From UK-Analyst.com: Thursday 4th March 2010

The Bank of England surprised no-one by keeping interest rates at the historically low level of 0.5%. It also said that it would not throw any more money at the economy - for now. UK house prices fell by 1.5% in February, the first fall since June 2009, with the end of stamp duty relief and the cold weather blamed. Greece announced plans to borrow 5 billion euros in 10-year bonds, as German politicians helpfully suggested flogging off some of the Greek islands to help alleviate the problem. Which country would buy them - one that felt it needed more Lebensraum? London markets remained unphased by the Bank's decision on interest rates, but Wall Street was ahead on news that US jobless claims fell by 29,000 in February, a greater than expected fall. At the London close the Dow Jones was ahead by 16.78 points at 10,413.54 and the Nasdaq was up by 1.71 points at 2,282.39.

In London the FTSE 100 fell by 6.05 points to 5,527.16; the FTSE 250 moved up 53.12 points to 9,665.29; the FTSE All-Share dipped by 0.57 points to 2,824.7; and the FTSE AIM Index edged ahead by 0.8 points to close at 682.19.

Arden Partners said that it believes that Halfords (HFD) would make more acquisitions in the coming months under its new CEO, David Wild, and it raised its target price from 459p to 530p, with an unchanged 'buy' stance. The broker said that the recent Nationwide acquisition would, with its "significant roll out potential and strong cash generation", help to enhance the Halfords brand. Over the long term, the group has significant scope for international expansion, and Arden expects it to open up to 300 stores in the Czech Republic and Poland. Compared to its peers, Halfords' online sales penetration is quite low at 5%, whereas the norm in the sector is 15-20%. Strong cash generation is expected to continue, allowing for further acquisitions, and the dividend is also forecast to grow, making the stock even more attractive. The shares moved up by 6.2p to 466.5p.

After its 2nd March results, engineer Rotork (ROR) has been removed from KBC Peel Hunt's 'sell' list. The broker substantially increased its forecasts for 2010, and now expects pre-tax profit of 97.7 million pounds, up from 79.1 million pounds, with underlying earnings per share moved up to 79.3p from 64.2p. KBC said that its previous bearish stance was alleviated by management forecasts of low-to-mid single digit organic growth in 2010. Revenue growth of 3.6% is expected, and the stance was upgraded from 'sell' to 'hold', with the target raised from 1,100p to 1,400p. Rotork shares gained 15p to 1,375p.

Nomura said that Standard Chartered's (STAN) results showed that the bank was "performing well in attractive markets". The results were also above expectations, which contrasts with the HSBC results which were below the broker's forecasts. The important difference between Standard and HSBC is the fact that Standard has avoided the scale of impairments suffered by HSBC in the Middle East. Nomura observed that the bank is geared to the more attractive emerging markets, where growth is expected to be higher than in the developed markets of Europe and America. For this reason, it prefers Standard Chartered to HSBC, "particularly in the near term". It restated its 'buy' stance and 1,790p target. The shares rose by 26.5p to 1,700.5p.

GE&CR said that upward revision to estimates for 2011 is now likely for Intandem Films* (IFM), after results showed "significant corporate developments". A sharply reduced pre-tax loss of 179,000 pounds for the six months to 31st December, from 0.6 million in 2008, is a welcome development, as is the 4 million pound book profit and elimination of a 6 million pound loan. Four films are expected to be delivered by the end of June, with the firm's fixed costs making earnings "highly sensitive to any increase in sales". A visible pipeline stretching into 2011 is also positive; and, with two films under development at a total cost of around 40 million pounds, pre-tax profits for 2011 "could easily reach 1 million pounds". GE&CR retained its 'buy' stance and 6.84p target. Intandem share price jumped by 0.625p to 3p.

Edison Investment Research completed its first half-yearly review of the PLUS Market, which covers the top 52 companies by market capitalisation. It also covers the best performing companies in terms of share price. The release is part of a programme by PLUS Markets Group (PMK) to raise the profile of its top-performing companies. Edison only provides coverage of PLUS every six months but the experts at UnQuoted-Analyst.co.uk, led by PLUS Journalist of the Year Richard Gill, publish updates, news and investment advice on the junior market every day of the working week. To access this invaluable resource, including our in-depth end of week market report, for no charge, click here.

Blue-Chips

Insurer Aviva (AV.) exceeded expectations in its 2009 results, with operating profit up 3% on a market consistent embedded value (MCEV) basis to 3.48 billion pounds. The shares dropped by 10.2p to 380p, however. A recovery in equity markets and strict cost control was reflected in a profit after tax of 1.32 billion pounds, against a loss in 2008 of 885 million pounds. Life and pension sales fell by 25% to 8.91 billion pounds, but the cost savings target of 500 million pounds was achieved a year ahead of schedule, as the firm shed 10,700 staff over two years. Earnings per share were 37.8p, versus a loss per share in 2008 of 36.8p, but the full-year dividend was cut by 27% to 24p. Aviva said that it was encouraged by an increase in saving from its customers in the last quarter of 2009. Panmure Gordon said that it preferred Aviva in the sector, due to the risk in the Prudential/AIG deal. It repeated its 'buy' stance and 526p target.

Project management firm Amec (AMEC) saw 2009 revenues fall by 2% to 2.5 billion pounds, but EBITDA rose by 13% to 208.3 million pounds thanks to acquisitions and currency movements. Adjusted pre-tax profit was up by 2% to 215.6 million pounds, but diluted earnings per share from continuing operations fell by 25% to 46.7p. The group said that it expects 2010 to be another challenging year. Shore Capital said that the company's long-term prospects remain excellent, and it retained its 'buy' stance. AMEC shares fell by 57p to 763.5p.

Petrofac (PFC), the other blue-chip oil services company, said that it is considering separating out its UK Continental Shelf assets into a new company in a joint venture with Swedish oil firm Lundin Petroleum. Called Enquest, the company will be listed in London and Stockholm. Petrofac shareholders would own around 45% of Enquest after the demerger. Westhouse Securities called the news "a very positive development" for the firm's shareholders, and kept to its 'buy' stance. The shares slipped by 9p to 1,086p.

Defence firm Cobham (COB) had a blitz on revenue in 2009, up 28% to 1.8 billion pounds with pre-tax profit doubling to 245 million pounds. Underlying earnings per share rose by 22% to 18.8p and the full-year dividend was lifted by 10% to 5.45p. Cobham's order intake was up 5% at 1.75 billion pounds, with organic growth at 7%. Earnings in 2010 are expected to be more than usually weighted towards the second half. Cobham shares fell back 4.2p to 244.3p.

Aggreko (AGK), the temporary power solutions firm, experienced good profits, revenues and margins in 2009, with revenue up 8.2% to 1.02 billion pounds, although this was 6.3% down at constant exchange rates. The shares lost 6p to 1,036p. Pre-tax profit pushed ahead by 28.4% to 244 million pounds, and group trading margin moved from 21.2% to 24.7%. Earnings per share surged ahead by 37.2% to 63.3p, and the full-year dividend payment was 12.6p, an increase of 25%. The firm said that its International Power Projects division made a good start to 2010, although it remained cautious about prospects for its Local business. Aggreko now expects to do "a little better" in 2010 than previously anticipated. Panmure Gordon said that Aggreko is "on the front foot in establishing world-wide strength of operations". It maintained its 'hold' recommendation and 1,042p target.

Leisure group Whitbread (WTB) announced that like-for-like (LFL) sales at the Costa Coffee chain rose by 9.5% in the three months to 18th February, with LFL sales at Premier Inn up a more modest 1.7%. This is the first time Premier Inn has reported LFL growth since the beginning of the economic downturn. Revenue per room was down 6.9%, against a sector average of 10.2%, and the group said this performance was helped by its value offering, including rooms at 29 pounds per night. Pub restaurant sales were up 1.3% on a LFL basis. Group LFL sales in the 51 weeks to 18th February were down 0.7%. Seymour Pierce said that the firm exhibited "impressive momentum" in the year to February and it retained its 'buy' recommendation. Investors were unmoved by the results, with the shares slightly down by 2p to 1,475p.

Scottish & Southern Energy (SSE) said that it would cut gas bills for domestic customers by 4% from 29th March. It added that the average household bill would drop by 30 pounds, from its current level of 1,162 pounds. The shares fell back by 4p to 1,121p.

Mid-Caps

After the rejection of two bid approaches, support services firm VT Group (VTG) abandoned its bid for Mouchel Group (MCHL), although it said it continues to "believe" in the rationale of a merger. Mouchel rejected the offer of 294p per share, and VT's plans were thrown further into disarray as rival Babcock International made a bid for VT itself. VT had argued that a deal with Babcock would be a retrograde step, as it would increase its exposure to a defence sector vulnerable to government cuts, while a tie-up with Mouchel would broaden its offering in the market for outsourced government contracts in areas such as road management. Shore Capital said it is now awaiting proposals from VT on how it intends to create shareholder value along the lines suggested by Babcock. Pending further news, it stayed with its 'hold' stance. The shares gained 10p to 685.5p.

Babcock (BAB) said that it and VT Group have agreed to begin talks about a potential merger worth around 1.25 billion pounds. The Financial Times reported that Scottish Widows, which is a large shareholder in both firms, had supported the idea of a merger, saying that significant shareholder value could be created. Babcock shares fell by 19p to 516p.

Fund manager and private equity firm SVG Capital (SVG) moved back into profit in 2009, with a pre-tax profit of 21.3 million pounds, after a loss of 862.5 million pounds in 2008. Net assets per share were up 7% over the year, with a 30% increase in the second half of the year, to 222.9p, and the investment portfolio increased 6.1% in 2009. Total operating income fell 20% to 31.9 million pounds, but 8p of earnings per share were recorded, against a loss per share of 621.5p in 2008. Significant investment in the business was planned in 2010-2011 but the group said it was unlikely to see the full benefits of investment until 2012. SVG shares inched up by 2p to 254p.

Newspaper publisher Trinity Mirror (TNI) saw pre-tax profits for 2009 fall by 41% to 72.7 million pounds, with revenues down 12% at 763.3 million pounds. The shares gained 10.4p to 156.4p. The firm, which owns the scholarly publication 'The Mirror', said that the regionals division suffered the heaviest losses, with revenues of 302.9 million pounds down 23.5%. Earnings per share were down 40% at 20p, and no dividend was paid for the year, after paying 3.2p per share last year. Numis said that the results indicated an improving trend, although volatility remained. The broker raised its target price from 186p to 200p, and kept its 'buy' stance unchanged.

Engineer Spirax-Sarco (SPX) reported adjusted pre-tax profit for 2009 that was flat at 90.2 million pounds, but down 16% in constant currency terms. Revenue was down by 7% at 518.7 million pounds, and adjusted earnings per share were 17% lower at 82.2p. The full-year dividend was increased to 36.1p per share, an 8% increase. The company said that there had been a positive start to the year, although a rapid rebound is not expected. Brewin Dolphin said that it saw attractions in the firm's broad geographic reach, long-term growth drivers and the high proportion of replacement/spares work in its business. An 'add' stance and 1,368p target was unchanged.  The shares rose by 55p to 1,353p.

Small Caps, AIM and PLUS

Digital Barriers (DGB), a security company, began trading on AIM, raising 20 million pounds. The firm, which is expected to have a market capitalisation of 24.8 million pounds, said that it would expand through acquisitions and organic growth, providing protection for high-profile targets, crowded spaces and critical national infrastructure.

Platinum Australia (PLAA) showed its iron fist as the majority of the employees of contractor Redpath Mining, who went on strike on 3rd March, were dismissed. The agitators were informed that they would have to appeal by 5th March to be considered for re-employment. Appeals will be heard on 5th and 6th March. Operations are still expected to recommence on 8th March. The shares fell by 1p to 55.5p.

Shares in engineering firm Delta (DLTA) rose by 38.25p to 192p on news that US firm Valmont has made an offer for the company. Valmont's offer values the company at 284.5 million pounds, or 185p per share, a premium of 20.3% to the closing price of 3rd March. The acquisition allows Valmont to expand its core infrastructure markets in regions outside the US. In 2008, Delta had revenues of 330.8 million pounds, with operating profit from continuing operations before exceptional items of 36.7 million pounds.

Builders merchant Grafton Group (GFTU) reported a 78% plunge in pre-tax profits for 2009 to 13.6 million euros, on revenues that were down 25% at 1.98 billion euros. Adjusted earnings per share were down a massive 83% to 5.4 cents, and the dividend was cut by two-thirds to 5p. The firm said that sales stabilised during the year, with second half figures broadly similar to the first six months of 2009. Sales in the first two weeks of January were seriously affected by difficult weather conditions, but since then have been close to expectations, with notable improvement in the new housing sector. Grafton shares added 41p to 285p.

Hardy Oil & Gas (HDY) swung into the red in 2009, with a pre-tax loss of 7.9 million dollars, having made a pre-tax profit of 12.4 million dollars in 2008. Revenue more than halved to 7.6 million dollars, and the firm incurred a loss per share of 10 cents, against earnings per share of 12p in 2008. Overall production fell from 0.93 million stock tank barrels (mmstb) to 0.56 mmstb, with the main cause being the closure in July 2009 for six months of its PY-3 field off the coast of India, which underwent repairs. The firm said it would not pay a dividend, and did not expect to do so for the foreseeable future. The shares price ebbed away by 12.5p to 234.5p.

Gold miner Serabi Mining** (SRB) leapt by 0.5p to 2.125p as it issued a statement saying that it is in talks with a third party over a possible merger. The firm said that the talks were very preliminary in nature, and that there is no certainty that an offer would be made.

Silicon wafer firm Pure Wafer (PUR) announced that it has launched a new manufacturing process, which will convert material from its wafer reclaim line into photovoltaic cells. The shares jumped by 1.125p to 6.625p. The project has been developed in conjunction with Swansea University and has had funding from the Welsh Assembly ( i.e. British taxpayers). Pure Wafer said it has received some initial orders for the new product.

Waste recycling firm Baylon (MOLE) reported that its EGM has approved the acquisition of alarms company Ila Security, the admission of shares to fund the deal and its renaming to Ila Group. The shares gained 0.3p to 1.25p. But penny share Invista Real Estate (INRE) fell 5.5p to 51p on news that it has terminated offer talks, which were at an highly preliminary stage, with an unnamed company.

Software firm Imaginatik (IMTK) warned that full-year revenue would be significantly lower than expected due to the timing of certain contracts. The company said that uncertainty remains over the timing of the closure of various ongoing contract discussions, and therefore the full impact on revenue for the year to 31st March is not certain. Arbuthnot Securities said that, although it views the prospects for the firm "positively", it would withdraw its stance and target price until such time as there is greater clarity over forecasts for 2010 and 2011. The shares slumped by 1.5p to 4.5p.

* The company is a corporate client of Rivington Street Holdings, the ultimate owner of this website. ** The T1ps Smaller Companies Gold Fund owns shares in Serabi.