Tuesday’s Stock Market Report featuring WPP, Brit, Wood Group and Monitise
The Markets
UK inflation fell once again in January, reaching a level of 0.3% according to new figures from the Office for National Statistics. This is the lowest rate since CPI calculation began in 1989. The drop has been attributed to falling fuel prices and the ongoing price battles between supermarket chains. Paul Hollingsworth, UK Economist at Capital Economics said, “the UK will experience a brief period of deflation around March or April this year. With little sign that low inflation is becoming entrenched, though, the UK’s period of deflation should be of the “good” sort”.
Elsewhere, Greek stocks fell by around 4% after bailout talks with the EU appeared to stall last night after the country’s government rejected a deal that would extend the current €240 billion (178.5 billion pound) bailout package. Yanis Varoufakis, Greece’s Finance Minister, said the proposal put forward by the EU was “absurd” but that he remained willing to do whatever was necessary to get the country back on track.
At the London close the Dow Jones had increased by 2.70 points to 18,022.05 and the Nasdaq was down by 3.34 points at 4,380.69.
In London the FTSE 100 closed up by 41.08 points at 6,898.13 and the FTSE 250 rose by 26.46 points to 16,887.70. The FTSE All-Share climbed by 18.56 points to 3,708.61 while the FTSE AIM Index closed up by 3.52 points at 705.47.
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Broker Notes
Westhouse Securities has downgraded its “buy” rating on advertising giant WPP (WPP) to an “add” in light of the 20% growth in the company’s share price since it published its 31st October interim statement. The broker said the fundamentals of the business remained strong and that it will be a major beneficiary of the strengthening US dollar. However, the share price, which rose by 6p to 1,451p, is now within sight of Westhouse’s 1,577p target,
Shore Capital rated insurance and reinsurance firm Brit (BRIT) as a “hold” after the announcement of a recommended cash offer from Fairfax that values the company at 1.22 billion pounds, 11% above yesterday’s closing price. The broker expects the deal to proceed and is beginning to look at which outfit might be the next M&A target after a flurry of industry activity. The shares surged by 30.8p to 305p.
Energy systems manufacturer APC Technology Group (APC) had its “buy” rating and 35p target price reiterated by Northland Capital following WM Morrison’s decision to resume its LED lighting rollout, which is expected to generate significant value for the business. The broker said that the news was positive, but that work to broaden the customer base made the company less reliant on the deal with the supermarket than it was previously. APC shares rose by 1.5p to 24.25p.
Blue Chips
Hospitality firm Intercontinental Hotels Group (IHG) recorded flat adjusted earnings for the year ended 31st December despite a 2% decline in revenues and an adverse foreign exchange environment. The decline in top line income came after the group disposed of or reduced its stake in a number of sites around the world including the Intercontinental London Park Lane. Nevertheless, the total dividend was hiked by 10% to 70 cents per share. The shares lost 43p, closing at 2,545p.
Mid Caps
International energy services outfit Wood Group (WG.) increased full year revenues for 2014 by 7.8% to $7.6 billion (4.94 billion pounds) driven by a strong performance in the PSN arm and an improved engineering services offering. Profits before taxation improved by 11% to $414.5 million (269.4 million pounds) and total dividends have been increased by 25% to 27.5 cents (17.8p) per share. Income investors were doubly pleased as the firm said it intends to increase the dividend payment by double digits in dollar terms from 2015. Shares in Wood Group closed up by 30p at 660p.
Small Caps
Bicycle specialist Tandem Group (TND) said that 2014 revenues were roughly 10% higher than during the prior year, with a significant contribution from the recently acquired Pro Rider business, which made 1.4 million since it was bought in August. Operating profits are expected to be significantly ahead of those posted in 2013. Management expect 2015 to be a strong year with new licenses acquired for childrens’ bikes and an expanded range of adult models. Tandem shares gained 11p to close at 117.5p.
International payments firm Earthport (EPO) believes that revenues for the six months ended 31st December were around 8.7 million pounds, more than double those in the first half of the year as the company won new customers and expanded into new countries. More than 30 clients are contracted but have yet to go live, meaning that significant growth potential remains for the immediate future. The shares inched up by 1.75p to 43.75p.
Bulk materials and solid fuel supplier Hargreaves Services (HSP) saw revenues for the half year ended 30th November drop by 23.7% to 351.2 million pounds as the firm faced difficult market conditions due to low and volatile coal and coke prices. As a result, Hargreaves is working to streamline its business and has disposed of certain non-core business segments, including its Imperial Tankers arm. Hargreaves Services shares plunged by 74p to 493p.
Africa-focus mineral exploration and development firm Ferrex (FRX) confirmed that it is primarily focused on a Togolese manganese site that would allow a rapid start to production with minimal capital expenditures. Management hope to receive the license in due course and believe that a facility could be operational within six months of receipt. Ferrex shares slipped by 0.03p to 0.5p.
Shares in mobile banking and payments software developer Monitise (MONI) surged by 3.5p to 25p after it hinted “market leading players” were interested in buying the business. The firm effectively put itself up for sale in January after initiating a strategic review and appointing financial advisers. Monitise also recorded an EBITDA loss of 30.8 million pounds for the six months ended 31st December on group revenues of 42.4 million pounds as management reiterated its aim of becoming EBITDA profitable in 2016. The company added 3 million registered users during the period and live transactions were 50% higher than a year ago.
Leather producer Pittards (PTD) confirmed that trading in 2014 was in line with expectations despite global economic uncertainty. Management said that recent developments, including the movement of the pound and US dollar, were positive indicators that it would maintain its momentum in the current year. Full results will be released at the end of March. The shares closed up by 3p at 139p.
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