From UK-Analyst.com: Friday 5th March 2010

The Prime Minister made his long-awaited appearance before the Iraq talking-shop, insisting that troops had all the equipment they needed and that he was convinced that Iraq needed to be dealt with. Yes of course. Anything you say. Talks over repayment of Iceland's debt broke down without agreement, meaning that a referendum will go ahead on Saturday. Markets on both sides of the Atlantic gained ground as US jobs data showed that the unemployment rate held steady at 9.7% in February, with only 36,000 jobs lost in the month. At the London close the Dow Jones was up by 82.68 points at 10,526.82 and the Nasdaq was ahead by 24.32 points at 2,316.63.

In London the FTSE 100 rose by 72.6 points to 5599.76; the FTSE 250 gained 109.43 points to 9774.72; the FTSE All-Share was up 36.36 points at 2861.06; and the FTSE AIM Index added 5.26 points to close at 687.45.

Brokers' Notes

Arbuthnot Securities downgraded its stance on support services firm Spice (SPI) from 'neutral' to 'reduce', saying that question marks still remain over risks to the core business and the longer-term opportunities for the group. The target price was lowered from 55p to 32p. Spice has now shifted its attentions to paying down debt through divestment of non-core activities such as gas, telecoms and facilities. No acquisitions are expected for some time, as it focusses on organic growth. The broker said that the risks relating to contract renewal were above average, with the largest client, EDF, due to renew all its contracts in December 2010. Arbuthnot said it would "not be surprised to see significant competitive pressure in agreeing any renewal", given the difficult economic climate and customer change risk within EDF's networks. After divestments, the core businesses will be Supply and Distribution, with the outlook for both remaining mixed. The edge was taken off the shares as they fell 1.25p to 34.25p.

Tesco's (TSCO) number one position in the UK dot.com grocery market is a positive sign, Shore Capital said, as the new market continues to grow at around 15%. The broker wondered whether the model, with large warehouses servicing online customers, would mean that supermarkets would suffer the same fate as West Yorkshire woollen mills, i.e. "empty, derelict or under alternative use". Tesco is well-positioned to capture further growth in the sector, not just in the UK but also overseas, and a third warehouse is expected to open later in 2010 to help ease pressure on the existing two. The 'buy' stance was retained. Tesco;s share price gained 3.9p to 437.15p.

Brewin Dolphin expects manufacturer Hill & Smith (HILS) to continue to show positive visibility, with worries over funding for motorway infrastructure overdone and also contradicted by the size and number of long-term projects being awarded and financed. The broker cited the view of sector rival Balfour Beatty, which had said that transportation spend in Britain would continue to increase. The recent run of positive news gives confidence in the firm's ability to continue to win contracts in the coming months. Brewin repeated its 'buy' stance and 402p target, advising investors to buy ahead of the 9th March results. The shares rose 14.5p to 346p.

Charles Stanley published a review of the shipping market, saying that optimism appears to be returning to the sector after a difficult 2009, when the economic crisis was magnified by low freight rates and overcapacity. Volatility is expected to continue, but Chinese demand and infrastructure spending will be key to any recovery. New vessel deliveries are continuing, but a cold winter and declining oil stocks have increased demand for tankers, and better conditions are expected in 2010 for container ships. Clarkson (CKN) is the next firm due to report results, on 11th March, and the broker expects pre-tax profit for 2009 of 21.7 million pounds, almost half of that for 2008. The firm had said in November that trading was in line with expectations, but still difficult, although broking volumes have either been maintained or increased, with a cautious return to buying activity in the sale and purchase markets. The 'add' stance and 954p target was unchanged.  Clarkson shares pushed ahead by 37.5p to 867.5p.

Hybridian said that pharmaceutical firm Summit (SUMM) is "far from the peak of its potential valuation", with many opportunities that could lead to rapid growth. The largest opportunity is its partnered programme with BioMarin relating to muscular dystrophy. Summit has also identified compounds that can be used to combat the c. dificile disease, prevalent in the NHS. The firm has received a grant of 2.2 million pounds from the Wellcome Trust that will fund development until 2012. Licensing opportunities also exist in the treatment of diabetes, with initial marketing of the SMT 14224 product provoking interest from several major pharmaceutical firms. Hybridian's stance remains 'strong buy'. Summit shares ascended by 0.62p to 5.25p.

Blue-Chips

Advertising giant WPP (WPP) beat expectations for 2009, which was described as a "brutal" year, with headline pre-tax profit down 24% at constant currency to 812.2 million pounds. The shares climbed 21p to 645p. Analysts had expected a fall to 780 million pounds. Revenue was up 5% at constant currencies to 8.684 billion pounds. The headline profit margin fell from 15% to 11.7%, and diluted headline earnings per share were down 20% to 44.4p. The full-year dividend was maintained at 15.47p. WPP said that there had been an "encouraging" return to stability in January, with flat like-for-like (LFL) revenue growth expected in 2010. LFL revenue was down 8.1% for 2009. The group hopes that 2010 will be a more stable year, with the Winter Olympics and Football World Cup expected to boost revenues. UBS said that the figures are not expected to result in any upgrades, given "recent share price moves and high expectations for an improving outlook".

Xstrata (XTA) shares rose by 65p to 1,189.5p on news that Swiss commodity trader Glencore is buying back the Prodeco coal operations in Colombia. Glencore exercised an option and will pay 2.25 billion dollars, plus profits accrued and the net balance of any cash invested during the option period. Xstrata said that it would use the proceeds for its own growth programme, which is due to result in a 50% growth in volumes by 2014.

Mid-Caps

United Business Media (UBM) posted figures ahead of expectations, with pre-tax profit for 2009 down 4% at 165.1 million pounds. Analysts had predicted a drop to 150 million pounds. Revenue was also 4% lower at 847.6 million pounds. Adjusted earnings per share were down by 3% at 55.1p, but the full-year dividend was increased by 1.7% to 24.2p. Emerging markets performed well, with revenue growing by 36% and China, India and Brazil providing a fifth of the operating profit of 171.2 million pounds. The firm's biennial trade shows reported revenue up 55% on 2007, which Numis said was "positive for sentiment" and demonstrated the "quality of the Asian events portfolio". The outlook for 2010 was said to be stable. Separately, the firm announced the acquisition of sign exhibition Sign China for 10.7 million dollars in cash. In 2009, Sign China generated revenues of more than four million dollars. The shares gained 29.7p to 493.1p.

Hochschild Mining (HOC) announced the sale of its 36.9% holding in Peruvian miner Zincore Metals for approximately 6.64 million pounds. The share was purchased by the firm's executive chairman Eduardo Hochschild for around 17p per share. The firm said that it disposed of the stake because it does not constitute a core asset for the company. Hochschild shares rose by 11.7p to 302p.

Recruiter Michael Page (MPI) reported an 85% fall in pre-tax profits for 2009 to 21.1 million pounds. The shares fell by 11.3p to 383.7p. Overall revenue was down 26.3% at 716.7 million pounds, with temporary revenue down 13% to 456.6 million pounds, representing about 64% of revenue. Permanent revenue suffered the heaviest falls, and was 42% lower at 260.2 million pounds. Diluted earnings per share plummeted 87% to 3.8p, with the full-year dividend unchanged at 8p. The firm reported a 45% jump in net cash to 137.2 million pounds. It said that a recovery is underway in some of its markets and geographies, although the strength of the recovery remains uncertain. Seymour Pierce said that it is still "very cautious about the outlook for recruitment markets" and so it remained with its 'sell' stance and 300p target.

Filter paper and plastics group Filtrona (FLTR) announced the acquisition of Cardiff-based adhesive labels firm BP Labels for up to 4.5 million pounds. The final consideration will depend on the trading performance of the company. Filtrona said that the BP business is highly complementary with its existing products. No details were provided on BP's revenue or profits. The shares edged up by 2p to 207p.

Premier Oil (PMO) said that it has abandoned well 16/4-5 in the North Sea but that results from the first of two more wells are expected shortly and are forecast to be more positive. In addition, good results are expected from the Blabaer well, in which Premier has a 15% stake. It has a resource potential of 15-75 million barrels of oil equivalent gross. Premier shares retreated by 13p to 1,118p.

Small Caps, AIM and PLUS

Kenmare Resources* (KMR) moved into the red despite revenue of 26.7 million dollars for 2009, having reported no revenue for 2008. The pre-tax loss was 30.35 million dollars against pre-tax profit of 345,000 dollars in 2008. A diluted loss per share of 3.59 cents was recorded, against earnings per share of 0.042 cents in the previous year. The firm said that demand would increase as firms ran down their existing stocks of titanium and use of the metal grew in developing economies. From 2012, increasing demand will lead to growing shortages of titanium, with consequent upward pressure on prices. Separately, Kenmare announced a placing to raise 179.6 million pounds through the issue of 1.49 billion shares to fund expansion of its Moma operation in Mozambique. Libertas Capital said that "it is amazing that a company with a record of late project delivery and cost over-runs, and one that has yet to record any profits, can be given more ammunition in order to produce more material that few people apparently want". The shares plummeted by 5.5p to 15.25p.

Shares in security alarms firm Visonic (VSC) fell 8.5p to 90p as it left AIM. The firm's shareholders had voted in favour of leaving the London market and concentrating on its listing on the Tel Aviv stock exchange. Visonic had fallen foul of listing rules as the proportion of shares in public hands had fallen below 25%.

Quadrise Fuels International (QFI) announced that it has signed an agreement with Danish shipping group Maersk to develop jointly a marine version of Quadrise's emulsion bunker fuel, MSAR. The programme is expected to take twelve months, with Maersk's vessels providing a testing ground for the new technology. The shares jumped by 0.875p to 3.875p.

Profit before tax and exceptionals for 2009 at West China Cement (WCC) jumped by 111% to 60 million pounds, as revenue rose 75% to 148 million pounds in 2009. Operating profit margins improved from 33% to 41%, which the firm said reflected strong product prices, efficiency gains and economies of scale. It added that the redemption of 7.8 million warrants in November removed liquidity and dilution risk. Diluted earnings per share were up by a third to 49p. The firm sold 47% more cement in 2009, at 5.08 million tonnes, and it is targeting a production level of 11.8 million tonnes in 2010, with infrastructure and urbanisation trends in Shaanxi province driving demand. West China shares raced ahead by 73p to 585p.

Software systems firm Eleco (ELCO) reported a pre-tax loss of 2.22 million pounds for the six months to 31st December, with a 12.5% fall in revenue to 32.49 million pounds. The shares fell by 4p to 33p. In 2008, the firm made a pre-tax profit of 270,000 pounds. The loss per share for the period was 3.5p, against earnings of 0.3p in 2008. Eleco blamed the performance on declines in its German connector plate business, and lower sales and margins in Building Systems, but said that losses were partially offset by group-wide cost reduction programmes.

Pre-tax losses for the year to 30th September at Chromex Mining (CHX) narrowed dramatically to 151,000 pounds, after a loss of 1.4 million pounds in 2008. Revenue soared by 358% to 2 million pounds, and the net profit was 195,000 pounds. Earnings per share were 0.23p, after a loss per share of 1.94p. Chromex said that much of the year was taken up with construction of the Stellite processing plant in South Africa, with full operations recommencing in January. Chromex was unchanged at 17.5p.

PLUS-quoted Zeta Compliance Group (ZCGP) said that its risk assessment subsidiary, Fineapply, had launched a new division called Zeta Carbon which will assist companies in complying with new environmental legislation, including the Energy Performance of Buildings directive and the Carbon Reduction Commitment. The shares remained unchanged at 33.5p.

In the fourteen months to 30th September, home automation firm JSJS Designs (JSJS)) endured a pre-tax loss of 0.93 million pounds, against pre-tax profits of 94,206 pounds in the year to July 2008. Revenue slumped by 81% to 157,519 pounds, and the diluted loss per share was 0.54p, from earnings per share of 0.07p in 2008. JSJS said it had concentrated on developing its range of home control devices and that turnover had been minimal. It had confidence that more volume business would be secured in 2010, adding that discussions with major customers for home automation products were in an advanced stage. JSJS shares fell by 0.25p to 1p.

Banana supplier Fyffes (FFY)) said that pre-tax profit for 2009 jumped by a third to 21.2 million euros, although group revenue (excluding joint ventures) was down 1.4% at 598.1 million euros. Diluted earnings per share were up 31.4% to 5.19 cents, and the full-year dividend was increased by 10% to 1.65 cents. The firm peeled back its profit expectations for 2010 after cold weather in January and February hit demand for fresh fruit. Davy Stockbrokers continued with a 'neutral' stance. The shares dropped by 2.25p to 37p.

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