From UK-Analyst.com: Wednesday 3rd March 2010

Former Labour leader Michael Foot passed away at the age of 96, a man active in politics since the 1930s; he lost spectacularly to the great Mrs T after Labour issued  what was termed 'The Longest Suicide Note in History' as its manifesto, with his approval rating at just 24%, just like our current leader. But Foot was a great classical scholar and a fundamentally very decent man. We somehow doubt the same will be said of our current dear leader when he moves on to a better place. Greece bowed to EU pressure and introduced a new round of tax rises and spending cuts in a bid to allay the ongoing worries in financial markets over its deficit. Confidence in the mining sector helped to push London markets higher, and Wall Street rose on news that US businesses cut jobs at the slowest rate in two years in February. At the London close the Dow Jones was up by 49.58 points at 10,455.56 and the Nasdaq was ahead by 11.28 points at 2,292.07.

In London the FTSE 100 rose by 49.15 points to 5,533.21; the FTSE 250 added 13.52 points to 9,612.17; the FTSE All-Share was 21.69 points higher at 2,825.27 at the close; and the FTSE AIM Index moved 2.4 points ahead to close at 680.86.

Brokers' Notes

Westhouse Securities commented that BP's (BP.) strategy update showed that the giant was by no means "resting on the success it has achieved to date in improving group efficiency". With another three billion dollars' worth of savings targeted over the next 2-3 years, the broker said that maximising the potential of its portfolio would be crucial with an increasing number of major projects to be undertaken in the coming years (with 42 projects planned between now and 2015). Westhouse expects the efforts to be successful in unlocking value, while the higher oil price and increased production give it confidence in BP's ability to maintain its dividend. It continues to rate the shares as 'buy'. The shares gained 4.5p to 604.7p.

Canaccord Adams said that information specialist Informa's (INF) results were "reassuring", particularly because the last two months of 2009 represent the all-important subscription renewal period for the academic publishing business. The broker now views the company as "much more operationally geared to an upturn in the marketing environment", with cost cutting actions having protected margins effectively. Canaccord said that, although its strengths of strong management, exposure to 'must-have' niche content and low exposure to advertising make it "the quality B2B play", the current rating takes these factors into account. The 'hold' stance and 321p target price were left unchanged. Informa shares rose by 15p to 365p.

Charles Stanley expressed its concern over the so-called 'transformational' acquisition by Prudential (PRU) of AIG's Asian assets. It said that the price tag looks "to be full", and that the market would have to be confident that expected revenue synergies would be substantial. The broker is also concerned about "a very long period of uncertainty" as the rights issue does not close until June. The good results, it said, were overshadowed by news of the acquisition; and, although the strategic rationale is "compelling", it would remain cautious in the coming months. The stance was downgraded from 'accumulate' to 'hold'. The shares recovered some lost ground, rising by 10.7p to 498.2p.

Singer Capital Markets initiated its coverage of precision machine tool firm Renishaw (RSW) with a 'buy' stance and 275p target, noting that sales have grown at around 8% per year over 20 years, almost entirely organically. 2009 was a difficult year, with sales down 15% and EBIT falling 84%, but monthly orders have returned to year-on-year growth after 18 months of declines, and the broker expects a return to the long-term average by 2012. It also forecasts a lower cost base for the firm, with operating margin jumping from 5.9% in 2009 to 17.7% by 2012. Singer expects earnings upgrades to drive outperformance. Renishaw's share price rose 3p to 608p.

Blue-Chips

Standard Chartered (STAN), the Asia-focussed bank, reported another record year, with 2009 pre-tax profits up by 13% to 5.15 billion dollars. Income rose 9% to 15.18 billion dollars, and normalised earnings per share were 2.8% ahead at 179.8 cents. A full-year dividend of 66.03 cents was declared, up 7.2% from 2008. The bank defended its decision to pay bonuses, saying that it rewarded good performance and not failure. 2010 was reported to have started well for both its retail and wholesale divisions. The shares gained 89p to 1,679p.

British Airways (BAY) said that 1,000 of its staff have volunteered to act as cabin crew in the event of strikes by its overpaid and idle staff. It also announced that it would hire up to 23 fully-crewed 'planes from a charter company if the threatened action by the luddites at Unite takes place. British Airways shares finished down 1.5p at 224p.

Mid-Caps

Transport group Arriva (ARI) saw pre-tax profits in 2009 fall by 19% to 121.7 million pounds as the recession and heavy fuel cost increases took their toll. Revenue was up by 3.4% at 3.14 billion pounds, although the UK Rail division suffered a fall in operating profit of two thirds to 12.1 million pounds. Arriva said it was disappointed by the lack of passenger growth in its Cross-Country rail franchise, with a weak spring and summer causing only 2.6% growth, when the target had been 10%. Adjusted earnings per share were down by 4% at 58.8p, but there was a 5% hike in the final dividend to 18.8p. Trading in most European countries was reported to be strong, while an acceleration of passenger revenue in the UK Rail division was "encouraging". Shore Capital retained its 'hold' stance, saying that growth in UK bus business would be offset by a loss-making UK Rail business. Arriva shares rolled ahead by 32.5p to 562.5p.

ITV (ITV) was lifted by a bounce in advertising spending, with the advertising revenues in the first quarter of 2010 forecast to be up 7%. In 2009, advertising revenue was down 9% in 2009 to 1.29 billion, but that was ahead of the wider market, which was down 11%. Overall revenue was down 7% at 1.87 billion pounds, although pre-tax profit for the year was 25 million pounds, compared to a loss of 2.7 billion pounds for 2008. Adjusted earnings per share remained flat at 1.8p, but the pension deficit ballooned to 436 million pounds, from 178 million pounds in 2008, despite a 110 million pound credit during the year. As expected, no dividend was issued. ITV cautioned that it still faces "formidable challenges" in the medium term. The shares eased by 0.1p to 55p.

Student accommodation firm Unite (UTG) met forecasts for rental growth for 2009, with like-for-like growth of 9.7% at the top end of expectations, and occupancy rates for the 2009/10 academic year at 96.5%. Annual rental growth of 3-5% is expected for the 2010/11 academic year. Revenue was up 98% to 265 million pounds, with a pre-tax loss of 35.6 million pounds, down 72% from 2008. The loss per share narrowed by a similar amount, falling 71% to 25.9p. Adjusted fully diluted net asset value per share was down 13% to 265p, but reservations for the coming academic year were 59%, compared to 63% at the same point in 2009. Unite said it aims to have 4-5,000 bed spaces of development secured by March 2011, with the significant majority expected to be in London. Unite shares slipped by 32.5p to 253.2p.

Lender International Personal Finance (IPF) reported pre-tax profits for 2009 that were down by 19% on 2008 at 61.7 million pounds, despite the first full-year profit from the Mexican business. Revenue fell back by 1.2% to 550.2 million pounds, and impairments rose by 29% to 164.3 million pounds. An unchanged dividend for the year of 5.7p was declared. IPF said that the results benefited from a decision to change product terms and pricing in the second half of the year. This benefit will continue into the first half of 2010, but will be offset by increased early settlement rebates on the introduction of the EU Consumer Credit Directive in 2010. Shore Capital said the results were "impressive", and the market should now focus on growth in Hungary and Mexico. It maintained a 'hold' stance. The shares fell by 10.6p to 197.5p.

The Restaurant Group (RTN) said that like-for-like sales returned to growth in the latter stages of 2009, although numbers were down 2% on 2008 at 435.7 million pounds. The shares lost 10.6p to 204.4p. The firm, which owns Italian chain Frankie & Benny's, said that like-for-like revenues for the first seven weeks of 2010 were up by 1%. Pre-tax profits rose by 2% to 48.33 million pounds, with a good performance from the pub division overall, and good results from pubs in the north-west of England offsetting a more mixed performance in the south-east. Nineteen new sites opened during the year, with 15 to 25 more planned in 2010. The full-year dividend was set at 8p, up 3% on 2008. Panmure Gordon said that the firm is now "firing on all cylinders" and it increased its target price from 260p to 270p, with a stance of 'buy'.

Carillion (CLLN), the support services firm, reported a 27% jump in pre-tax profit to 147.7 million pounds for 2009, as its operating margin rose to 4% from 3.7%. Revenues increased by 4% to 5.426 billion pounds, although the order book was down by 13% at 17.7 billion pounds, mainly due to divestments. Earnings per share were up 18% to 33.4p, and the full-year dividend was increased by 12% to 14.6p. The firm expects a continuation of challenging market conditions, and revenue from the UK construction services division is expected to continue to decline. Seymour Pierce said that the company was "significantly undervalued compared to its peer group", and the broker retained its 'outperform' stance and 320p target. Carillion shares fell back by 1p to 285.8p.

Small Caps, AIM and PLUS

Strontium (STTM), the business services firm, announced a thirteen-fold increase in profit after tax and exceptionals for 2009, to 97,895 pounds. Profit before tax and impairment was up by 95% to 145,270 pounds. Revenue grew by 23% to 1.228 million pounds, while earnings per share from continuing operations was ahead by a third at 0.73p. The over-hyped and - historically - under-delivering firm said that it had weathered the worst of the recession and was now planning to expand by introducing new products and increasing existing business revenues. Investors did not share the firm's confidence, with the shares falling 1p to 12p.

Platinum Australia (PLAA) said that its employees at the Smokey Hills Mine have downed tools, refusing to go underground since the dayshift on 1st March. The staff, employed by contractor Redpath, have been advised to return to work or face dismissal. Operations at the site have halted, but scheduled maintenance has been brought forward in an attempt to offset the impact of the strike. Normal operations are expected to recommence by the end of the week or the beginning of next week. Platinum shares lost 2p to 56.5p.

Shares in Health and social care firm Care UK (CUK) gained 32.25p to 444.5p on news that Bridgepoint Capital has offered to buy the firm for 281 million pounds, equivalent to 450p per share. Care UK said that the offer allows shareholders to realise their investment at a premium to the current share price.

Lavendon Group (LVD), which makes powered access equipment, suffered a fall of more than 50% in pre-tax profit for 2009, down to 13.9 million pounds. Revenue was down 12% at 226.9 million pounds, and the operating margin dropped to 13.7% from 17.9% in 2008. Earnings per share plummeted by 62% to 19.16p and the dividend was slashed by 68% to 1.6p. The firm said that further deterioration in its markets is now unlikely. The shares rose by 7p to 68.5p.

Healthcare firm Assura Group (AGR) announced that it has sold a 75.1% interest in its medical services business to Virgin Healthcare Holdings for four million pounds. The proceeds will be invested in a new partnership. The firm said the deal would allow it to resume paying dividends in 2010/11. Assura shares fell by 6.25p to 45.25p.

Mobile data firm Belgravium Technologies (BVM) said that pre-tax profits for 2009 were up by 1% to 405,000 pounds, with revenues flat at 8.29 million pounds. The firm said that it managed to maintain market share in "uncertain circumstances", and earnings per share rose 10% to 0.43p. It added that there are "several exciting prospects" for 2010, but could not give exact timing on their occurrence. The shares jumped by 0.625p to 4p.

OPG Power Ventures (OPG) gained 7p to 64p as it announced that a new Air Pre-Heater unit has been delivered to its 77 megawatt plant in Madras to replace one that failed during commissioning trials. Installation is expected to take several weeks, and trials will begin in April.

Recruiter Hydrogen's (HYDG) profit before tax and exceptionals collapsed to 0.3 million pounds in 2009, down 90%, as sales fell by 23% to 74.1 million pounds. A diluted loss per share of 22.25p was recorded, from earnings in 2008 of 4.16p, but the dividend was unchanged at 4.1p. The Australian division recorded a strong performance, with net fee income jumping 189% to 1.2 million pounds. Since the end of 2009, the group has opened an office in Singapore to expand its presence in the growing Asian market. Hydrogen said it is cautiously optimistic for 2010. Seymour Pierce said that it is encouraging that the firm has maintained the dividend, despite the expected falls in revenue and profit. The broker added that these falls were to be expected given that much of its business is derived from the London investment banking sector and the small exposure to non-UK staffing markets. It has a 'hold' stance and 85p target. Hydrogen shares finished down by 1.5p at 87.5p.

Pre-tax profit for 2009 at LED firm Dialight (DIA) fell 6% to 5.2 million pounds, although revenue was largely unchanged at 77.3 million pounds. The shares dimmed by 3.5p to 266.5p. Diluted earnings per share rose by 56% to 17.1p, and the dividend was lifted by 10% to 4.3p. Dialight said the second half of 2009 saw excellent growth, and that this gives it confidence for 2010. Canaccord Adams said that the results were ahead of expectations, and it raised its target price from 276p to 310p, which it called a conservative forecast. Its 'buy' stance remained unchanged.