From Friday 18th January 2013

Date of publication: 
Jan 18 2013

The Markets

The Chinese economy is showing signs of a rebound according to latest government figures which show that economic growth increased to 7.9% in the final quarter of 2012, up from 7.4% in the previous quarter. The growth of the world 's second largest economy is thought to have been driven by state investment in infrastructure projects and efforts to get consumers to spend. Dariusz Kowalczyk of Credit Agricole CIB commented, "The government's stimulus measures implemented last year have managed to stabilise growth and lay the foundations for solid expansion this year".

Meanwhile in the UK, retail sales fell by a seasonally adjusted 0.1% in December according to the Office for National Statistics. Despite an improvement in online sales the sector was hit particularly hard by a bad performance in clothing and food sales. Vicky Redwood, UK analyst at Capital Economics said, "December's drop in the official measure of UK retail sales volumes confirms that the festive period was fairly lack lustre for the high street".

Staying in the UK, rent arrears hit their highest level for a year in December as Christmas spending took its toll on the finances of tenants up and down the country. According to LSL Property Services the total amount of unpaid rent in England and Wales stood at 326 million pounds, an increase of 35% on November's level. Director of LSL Property, David Newnes , said, "December always sees a step backwards, and last month was no exception."

At the London close the Dow Jones was down by 0.72 points at 13,595.30 and the Nasdaq fell by 14.97 points to 2,732.18.

In London the FTSE 100 increased by 22.05 points to 6,154.41; the FTSE 250 finished 98.51 points up at 12,946.12; the FTSE All-Share gained 13.32 points to 3,229.55; and the FTSE AIM Index crept up by 0.40 points to 737.93.

Broker Notes

Panmure Gordon maintained its "buy" recommendation on housebuilder Bovis Homes (BVS) with a target price of 650p. The broker is extremely impressed with the firm's recent trading update which illustrated good growth in sales, prices and margins. Bovis is the broker's only "buy" recommendation in the sector, a stance which is underpinned by the fact that the house builder's 2012 pre-tax profits are expected to come in ahead of expectations significantly enough for Panmure to increase its forecasts for 2013. The shares fell by 12.5p to 624p.

Seymour Pierce reiterated its "buy" recommendation on Oracle Coalfields (ORCP) with a target price of 11p. The broker notes that the company has recently raised 957,000 pounds via a placing, with funds intended to be used to continue the pre-development work at its Thar Coal Project in South East Pakistan which, according to the broker, will improve the overall growth prospects of the group. The shares slipped by 0.13p to 2p.

Shore Capital retained its "sell" recommendation on supermarket Morrison's (MRW) based on its recent weak trading update. The broker acknowledges that sales over the festive period were up by 1.7% but notes that once new store openings and inflation are taken into account the like-for-like figures are well into the negatives. A further reason for caution was the comparatively poor performance of the supermarket when compared to others in the sector, with Tesco, Sainsbury, Asda and M&S all performing more robustly. The shares were down by 2.8p at 252.8p.


Mining giants Xstrata (XTA) and Glencore (GLEN) have postponed the completion date for their merger to the 15th March 2013. The deal, originally due to be complete by the 31st December 2012, has been delayed because of the "ongoing regulatory process in South Africa and China". Assuming the deal gets approval from China and South Africa, the merger would still need to be granted approval by the European Commission before the deal is finally completed. Xstrata shares lost 0.5p to 1,137p, while those of Glencore were flat at 379.85p.

Elsewhere in the mining sector Vedanta Resources (VED) announced that its subsidiary Hindustan Zinc oversaw an 11% increase in metal production to a record high of 233kt, with silver production notably increasing by 103%, resulting in a 27% increase in the group's net profit for the three months ended 31st December 2012. The firm intends to start its mass expansion plan this year, which will see the group develop and extend two mines, costing 250 million dollars (158 million pounds) a year over the next six years. The shares remained flat at 1,169p.

United Utilities (UU.) confirmed that it has agreed to the amended terms of a new Ofwat licence which set a framework for more regulation in the sector. In particular, this newest version of the licence sets two wholesale price controls; one for water and one for sewerage. The deal comes after months of negotiations between Ofwat and the FTSE 100 firm with delays anchored on fears that the measures would cause uncertainty for customers and shareholders alike. The shares remained flat at 711p.

Mid Caps

Technical equipment provider Spectris (SXS) posted a 4% increase in like-for-like sales for the fourth quarter of 2012, driven by strong demand in China. As a result of the uplift in sales the group's operating profit was able to grow by 12% to 229 million pounds, a figure which was also boosted by continued progress in the Test & Measurement and Industrial Controls segments. The shares climbed by 167p to 2,190p.

Investment group The Bankers Investment Trust (BNKR) posted a 13.4% increase in income for the year to October 2012, driven by an 11.9% increase in fee income from new investments. The firm also reported that overseas investment income has exceeded UK investment income for the second year running as an increasing amount of overseas companies are now offering dividends for the first time, enticing investors to put their cash down. The net asset value total return was 9.4% over the year. The shares gained 4p to 479p.

Engineering and construction group Kentz Corporation (KENZ) reported a 32% increase in its pipeline of prospects to 13.2 billion dollars (8.3 billion pounds) for the end of 2012. The group went on to confirm that 65% of target revenues for 2013 are already under contract and that it had a backlog of 2.57 billion dollars (1.6 billion pounds), which represents a 7% increase on December 2011. The shares increased by 35.2p to 424.2p.

Small Caps & AIM

Supply chain software provider K3 Business Technology (KBT) revealed that its full year pre-tax profits for 2012 will be below market expectations. The firm attributed this under-performance to a delay in signing significant retail deals, as well as on a substantial investment in the Microsoft AX offering. The shares plummeted by 19.5p to 112.5p.

Electricity firm Alkane Energy (ALK) posted a 19% year-on-year increase in electricity output for 2012, delivering a total output of 167Gwh. Growth was boosted by the contribution of seven sites gained following the acquisition of Greenpark Energy Limited, which are now producing a greater amount than originally anticipated. As a result of the high level of interest in UK onshore shale gas the group is currently considering changes to its portfolio which would further capitalise on this shift. The shares were up by 1p at 27.75p.

Tristel (TSTL), the hygiene products supplier, has received approval to sell the Tristel Wipes System in China from the national health department. The system in question comprises of three individual wipes that clean, disinfect and then finally rinse medical devices to remove any chemicals before being used on the next patient. The firm believes this new license is a good chance to build upon the 3.4 million pounds worth of sales achieved for this product in the year ended 30th June 2012. The shares were down by 0.5p to 32p.

EKF Diagnostics (EKF) reported a 20% increase in revenues to 26.1 million pounds for the year ended 31st December 2012. As a result, EBITDA for the period is expected to be ahead of market consensus. This uplift in performance was driven by a good sales performance from its higher margin Beta-Hydroxybutyrate (BHB) reagent product. The shares increased by 2.125p to 29.625p.

Marine services company Thalassa Holdings (THAL) announced that subsidiary WGP Energy Services has entered into a contract with SMG Ecuador in a deal worth an initial 4.175 million dollars. Under the agreement Thalassa will provide and operate its Portable Modular Source System as part of SMG Ecuador's seismic data acquisition surveys, which are scheduled to commence on 14th February 2013. The shares shot up by 4p to 56p.

Financial services group Fairpoint (FRP) revealed that full-year pre-tax profits for 2012 will be in line with market expectations and substantially ahead of 2011 figures. The group attributed this improvement to increased revenues generated from its management services despite anticipated subdued market conditions. As a result the company was able to turn the 6.4 million pounds net debt position at the end of 2011 into a 1.6 million pounds net cash position by 31st December 2012. The shares gained 5p to 104p.