The Markets
The Office for National Statistics has said that UK productivity levels remain below those in 2007, with recorded figures showing a drop of 0.2% in the final quarter of 2014. While alternative measures such as output per worker were more positive, Vicky Redwood, UK Economist at Capital Economics, said that “this still isn’t great – productivity [growth] has still not even returned to its long-run average rate of about 2%, let alone recouped any of the shortfall relative to its pre-crisis trend”.
Eurozone manufacturing picked up pace during March, according to the latest PMI survey, hitting a 10 month high. Jobs were also created at the quickest rate since 2014. Chris Williamson, Chief Economist at Markit, said that “this is still a fledgling recovery, however, and the overall rate of expansion remains only modest”.
At the London close the Dow Jones was down by 105.43 points at 17,670.69 and the Nasdaq was 31 points lower at 4,302.69.
In London the FTSE 100 closed up by 36.46 points at 6,809.50 and the FTSE 250 finished 32.77 points ahead at 17,123.41. The FTSE All-Share climbed by 16.87 points to 3,680.45 while the FTSE AIM Index fell by 0.88 points to 714.35.
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Broker Notes
Westhouse raised its price target for conference and trade exhibition organiser ITE Group (ITE) to 170p and reiterated a “neutral” position on the stock, following a pre-close update saying that strong Asian results had more than offset Russian weakness. The broker has a positive view on the events industry as a whole and thinks ITE’s geographical diversity offers great upside. The shares grew by 8.5p to 189p.
Bernstein cut its rating on engine manufacturer Rolls Royce (RR.) to “underperform”, citing emerging challenges in the Civil Aerospace and Land & Sea divisions as well as the recent strength of the shares in its reasoning for the move. However, Bernstein did adjust its target price upwards to 850p. The shares dropped by 3p to 950p.
HSBC upgraded its view on broadcaster SKY (SKY) from “underweight” to “hold” after Sky fixed programming costs for 85% of its content for the next 4 years, cutting downside risks, and exhibiting little evidence of cannabalistic demand from online rivals such as Netflix. The bank increased its target price on the firm from 610p to 930p. SKY shares fell by 6p to 987p.
Blue Chips.
RSA Insurance Group (RSA) completed the sale of the insurance branches of its Hong Kong and Singapore arms to Allied World Assurance Company following the receipt of all necessery government approvals. The sales earned an aggregate consideration of £130 million and gains on sale were estimated to be around £110 million. The shares rose by 5.7p to 426.6p.
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Mid Caps
Consumer transport firm FirstGroup (FGP) said that trading in the quarter ended 31st March was positive, with strong demand in the UK bus and rail markets. Performance in North America was negatively impacted by poor weather conditions and Greyhound is working to cut costs to mitigate drops in passenger volume due lower fuel prices. The shares climbed by 6.2p to 97.15p.
Biotechnology specialist Genus (GNS) finalised its purchase of 51% in bovine IVF outfit In Vitro Brazil for a cash consideration of BRL 20 million (£4.24 million). Genus intends to buy the outstanding shares by 2019 at a price which will be determined by performance but not higher than BRL 49 million (£10.5 million). Genus shares declined by 28p to 1,341p.
Manufacturer Senior (SNR) announced the acquisition of Lymington Precision Engineering from management and Vine Street Capital for an initial consideration of £45.8 million, with performance based earnouts worth up to £31.7 million. The company has warned that financial performance may be materially lower during the next year due to uncertainties in the oil and gas markets. The shares grew by 2.2p to 327.4p.
Small Caps
Food producer and distributor Real Good Food (RGD) said that EU reductions in sugar prices have made trading difficult for its Napier Brown and Garrett Ingredients arms. While conditions have improved slightly in recent months, full year performance continues to lag behind expectations. Shares in the company dropped by 6p to 36p.
Online fashion retailer ASOS (ASC) earned revenues of £0.55 billion during the 6 months to 28th February, a 14% increase over the same period of last year, driven by UK retail sales. Gross margins dropped by 230 basis points to 48.2% due to investment in increasing capacity and international flexibility. Shares in ASOS rose by 99p to 3,728p.
Cloud computing and managed hosting services provider Iomart (IOM) said that results for the year ended 31st March will be in line with expectations, with adjusted pre-tax profits of around £16.6 million as the company continues to grow organically. Management believe the firm is well placed to benefit from fresh demand for cloud services. The shares climbed 2p to 206.5p.
Technology and information services outfit Altitude (ALT) narrowed its loss before taxation to £1.5 million during 2014 as it worked to resculpt itself as a Software-as-a-Service business. The company said that it saw some encouraging signs during the year including a 6% increase in overall revenues and the board believe it is well placed for 2015. The shares fell by 1.75p to 14.75p.
Commercial property developer Sirius Real Estate (SRE) increased average rents per square metre and occupancy over the year ended 31st March with new lettings agreed on over 120,000 sqm of space. A capex programme is underway to bring 100,000 sqm of currently unlettable space on to the market. Full results will be released in May. Shares in Sirius closed flat at €0.42.