong performance over the last quarter. The broker feels the company’s improved production outweighs the recent softness in the gold price, with the firm well on track to smash the broker’s output forecast. Cantor also notes that Patagonia Gold is developing additional projects to ensure longer term growth. The shares climbed by 0.25p to 5p.

Westhouse Securities has rated business information and marketing outfit Centaur Media (CAU) a “buy” after the firm published a trading statement showing that revenue trends have stabilised, with underlying revenues up by 6% over the four months to 31st October. Critically, overall revenue growth in events and commissioned content now exceeds the decline in advertising income, showing that the firm’s switch to higher margin business has gained traction. The shares rose by 0.75p to 58p.

Broker says Centaur not horsing around

Blue Chips.

Telecommunications giant Vodafone (VOD) saw new product offerings lift its revenues to 20.8 billion pounds for the six months ended 30th September, an 8.9% rise from the same period of last year. The firm will also move in to fixed line broadband and TV services to compete with rivals, as the world’s second largest mobile operator targets additional growth in cash flow and profitability for the full year. Vodafone saw EBITDA for the first half down by 10% at 5.9 billion pounds but increased its dividend by 2% to 3.6p per share. The shares, on which broker UBS recently upped its target price to 260p, grew by 11.2p to 219.05p.

Building materials firm CRH (CRH) saw operating earnings and like-for-like sales rise in the third quarter. This was on the back of its American operations benefitting from the economic recovery, to generate a 10% rise in EBITDA for the three months to 30th September. The European business completed its reorganisation, but suffered from the weak macro conditions on the continent. Overall performance for the full year is expected to be slightly ahead of last year. CRH shares fell by 15p to 1,370p despite broker Liberum maintaining its 1,790p target.

CRH builds on improving Macro conditions

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Mid Caps

Reinforced polymers producer Fenner (FENR) saw revenues drop by 11% to 729.4 million pounds in the year ended 31st August as foreign exchange headwinds and weaknesses in the US and Australian markets ate into sales. This offset a strong performance from Fenner’s AEP division which earned recorded sales at constant currency rates. Profits before tax of 29 million pounds were less that half of those achieved in 2013 but Fenner still increased its dividend by 7% to 12p per share for the full year. The shares declined by 22.2p to 286.9p.

Housebuilder Taylor Wimpey (TW.) raised its profit forecasts for the year after prices and sales both continued to improve ahead of expectations since the end of June. Management believe that this growth is sustainable and will translate to a 400 basis point increase in gross profit margins for 2014. Cancellation rates remain low and weekly sales per outlet are very slightly ahead of 2013’s levels. The shares rose by 4.9p to 122.2p.

Tools and systems developer Oxford Instruments (OXIG) announced that it expects full year results to be towards the lower end of market expectations after the firm saw organic revenues drop by 5.9% to 178.5 million pounds for the six months ended 30th September. The strength of sterling has had a deleterious effect on the firm’s fortunes, but management believes that recent acquisitions and fresh investment in R&D will help the firm generate returns in the next six months. The shares fell by 33p to 1,104p.

Is Oxford Instruments measuring up?

Small Caps

UK voice and data telecommunications provider AdEPT Telecom (ADT) has upped its interim dividend by 50% to 1.5p after revenues rose by 11.3% to 11.3 million pounds for the six months to 30th September. Pre-tax profits rose by 14% to 2.2 million pounds. In an impressive set of numbers AdEPT also reduced its gearing ratio by 900 basis points to 29% and free cash flow rose by 29.1%, leading management to reiterate its commitment to progress dividends and the firm’s acquisition-focused strategy. The news comes after the company announced last week that it has renewed a contract with its largest customer worth 2.2 million pounds over three years. AdEPT shares grew by 6p to 126p.

LP Hill (LPH), a Madagascar-focused minerals explorer, posted an increased loss of 0.66 million pounds for the year ended 30th June as the company continues to develop its uranium and thorium mining project on the island. There have been additional delays in permitting for the site and as a result, LP Hill has recognised an impairment of 0.48 million pounds. The firm is actively seeking additional opportunities. The shares fell by 4.25p to 63.5p.

Nickel and copper specialist Amur Minerals Corporation (AMC) has had its “Detailed Exploration and Production Licence” application for its Amur’s Kun-Marie project in the far east of Russia approved by the local Ministry of Economic Development. This is a major step in the process of exchanging an exploration licence to a production permit and all documents will now be passed to central government for final consideration. The shares grew by 1.45p to 5.79p.

Sales at gardening and horticultural products firm William Sinclair (SNCL) were flat for the year ending 30th September according to its latest trading update. This was in part due to the unusually late growing season in 2013 and the closure of the company’s Boothby site. The peat harvest was below expectations, leading management to believe that the company will make a 1 million pound EBITDA loss for the year. The shares dropped by 2p to 43.5p.

Shares in mining and exploration outfit Central Rand Gold (CRND) almost trebled, rocketing by 15.5p to 23.5p after the firm signed a non-binding Memorandum of Understanding regarding the potential sale of it’s assets to Hong Kong based Hiria Group for a cash consideration of around $150 million (94 million pounds). In contrast the firm’s current market cap is just short of 18 million pounds. The deal is subject to due diligence and regulatory approval, but Central Rand Gold hopes that matters can be concluded by the 31st March next year.

Golden opportunity for Central Rand?