From UK-Analyst.com: Tuesday 2nd March 2010

Ongoing worries over Greek debt saw the euro fall to its lowest level against the dollar for ten months, while the pound was lower against the euro over concerns about a possible hung parliament and high debt levels in the UK. The House of Lords dismissed calls for an investigation into the noble Lord Ashcroft, as the row over his non-dom tax status continued. In London, the banks gained strength, leading the FTSE higher as investors seemed less perturbed about Greece than their cousins on the money markets. A similar view prevailed on Wall Street, as it pushed ahead. At the London close the Dow Jones was ahead by 43.83 points at 10,447.62 and the Nasdaq was up by 14.94 points at 2,288.51.

In London the FTSE 100 pressed ahead by 78.12 points to 5,484.06; the FTSE 250 rose by 118.82 points to 9,598.65; the FTSE All-Share climbed by 38.96 points to 2,803.58; and the FTSE AIM Index added 5.39 points to close at 678.46.

Brokers' Notes

Panmure Gordon remained positive on construction firm Carillion (CLLN) ahead of results due on Wednesday, with trading expected to be line with forecasts as per December's update. Earnings are expected to rise by 10%, with "substantial" revenue growth anticipated in the Middle East, due to the group's focus on Abu Dhabi and Oman. Key issues identified as causes for concern include a slowdown in public sector spending, a reduction in demand for construction in Middle Eastern markets and cash collection in those areas, and pressure on service margins and the impact of contract start-up costs. Carillion is expected to be in a net cash position for the end of 2009. The broker held its stance at 'buy' with a 300p target price. The share price fell by 1.2p to 286.8p.

Charles Stanley initiated its coverage of financial trading systems firm Fidessa (FDSA) with an 'add' stance and 1,550p target, saying that even after a decade of 28% compound revenue growth, it "has a level of potential that few peers can match". A careful focus on investment in research and development has allowed the company to expand its addressable market. Fidessa also has high revenue quality, with its software products used at 85% of Tier One institutions and recurring revenue standing at 81% in 2009. This provides a "solid base for growth and provides investors with peace of mind". The firm was described as a "core, long-term holding", with an excellent market position, strong management and good track record. Fidessa shares rose by 19p to 1,419p.

Brewin Dolphin said that Spice's (SPI) management statement on 23rd February was "disappointing", although recovery value remains. In the short term, the broker expects sentiment to remain negative but it also added that the growth drivers remain intact, such as the infrastructure investment requirements in the public sector. Although the Public Distribution businesses have continued to perform poorly compared with other parts of the group, these operations will become less of a concern as they are sold or closed. Brewin believes that, once benefits start to be seen from cost-cutting and other actions, the market will recognise the medium-term growth achievable in core businesses. The stance was kept at 'buy' but the target price was lowered from 83p to 63p to reflect the ongoing short term uncertainty. The shares finished unchanged at 35p.

GE&CR repeated its 'buy' stance and 4p price target for Vatukuola Gold Mines* (VGM), saying that it retains "confidence in the company's ability to deliver on its goals". A maiden gross profit of 1.4 million pounds was recorded for the year to 31st August, on the back of 33,757 ounces of gold production. Additional ore has been sourced from a low-grade waste dump, in order to offset interruptions in production from its main project. Additional underground equipment has been acquired, including more reliable power generation capacity and spare pumping capacity. In return for various concessions and exemptions from the Fijian government, Vatukuola has set up a Social Assistance Trust to aid previous employees of the firm. Vatukuola has also set up a ten hole exploration programme at historical surface mine site President Dyke. Production for the 2009/10 financial year is targeted at 60,000 ounces of gold, with cash costs for the period expected to be between 550 and 600 dollars per ounce. GE&CR cautioned that significant work still lays ahead in modernising the project. Vatukuola shares fell by 0.02p to 2.3p.

Blue-Chips

Admiral (ADM), the motor insurer, reported record profits and sales in calendar 2009, with pre-tax profit up by 7% at 215.8 million pounds and sales rising by 18% to 1.08 billion pounds. But the shares lost 49p to 1,216p. The number of customers rose by 19% to 2.08 million, and the combined ratio stood at 92%, from 86.5% in 2008. Earnings per share advanced by 7% to 59p, and the full-year dividend was increased by 10% to 54.2p. The group warned that increasing competition would make 2010 a difficult year for its price comparison site Confused.com. Shore Capital continued with a 'sell' stance, viewing the shares as "materially overvalued", given the risks to ancillary profits.

The world's largest silver producer, Fresnillo (FRES), saw pre-tax profit jump 71% to 457.4 million dollars in 2009, as total revenue increased by 18% to 849.9 million dollars. The firm reported an 8.8% rise in silver production to 37.9 million ounces, and gold production was up 4.9% at 276,584 ounces. Earnings per share soared 141.3% to 44.9 cents. Fresnillo commented that higher average metal prices, "excellent" operational results and lower costs per tonne were behind the improved results. It added that it was on track with its aim of delivering one new mine or mine expansion each year until 2014; it said that the results were a good step towards its goal of becoming the world's largest primary silver firm by 2018, producing 65 million ounces of silver and 400,000 ounces of gold by that date. The shares pushed ahead by 32p to 814.5p.

BP (BP.) unveiled a plan to reduce costs and boost production, increasing profitability by three billion pounds during the next three years. Annual output is now expected to rise between 1% and 2% on average to 2015. The refining and marketing division aims to improve underlying profitability by more than two billion dollars over the coming three years. Organisational restructuring will take place in the Exploration and Production division, and will see the centralisation of project management and improvements in cost efficiency. BP shares rose by 5.1p to 601.1p.

Mid-Caps

Shares in digital TV technology firm Pace (PIC)) fell by 11.8p to 178.2p, as it announced a 405% rise in pre-tax profits for 2009 to 69.9 million pounds, with its adjusted operating margin expanding to 6.7% from 3.9% in 2008. Revenues were up by 52% to 1.13 billion pounds, and adjusted earnings per share leapt 147% to 19.3p. The total dividend was up 150% at 1.5p. 17.2 million set-top boxes were shipped in the year, from 13.1 million in 2008, as strong demand continued despite the economic downturn. Separately, the firm announced that it has acquired French IP and cable gateways specialist Bewan Systems for 12.5 million euros. Bewan reported revenues of 16.3 million euros in 2009. Seymour Pierce kept its 'buy' stance and 270p target, saying that the shares are significantly undervalued.

Rotork (ROR), the industrial engineer, had a good 2009, with pre-tax profits rising by 5.1% at constant currency rates to 90.9 million pounds. Revenue inched up by 0.5% to 353.3 million pounds, but basic earnings per share moved ahead by 4.5% to 74.2p. A special dividend of 11.5p was declared, and the final dividend was increased by 2% to 17.25p. Although uncertainty remains regarding project timing, continued improvement in the infrastructure and energy markets is expected. Brewin Dolphin commented that it still expects a fairly flat performance for 2010, and it expects to retain its 'reduce' stance, which is currently under review, as is the 1,100p target. Rotork shares lost 12p to 1,361p.

Housebuilder Persimmon (PSN) swung back into the black with a pre-tax profit of 77.8 million pounds for calendar 2009, from a loss of 780 million pounds in 2008. Sales were up 7% at 1.42 billion pounds, but the number of legal completions was 12% down on 2008, at 8,976. After a loss per share in 2008 of 208.3p, the group reported 2009 earnings per share of 24.7p. Forward sales stood at 900 million pounds, up 29% from a year earlier, and 90 sites are scheduled to open in 2010. Persimmon said that the number of visitors to sites had increased, with website traffic up after recent marketing campaigns. Arbuthnot Securities retained its 'buy' stance, saying that the firm is in "a strong position to acquire new land and commence the margin restoration process and at the same time reduce net debt". The share price moved ahead by 23.5p to 424.1p.

Engineer Cookson (CKSN) reported a 57% slump in pre-tax profit to 75.7 million pounds for 2009, although the fall in revenue was less marked, down by 10% to 1.961 billion pounds. The firm expects performance to recover significantly in 2010 as the steel and electronics end-markets improve. Earnings per share dropped by 75% to 18p, and no dividend was declared for the year. Brewin Dolphin's 'conviction buy' and 560p target price were left unchanged as a result of the firm's "encouraging" outlook statement. Cookson shares moved up by 2.9p to 470.9p.

Home credit firm Provident Financial (PFG) said that profit before tax and exceptionals in 2009 was up 1% to 130.1 million pounds, as customer numbers increased by 5.4% to 2.3 million. The shares fell 60p to 912p. The amount of year-end receivables was up 7.1% at 1.139 billion pounds, and basic earnings per share before exceptionals edged up 0.7% to 71.4p. The dividend for the year was unchanged at 38.1p. Provident expects low receivables growth in conjunction with tight cost control.

Ground engineering firm Keller (KLR)) endured a 34% fall in pre-tax profit for 2009, down to 74.7 million pounds as revenues declined 13% to 1.03 billion pounds. Earnings per share were down by 29% to 78.8p, but the company felt able to increase the dividend to 21.75p, an increase of 5%. The order book is down 14% on the same period last year on a constant currency basis, and margin pressure is expected to increase as construction activity in the developed world continues to contract. Some benefit is expected from continued high government spending. Panmure Gordon said the ongoing focus on costs and more opportunities in developing markets support its positive view of the firm, and it did not change its 'buy' stance and 700p target. Keller shares lost 22p to 653p.

Sports Direct (SPD) indicated it may make a bid for rival Blacks Leisure, in which it holds a 28.5% share. As a result, Blacks scrapped its planned 20.3 million pound fund raising, a move it has postponed once before as Sports Direct said it would vote against the plan. If Sports Direct does not make a bid, Blacks said it would look at other alternatives that would require only a simple shareholder majority to gain approval. Seymour Pierce said that Sports Direct could "extract significant synergies ... in terms of optimising the store portfolio, ranges and costs". An 'outperform' stance on Sports Direct remained unchanged. The shares rose by 6p to 112p.

Small Caps, AIM and PLUS

Scientific Digital Imaging* (SDI) shares soared by 4p to 17.5p as it released a trading update saying that the firm has enjoyed "robust market conditions" and a trend of increasing sales of higher-value instruments. Profits are now expected to exceed market expectations.

Chariot Oil & Gas (CHAR) increased its resource estimate significantly for its offshore Namibia project, upping the figure by 3.3 billion barrels to over 8.5 billion barrels. Ambrian Capital commented that the news was a further indication of the exploration potential in the region. It added that Chariot may now receive increased attention from major exploration and production operators that may lead to new farm-out deals. Chariot shares rolled ahead 7.75p to 43p.

Internet telephony service Coms (COMS) said that it was profitable in January for the first time in its history. In the year to 31st January, it generated revenues of 3.23 million pounds, up 33% on the previous year, although it still expects to report a loss for the period. Astaire Securities said that the move represented "an important milestone ... after a period of considerable restructuring". It added that Coms is well-placed to benefit from the increasing demand for internet telephony services. Coms shares advanced by 0.875p to 5.25p.

EG Solutions (EGS), the management software company, announced that it has received orders from two British financial services firms worth approximately 0.25 million pounds. Nationwide Building Society has placed an order for support and implementation services relating to back office functions. The second order is from an unnamed pensions company where the use of EG's management software will be expanded to an additional 400 users, bringing the total to 2,125 across four divisions and five locations. Arbuthnot Securities said that it views the wins as proof of positive momentum, and it increased its target price from 43p to 55p, with an unchanged 'strong buy'. EG shares soared by 16p to 59p.

Shares in drug research firm Cyprotex (CRX) jumped by 0.5p to 4p on news that the company has received an "highly preliminary and unsolicited approach" regarding a potential offer.

Satcom Group (SGH) said that it intends to seek permission to delist from AIM. The firm cited the low market capitalisation, which it said does not reflect its financial performance or prospects, and also the low liquidity of its shares and the ongoing costs of maintaining an AIM listing. The shares lost 3.5p to 11.5p.

Advertising firm Mission Marketing Group (TMMG) issued a profit warning, saying that operating profit for the full year would be below expectations. As a result the shares fell 4.5p to 22.5p. Ongoing margin pressure due to additional staff costs and "ongoing client constraints" were blamed for the performance. Current trading is in line with expectations, the firm said, but uncertainty persists in the market as a whole.

WH Ireland (WHI)) - a perennial dog of an investment -  reported a fall of 8% in turnover for the year to 30th November to 24.6 million pounds, although pre-tax losses narrowed by 16% to 2.1 million pounds. The basic loss per share from continuing operations widened 23% to 8.95p. Funds under management rose slightly to 1.18 billion pounds. Restructuring efforts are expected to save 2.1 million pounds annually.  The firm said its restructuring programme has left it well placed to take advantage of economic improvements, although it remains cautious on the economic outlook, given the upcoming election and impending change of government. WH Ireland shares dropped by 6p to 36.5p.

Water treatment firm Hydro International (HYD)) said that pre-tax profits fell by a third to 1.8 million pounds, with revenue down by 10% to 27.3 million pounds. The shares ebbed 8.5p to 85p. Earnings per share dropped by 35%, to 7.97p, but the final dividend was unchanged at 3p. Hydro's closing order book was down 11% from a year earlier at 7.8 million pounds. It commented that no meaningful recovery is to be expected until the second half of 2010, but it is well positioned on several strategic wastewater projects in the UK, US and Middle East.

* Vatakuola is a corporate client of Rivington Street Holdings, the ultimate owner of this website; the T1ps Gold Fund owns shares in Vatukuola. Scientific Digital Imaging also also a RSH corporate client.