Wednesday’s Stock Market Report featuring Tullow Oil, N Brown, boohoo.com and Lombard Risk Management

The Markets

The UK government has agreed to follow Australia and Ireland by introducing standardised packaging for cigarettes. From 2016 all packets will look identical except for the brand name, health warnings and unpleasant pictures of rotting body parts. Simon Clark of smokers group Forest commented: “Consumers are fed up being patronised by politicians of all parties. Smokers know there are health risks associated with tobacco. Plain packaging won’t make any difference.” In reaction, shares in UK listed tobacco firms slipped, with British American Tobacco closing down by 25.5p at 3,627p and Imperial Tobacco down by 11p at 3,080p.

Figures from the Office for National Statistics revealed that UK industrial output rose by 1.3% in January on a year-on-year basis. Manufacturing output drove the figures, rising by 1.9%, with there being rises in eight out of the 13 manufacturing sub-sectors. However, compared to December 2014 production actually decreased in January, by 0.1%, despite a 2% rise in mining & quarrying output.

At the London close the Dow Jones was up by 31.78 points at 17,694.72 and the Nasdaq 100 was down by 2.86 points at 4,326.22.

In London the FTSE 100 rose by 18.67 points to 6,721.51 and the FTSE 250 gained 26.36 points to 16,948.85. The FTSE All-Share was up by 9.13 points at 3,633.90 and the FTSE AIM Index closed slipped by 0.04 points to 711.10.

Broker Notes

Investec has a 1,296p target and “buy” stance on miner Anglo American (AAL). On the broker’s base case assumptions it believes that the firm offers attractive earnings growth and commodity diversity, with flagship diamond business De Beers being of increasing importance. Debt is expected to peak next year and to fall below the targeted $12 billion by 2018, when Investec thinks the firm may choose to improve shareholder returns. On the downside, the broker flagged that if current spot commodity prices persist into 2016 Anglo American could face serious structural and financial headwinds. The shares gained 4p, closing at 1,085.5p.

Shore Capital likes the look of FirstGroup (FGP), with the transport operator reporting that Wolfhart Hauser will replace John McFarlane as Chairman from 16th July. The broker notes that over the ten years in his current role as CEO of testing and inspection group Intertek, the shares have trebled in value. Shore believes that his performance has been impressive and that investors will be pleased that the uncertainty over the Chairman’s role has now been removed. With FirstGroup trading on a forecast March 2015 price to earnings ratio of 9.8 times the broker maintains its positive stance. FirstGroup shares rose by 1.95p to 100p.

Blue Chips

Not much news from the blue-chips today, with the only announcement of note coming from Tullow Oil (TLW). In Kenya the oil explorer has plugged and abandoned the Engomo-1 exploration well after drilling to 2,353 metres and finding no significant oil or gas shows. However, more positive news came from the Amosing-1 and Amosing-2A wells where production tests showed respective combined maximum flow rates of 5,600 barrels of oil per day (bopd) and 6,000 bopd. Elsewhere, the Ngamia-7 appraisal well encountered up to 132 metres of net oil pay, expanding the proven extent of the field. But with the price of Brent Crude slipping by $0.32 to $56.53 a barrel Tullow Oil shares fell by 3.2p to 318.6p.

Mid Caps

Clothing retailer N Brown (BWNG) saw flat sales in the year to 28th February but trends improved in the final quarter. The owner of the Simply Be and Jacamo brands said that a recovery in trading momentum saw revenues up by 3.6% in Q4, up from -2.2% in Q3. However, the firm was forced to announce its second profits warning within six months. Pre-tax profits are now expected to be slightly below previous guidance and the current market consensus of £88 million as the company decided to discounted its winter stock in order to boost volumes. N Brown shares fell by 69.7p to 338.9p, with broker N+1 Singer putting its “buy” recommendation under review.

Full year results from bwin.party digital entertainment (BPTY) reported revenues down by 6.2% at €611.9 million for 2014. The gaming firm was hit during the year by internet service provider blocking in Greece, along with a continued decline in regulated poker markets in Continental Europe. However, the firm saw a marginal increase in sports betting during the period, with mobile derived bets increasing to 45% of gross gaming revenue, up from 28% in the previous year. The company posted a €94.3 million net loss for the period, after taking a €104.4 million non-cash impairment charge against poker related and other intangible assets. bwin said that trading in the first eight weeks of 2015 has been in-line with expectations but that lower margins in sports betting and casino have seen daily net revenue down 12% year-on-year. It also hinted at further industry consolidation, confirming that it is in talks with several parties regarding a variety of potential business combinations. The shares inched up by 0.3p to 78.7p.

Galliford Try (GFRD) the housebuilding and construction group, has reached financial close on the Priority School Building Programme batch for North East England with the Education Funding Agency. The £160 million deal will consist of a £103 million construction contract, with a further £56.6 million coming through a 25 year maintenance and lifecycle contract for Galliford Try’s Facilities Management business.  A total of six new secondary schools will be constructed along with six primary schools. Galliford also announced a £26 million deal with Flintshire Council to build the Holywell Learning Campus in North Wales, as part of the Welsh Government’s 21st Century Schools programme, to create new primary and secondary schools. The shares rose by 15p to 1,500p.

Small Caps

Shares in Lombard Risk Management (LRM) plunged by 2.75p to 12.75p after announcing a profits warning for the year to March. Once again, the financial regulation software provider blamed regulatory delays as a reason for the warning, with the setbacks causing delays in signing contracts and in achieving revenues from certain of its alliance partnerships. Together with certain limited additional costs, second half EBITDA will be materially lower than the £5.8 million required to meet market expectations.

Doing better were shares in Ormonde Mining (ORM), which surged by 1.05p to 3.4p. This came on the back of the Spain focussed minerals explorer confirming that last night it received an unsolicited bid approach from Canada based tungsten miner Almonty Industries. Ormonde plans to respond to the potential suitor in due course, but has concerns over how project financing for its flagship Barruecopardo tungsten project will be secured. Ormonde believes that once in full production Barruecopardo will deliver around 12% of the current non-Chinese world tungsten concentrate supply.

Specialty global pharmaceutical business Clinigen (CLIN) has extended its exclusive license and distribution agreement with Hospira Inc. for its anti-viral product Foscavir in the US. The revised deal sees the agreement extended until the end of 2019, from May 2017 previously. Foscavir, Clinigen’s lead product, received FDA approval in May 2012 for the treatment of HIV/AIDS-related cytomegalovirus infections and herpes. The shares slipped by 5.5p to 528p.

A trading update from online fashion firm boohoo.com (BOO) reported revenues up by 22% at £21.86 million in the two months to 28th February. This was driven by a 56% rise in sales in the Rest of the World segment and took total revenues for the year to February up by 27% to £139.85 million. boohoo, which listed on AIM almost a year to the day, saw active customers grow by 29% to 3 million in the year to February. However, the January sales saw margins fall to 58% in the two months to February, compared to 61% for the year as a whole. With cash of £54 million at the period end the company is seeking approval to buy back 10% of its shares at the upcoming AGM. The shares rose by 1.75p to 26.5p but are down by 47% from the IPO price of 50p and down by 66% from their peak of 77p. boohoo now trades on 30 times consensus profit forecasts for the year just gone.

Orosur Mining (OMI) the South American focused gold producer, reported that it continues to trade in line with expectations, producing 13,760 ounces of gold in the three months to February. The miner cut cash operating costs from $945 to $875 per ounce in the period and added that it is on schedule to achieve annual production towards the top end of the 50,000 to 55,000 ounce guidance. The shares rose by 1.25p to 9.125p. To read the latest comments of Simon Cawkwell (aka Evil Knievil), including his stance on Orosur, CLICK HERE

Gas to power producer Alkane Energy (ALK) saw revenues fall by 22% to £16 million in 2014, an expected result due to lower design build and operate business. However, statutory pre-tax profits rose by 21% to £3.21 million as the firm booked in a £9.95 million profit from the transfer of its shale assets to Egdon Resources. Alkane increased the dividend by 50% to 0.3p per share and commented that 2015 has started well, the firm benefitting from sites acquired during 2014 and record levels of production on base load and winter peak running. The shares were flat at 21p.