From UK-Analyst.com: Thursday 12th August 2010

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Four Metropolitan police officers have been charged with assaulting Babar Ahmad, a terror suspect fighting extradition to the US, in a case likely to trigger fresh criticism of the way prosecutors deal with allegations against Scotland Yard. Meanwhile, the number of homeowners falling behind in their mortgage payments eased in the second quarter of the year, but the trade body representing the nation's lenders warned of "strong headwinds" ahead for the housing market as it downgraded its lending forecast for 2010. Elsewhere, industrial production in the euro-zone fell unexpectedly in June, prompting concerns over the strength of the economic recovery. At the London close the Dow Jones was down by 28.6 points at 10,350.23 and the Nasdaq was down by 13.68 points at 2,194.95.

In London the FTSE 100 rose 20.85 points to 5,266.06; the FTSE 250 dropped 66.18 points to 9,788.31; the FTSE All-Share climbed 8.02 points to 2,714.61; and the FTSE AIM Index trickled 2.74 points lower to 686.51.

Brokers' Notes

Evolution Securities issued a "sell" recommendation for mining company Randgold Resources (RRS) with a 4,000p target price. Having originally expectations that the vaunted Purple Patch in the Yalea decline would be reached in late 2009, the group has once again disappointed shareholders with a further delay taking it into 2011. The broker commented that mining this area of the deposit is important as its higher grades would have helped offset the decline at Morila. Consequently, attributable output in 2010 is expected to be about the same as in 2008, and still less than that achieved in 2006. Even allowing for substantial future growth, Evolution believes that the group's shares leave little scope for further upsets and delays. Randgold shares climbed 130p to 5,595p despite the negative comment.

Brewin Dolphin downgraded its recommendation for care home services company Southern Cross Health (SCHE) from "hold" to "sell" with a 10p target price. Following a poor third quarter trading update and ongoing occupancy headwinds, the broker lowered its earnings per share forecasts by 27% for the 2010 financial year. It said that the weakness reflects both occupancy and cost disappointments. Given the downbeat assessment of Southern Cross' occupancy outlook, Brewin believes that the prospect of moving to a loss-making position by 2012 and not having sufficient cash flow to meet quarterly rent obligations is realistic. In the absence of some meaningful rental concessions from the landlords, the earnings outlook is set to remain hugely uncertain on a 2-3 year view, the broker added. The shares tumbled 2.75p to 25.75p.

Panmure Gordon initiated coverage of mother and baby products retailer Mothercare (MTC) with a "buy" recommendation and 600p target price. The broker commented that the strength of the business model included two valuable brands, Mothercare and Early Leaning Centre, its early adoption of multichannel retail and social networking, and a growing international business. Following its analysis, Panmure said that it is now looking beyond recent "weak UK like-for-like trends" which have caused the shares to underperform the sector by 16% year to date. It believes the shares would be trading at a higher price if not for being oversold. The shares rose 3.2p to 499.5p.

Shore Capital issued a "buy" recommendation for the consultancy group Tribal (TRB) following yesterday's approach by a potential purchaser of the business. This comes at a time of recent share weakness reflecting investor sentiment towards those servicing the public sector at a time of austerity. It added that consulting, particularly in central government, looks to be a fragile area for some time to come. Ahead of its interim results for the half year to end-June 2010, the broker expects to see both revenue and profits before tax fall by 10% to 113 million pounds and 6% to 9 million pounds, respectively, compared to the same period in 2009. Nevertheless, Shore believes that the business has strong exposure to key areas of the public sector which offer longer term growth opportunities, such as education and the NHS healthcare. Tribal shares advanced a further 2p to 84.5p.

Blue-Chips

Insurer Prudential (PRU) announced it had lowered the cost of its failed bid for AIG's Asian Unit as it reported increased half-year profit for the first six months of 2010. The botched takeover attempt will cost 337 million pounds, down from an initial estimate of 450 million pounds, due to reduced advisory fees and current fluctuations. The group reported a European Embedded operating profit of 1.68 billion pounds for the six months, up by 34% a year earlier, helped by a strong performance from its own Asian business. In its first results statement since the collapse of the AIA deal in May, the firm also said it was sticking by its strategy of prioritising investment in fast-growing Asia. Prudential shares finished 8.5p lower at 553.5p.

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Centrica (CNA) shares rallied 10.4p to 330.1p after the energy company announced that its North American subsidiary, Direct Energy, has acquired Suncor Energy's natural gas assets in the Wildcat Hills region of Alberta for 375 million Canadian dollars (229 million pounds). The acquisition will provide the firm with 241 billion cubic feet equivalent of additional natural gas reserves, an increase of approximately 60%, and an incremental 80 million cubic feet per day of natural gas production. This is in line with the group's strategy to build a more integrated North American business with leading positions in deregulated markets. "We will continue to explore opportunities to secure further strategic gas and power assets in North America to enhance the scale of the business," chief executive of Centrica Sam Laidlaw commented.

Mid-Caps

HomeServe (HSV), the domestic repair company, announced the acquisition of National Grid's Energy Services' service contract business in the US. The net consideration paid was 15.4 million dollars (9.7 million pounds). Commenting on this, Jonathan King, chief executive of Homeserve USA said: "The 340,000 policies acquired as part of the acquisition takes our policy base to over 1.1 million and firmly establishes HomeServe USA as the leading provider of home emergency solutions to US customers." HomeServe shares finished 10p lower at 466.1p.

Shaftesbury (SHB), the specialist real estate investment trust, announced that trading conditions in London's West End remain buoyant "thanks to unrivalled attractions which bring growing numbers of visitors." Consequently, the company reported on a healthy demand for retail, restaurant and residential accommodation across its Villages. At 31st July 2010 the total estimated rental value of wholly owned commercial vacancies was 3.4 million pounds per annum. Of this total, space under construction or refurbishment amounted to 2 million pounds per annum. "We are confident that the underlying strengths of the locations in which we invest…will continue to deliver sustained out-performance in income and capital values," the group commented. Shaftesbury shares fell 5.7p to 396p.

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De La Rue (DLAR) shares tumbled 82.5p to 711.5p after James Hussay resigned as chief executive of the bank note printer with immediate effect. This decision follows the company's statement last month in relation to "certain quality and production irregularities" at one of its paper production facilities. The security printer and papermaker firm has declined to provide details of what was wrong with the paper and suspended production and shipment pending an investigation. However, the board admitted that it considered the irregularities "to be of a serious nature". The group added: "owing to the complexity of the issue, it was unlikely to be able to assess the financial implications on the group's full-year results in the near future" Commenting on this, Panmure Gordon remained concerned that the extent of the problems may have ongoing ramification and, thereby, issued a "sell" recommendation.

Dana Petroleum (DNX) shares dropped 63p to 1,630p on news the oil company has effectively rejected Korea National Oil Corporation's (KNOC's) 1.7 billion pounds takeover approach after the two sides failed to agree on the value and terms of the offer. In a strongly worded statement Dana said that it would not recommend KNOC's 18 pounds per share indicative offer to its shareholders as it failed properly to reflect the value of its oil exploration programme and that KNOC had refused to raise its offer. Given the risk of the deal falling through completely, WestHouse Securities issued a "sell" recommendation.

Small Caps, AIM and PLUS

Forest Support Services (FSS) shares jumped 2.375p to 8.625p as the traffic management solutions company announced the disposal of its only trading subsidiary, Forest Traffic Signals, to Caswell Support Services for 1.97 million pounds. Caswell is a newly incorporated company acquired by Mr Ross Williams, Managing Director of Forest Support Services, for the purpose of use as a vehicle to acquire the disposed business. The firm also announced that it is seeking approval for the cancellation of its shares on AIM. Commenting on this, the group said, "Shareholders interest as a whole will be best served by the company realising value for Forest Traffic Signals."

ViaLogy (VIY), a provider of sensor technology to oil explorers, announced signing a master services contract with a "global super major oil firm," sending its shares up 1.125p to 5.125p. The company said it would use its QuantumRD technology to provide accurate predictions in porosity variations over a dolomite reef formation in south-western United States, enabling improved net pay estimates and increased commercial recovery.

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Beacon Hill Resources (BHR) shares rose 0.5p to 8.25p subsequent to the mining company being granted a mining lease for the Arthur River magnesite project by the government of Tasmania. This allows the group to progress to the next stages of the development and construction of the mine. The company said that, following the approval, it will continue to advance the statutory Development Proposal and Entertainment Management Plan, which is already well progressed and anticipated to be finalised by the end of the year.

Lincat Group (LCT), the catering appliances company, delivered another strong performance, sending its shares 50p higher to 562.5p. In its half year results to 2nd July 2010, the company reported an increase in both revenue and operating profit by 6% to 15.8 million pounds and by 25% to 2.6 million pounds, respectively, compared to the same period last year.  The company added that performance at its three operating companies varied considerably, as each of them supplies different product to different segments of the market. "We…remain cautiously optimistic about our prospects and our ability to deliver robust margins and a healthy cash flow in the second half of the year," the company commented.

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Hampson Industries (HAMP) shares plunged 31.25p to 20p as the aerospace engineering group warned its full year pre-tax profits for the 2011 financial year will be materially less than current market estimates. In a trading update, the company said that although the overall rate of recovery in its tooling operations has been slower than the board had initially anticipated, both the tooling order book and the pipeline of potential new work in quote continue to remain strong. However, the group added, "in light of the slower than anticipated start to the year, the board now expects first half trading profit to be approximately 6 million pounds," down from 13.5 million pounds in the same period a year earlier. Brewin Dolphin commented that the update was worse than it feared and, thereby, expects to downgrade its forecasts and price target "materially."

PLUS-quoted company Technis International (PLUS: TECP), the retail technology development firm, announced the acquisition of a 51% stake in the flowers and plants distributer Fresh Bouquets. The consideration for the acquisition is 450,000 pounds which is being satisfied through the issue of approximately 12 million shares together with a 100,000 pounds cash element. "We believe that this represents a substantial profits turnaround opportunity," chief executive Jack Kaye said in a statement. In a separate announcement, the firm announced that, during the first six months of 2010, the business continued to make progress in meeting its goals and objective, with revenue generation having commenced.

Correction

In yesterday's report we suggested that Rivington Street Holdings, the owner of UK-Analyst, had paid 270,000 million pounds to buy Presentation Matters.  This was an editorial error. RSH CEO Tom Winnifrith commented "I will not be promoting the stockmarket reporter to group FD. At 270 billion pounds Presentation Matters would have been expensive. At 270,000 pounds it was a snip." We apologise for any confusion caused.