Wednesday’s Stock Market Report featuring Moody’s, Sky, Reckitt Benckiser, Telecity, Red24 and DP Poland
The Markets
Rating agency Moody’s said that cheaper oil will not significantly accelerate global economic growth due to the negative effects of the ongoing sluggishness in the Eurozone, China, Russia and Japan. The organisation commented that the European Central Bank’s quantitative easing programme would offer a slight boost, but that “weak demand in the euro area suggests that companies will have to pass on the lower energy costs, limiting the potential for higher profit margins”.
A poll of 82 economists carried out by Reuters has indicated that analysts believe that this year will see the US economy’s strongest performance in the last decade and the consensus suggests that the Federal Reserve will increase interest rates in June. The survey responses gave an average GDP growth forecast of 3.2%. A strong jobs market is one of the key reasons behind this confidence, with job seekers per open position falling to its lowest level since 2007 during December.
At the London close the Dow Jones was down by 0.18 points at 17,837.00 and the Nasdaq was 0.38 points higher at 4,297.56.
In London the FTSE 100 closed down by 14.61 points at 6,814.17 and the FTSE 250 dropped by 47.07 points to 16,611.67. The FTSE All-Share decreased by 5.54 points to 3,664.00 while the FTSE AIM Index dropped by 3.11 points to 696.84.
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Broker Notes
Westhouse Securities issued a “neutral” rating and 932p target price for SKY (SKY) following news that the broadcaster won the bulk of the live rights for Premier League games in the UK over the next three years at auction. The broker was relieved that uncertainty around the rights has been cleared up, but felt that BT had enhanced its position relative to SKY. Shares in SKY dropped by 21p to 933p.
Brewing giant SABMiller (SAB) has had its “buy” rating and 3,532p target price reiterated at Shore Capital after the firm’s MillerCoors joint venture posted results for the 3 months to 31st December showing a decline in sales volumes and revenues. The news disappointed the broker but with the key Miller Lite brand returning to growth there were positive signs for future performance. The shares rose by 10p to 3,542.5p.
Hotel management chain Millenium & Copthorne (MLC) kept its “hold” rating and 567.5p target price from Beaufort Securities. The broker expressed concerns over falling top line revenues and reduced profits for 2014, but the company ended the year strongly and Beaufort has confidence that recent acquisitions will aid the hotelier in the future. Millenium & Copthorne shares dropped by 2.5p to 565.5p.
Broker seems room for improvement at hotels
Blue Chips
Household good manufacturer Reckitt Benckiser (RB.) met its revenue targets for 2014 as it earned 8.83 billion pounds over the year. Adverse foreign exchange movements mean that this is 5% lower than in the prior period, but it represents a 4% improvement on a constant currency basis. Gross margins rose by 100 basis points to 57.7%. Reckitt Benckiser shares grew by 185p to 5,775p.
Revenues were down by 16% at hydrocarbon extractor Tullow Oil (TLW) as global oil prices fell sharply and the sale of gas assets in Europe and Asia reduced output. The firm posted a loss before tax of 1.96 billion dollars (1.28 billion pounds). Management are considering further reductions to the 2015 capital expenditure programme, including exploration and appraisal cuts. Tullow shares fell by 29.7p to 384.6p.
Microprocessor firm ARM Holdings (ARM) saw group revenues for 2014 rise by 11% to 714.6 million pounds, driven by a substantial increase in chip licensing fees. Normalised profits before taxation were up by 95% at 411.3 million pounds after the firm posted a 120 basis point improvement in its operating margins. Management said that the outlook for royalty revenues in 2015 was very positive. The shares rose by 31p to 1,087p.
Good results at stronger ARM
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Mid Caps
Data centre services provider TeleCity (TCY) increased its revenues by 7.1% to 348.7 million pounds due to new initiatives and increased sold power percentages throughout the business. Management forecast a strong performance for 2015, but also announced that the board had agreed non-binding terms for an all share merger with InterXion Holdings which it says would provide synergies with a net present value of 600 million pounds. The shares rose by 129.5p to 978p.
Specialised pharmaceutical firm Indivior (INDV) earned net revenues of 1.11 billion dollars in the year ended 31st December, an 8% decline from the prior year as competition from generic and branded alternatives to Suboxine Film intensified in the US and European governments restricted spending. Operating profits fell sharply due the reduced income and increased R&D spending. Indivior shares dropped by 3.6p to 167.8p.
Aerospace and defence technology outfit Qinetiq Group (QQ.) said that its EMEA operations performed strongly in the final quarter of 2014 with high levels of contracted income despite the ongoing restructuring programme being carried out by the UK Ministry of Defence. The Global Products arm suffered from reduced US military spending. QinetiQ shares rose by 1.5p to 190.4p.
QinetiQ retains momentum
Small Caps
Security services outfit Red24 (REDT) announced that its results for the year ending 31st March will be materially ahead of expectations after a number of new client wins. Management believe that this momentum can be carried through into the subsequent financial year. Red24 will launch a new travel tracking product at a trade show later this month. The shares climbed 1p to 14.75p.
Call centre software provider IPPlus (IPP) saw revenues for the 6 months to 31st December drop to 3.73 million pounds from 4.71 million in the previous year after a major client opted to bring the majority of its telephone operation in house and the sale of Ancora Solutions. Losses before taxation were 0.16 million pounds, but management believe performance will improve in the near future. The shares dropped by 1p to 14.25p.
Public relations and marketing outfit Porta Communications (PTCM) expects revenues for 2014 to be almost 30% higher than the prior year after the addition of Redleaf PR in Australia and the advertising arm starting to gain traction in core markets. The board believes that the firm will continue to grow strongly in 2015 and said that margins should improve over the course of the year. Porta shares closed flat at 7.37p.
Digital and print marketing firm Tangent Communications (TNG) said that underlying operating profits for the year ending 28th February will be roughly 1.2 million pounds, half of the level that was achieved in the previous year. The company is restructuring its print facilities in the Newcastle area in order to reduce costs. The board does not expect to recommend a final dividend for the year. The shares declined by 1.12p to 3.75p.
Fast food operator DP Poland (DPP) recorded its 9th consecutive quarter of double-digit like-for-like growth at the end of 2014 as it moved into positive EBITDA for the year at its best performing corporate stores. The firm is planning significant new openings throughout Poland during 2015 and said its franchisees were reporting improved sales and profits. DPP shares grew by 4.63p to 13.88p.
Pizza firm in pole position?
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