The Markets
The World Bank cut its economic forecasts for 2015 and 2016 in a new note issued this morning. The Bank said that sluggish Eurozone performance, the state of Japan’s finances and slowing growth in a number of major emerging markets were the main reasons for its decision. Global growth of 3% is now expected this year and 3.3% next year, down from previous forecasts of 3.4% and 3.5% respectively. After the news, the price of copper dropped by 8% to a new five year low, mining shares across the world dropped significantly and the FTSE closed down by 2.35%. UBS Analyst Daniel Morgan said that decision was not unexpected as, “Europe has been pretty sluggish, China’s still got that property overhang, Japan’s entered recession. You’ve got the US and UK going fine, so it’s a patchy global growth picture – but it’s one that has definitely deteriorated from six months ago”.
Elsewhere, the European Court of Justice has ruled that the European Central Bank’s Outright Monetary Transaction programme is legal, with attached commentary suggesting that the bank can set policy as it sees fit so long as it is proportional and clearly communicated. The decision opens the door to the bank buying member nations’ sovereign debt and will aid the ECB if it begins a significant quantitative easing programme as it is expected to do later this month. Following the ruling, the Euro dropped to a nine-year low against the dollar and fell beneath its launch price.
At the London close the Dow Jones had decreased by 241.50 points to 17,372.18 and the Nasdaq fell by 30.27 points to 4,135.93.
In London the FTSE 100 closed down by 153.37 points at 6,388.83 and the FTSE 250 dropped by 212.88 points to 15,872.09. The FTSE All-Share decreased by 75.53 points to 3,447.51 while the FTSE AIM Index dropped by 4.84 points to 697.24.
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Broker Notes
Westhouse Securities has reiterated its “add” rating and 310p target price on Premier Oil (PMO) after the firm issued a production update revealing that its 2014 output was 9.3% higher than in 2013 and towards the top end of the prior guidance range. The broker believes that revenues for the year will be roughly $1.6 billion (1.05 billion pounds) based on an average achieved price of $101 a barrel. The shares dropped by 4.7p to 131.9p.
Housebuilder Barratt Developments (BDEV) has kept its “hold” rating and 425p target price following the firm’s Interim Management Statement which indicated that the company was trading in line with previously released guidance. The broker said that while the industry has recent seen widespread drops in stock prices these had not yet gone far enough for there to be significant upside. The shares fell by 0.5p to 425p.
Cantor Fitzgerald maintained its “buy” stance and 32p target price on gold producer Orosur Mining (OMI) despite reduced output and increased costs caused by declining ore grades at its Arenal Deeps mine. The company dropped to a net loss of $1.2 million (0.79 million pounds) for the most recent quarter after earning a profit of $3.5 million in the equivalent period of last year. Cantor believes the stock is trading at a substantial discount to peers and that life of mine improvements and current development projects indicate longer term value. The shares ended the day flat at 10.75p.
Broker still thinks Orosur shares are gold standard
Blue Chips.
Fashion and luxury goods outfit Burberry (BRBY) saw retail revenues for the three months to 31st December rise by 15% to 604 million pounds, with double digit growth rates in American and EMEA markets and rapid improvement in digital income. Asian sales were limited by disruption in Hong Kong, where protests caused sales in the market to fall relative to 2013. The shares fell by 22p to 1,642p.
Real estate investment trust British Land (BLND) has let an additional 93,400 sq ft of space at The Leadenhall Building in London, with new tenants including the architecture firm Roger Stirk Harbour + Partners. Five additional floors of the property are under offer, bringing the prospective occupancy rate of the building to around 70%. British Land also confirmed that some bolts will be replaced following two fractures seen last year, but said that independent engineers have found no structural issues in the construction. The shares dropped by 4p to 781.5p.
British Land look to cream a profit as Cheese Grater fills up
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Mid Caps
Online takeaway marketplace Just Eat (JE.) recorded a 52% increase in total orders over the 12 months ended 31st December 2014, with growth in all markets being driven by a shift to mobile apps and investments in marketing and technology. The numbers include the firm’s French business, which it acquired in July last year, but exclude orders from Brazil, where the company formed a strategic partnership in November. Just Eat shares closed the day up by 11.3p at 340.8p.
Grocery retailer and distributer Ocado (OCDO) increased sales during the month of December by 14.8% relative to the same period of 2013, with order volumes processed for Ocado.com and Morrisons.com over the seven days immediately preceding Christmas more than 40% higher than the prior year. Management said that preliminary results for 2014 will be published early next month. The shares fell by 5.9p to 404.4p.
Retail sales at high street fashion chain SuperGroup (SGP) for the 11 weeks to 10th January increased by 17.8% relative to the same period of last year, with the improvement in online sales particularly noteworthy. Cold weather after Christmas also helped the company shift substantial volumes of outerwear and knitwear, which had higher that planned stock levels due to a warm Autumn. The shares climbed by 84.5p to 896p.
SuperDry results are no damp squib
Small Caps
Independent cinema operator Everyman Media Group (EMAN) said that trading for the year ended 31st December was in line with market expectations. The firm operated ten permanent sites during 2014, as well as pop-up venues at Battersea Power Station and Selfridges, and plans to open two new cinemas in London and Birmingham during the first half of this year. The shares ended the day flat at 85p.
Business services provider Christie Group (CTG) announced that it believes revenues and profits for 2014 will be significantly ahead of market forecasts after a strong end year period in the transactional and advisory business with the completion of some major assignments. In a brief statement the firm added that preliminary results will be published at the end of March. The shares rose by 17p to 157p.
Healthcare industry software developer Craneware (CRW) increased the value of its signed contracts by 10% over the six months ended 31st December and the margins from these gains will be recognised over future periods. However, the firm does expect EBITDA for the half year to rise by around 10% and a modest improvement in recognised revenues. The shares gained 5p, closing at 507.5p.
Outsourced after sales support provider Regenersis (RGS) traded in line with expectations over the six months ended 31st December. Management are pleased with the progress of all key business units and look forward to the digital care unit delivering profits in the second half of the firm’s financial year. Full results for the period will be released mid-March, The shares fell by 23.25p to 223.75p.
Budget footwear retailer Shoe Zone (SHOE) saw revenues for the year ended 4th October drop by 10.8% to 172.9 million pounds after the planned closure of a number of temporary stores. However, gross margins improved by 190 basis points to 61.3% and profits before tax doubled to 10.4 million pounds. The board expects 2015 to be a year of growth despite the warm start to the Autumn season. The shares increased by 2.5p to 235p.
Colour x-ray imaging firm Kromek Group (KMK) increased revenues for the six months ended 31st October by 33% to 3.2 million pounds as the firm sold more nuclear and security products and won contracts from the US and UK governments. The company’s loss before taxation narrowed slightly to 2.3 million pounds from 2.5 million in the prior year. Kromek said that it expects to be EBITDA positive in the second half of its financial year. The shares rose by 1p to 37.5p.
What’s the prognosis for X-ray outfit?