From UK-Analyst.com: Wednesday 25th August 2010

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The capital faces its most serious transport disruption in more than a year after 10,000 London Underground staff called a series of 24-hour strikes, starting on 6th September. Meanwhile, George Osborne's claim that his plans for cuts in public spending will be "progressive" is roundly dismissed in a report by the Institute for Fiscal Studies, which suggests that the burden of deficit reduction will fall most heavily on poor families. Elsewhere, Ireland criticised Standard & Poor's after the credit rating agency cut the country's long-term credit rating, causing Irish government bonds to tumble in early trading. At the London close the Dow Jones was down by 9.15 points at 10,031.30 and the Nasdaq was up by 1.75 points at 2,125.51.

In London the FTSE 100 dropped 46.55 points to 5,109.40; the FTSE 250 slipped 77.35 points to 9,623.56; the FTSE All-Share fell 19.39 points to 2,642.07; and the FTSE AIM Index finished 5.12 points lower at 680.72.

Brokers' Notes

Brewin Dolphin downgraded its recommendation for Bodycote (BOY) from "hold" to "reduce", while lowering its target price from 220p to 189p. Following the industrial engineering company's interim results, which were in line with expectations, the broker made some changes to its forecasts. In particularly, 2010 earnings per share are now forecasted to rise by 2% to 13.4p whereas in 2011 a fall by 4% to 17p is expected. Given the firm's high operational gearing and lingering uncertainties during the trajectory of the economic recovery, Brewin also carried out a sensitively analysis on its 2011 forecast. In summary, it currently sees more risk of downgrades and expects the share price to fall while the economic outlook remains uncertain. Bodycote shares slipped 7.6p to 214.5p.

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Singer Capital Markets issued a "buy" recommendation for the international trade exhibitions and conference organiser ITE Group (ITE) with a 174p target price. The broker notes Russia's estimates for the impact of the drought, which has reduced grain output by approximately 26%. The blow is estimated to be at least 0.7% of gross domestic product for 2010 against an official growth estimate of approximately 4%. Singer continues to be positive on the firm given that it fulfils the broker's criteria of having an attractive geographical exposure and favourable market position, not to mention a sound product range. The broker added that the firm also has scope to utilise its balance sheet further and that, while direct affects on the firm's exhibitions may not seem obvious, a slowing economy will most certainly have a detrimental impact on the business. The shares dropped 2.3p to 151.6p.

Panmure Gordon retained its "hold" recommendation for the insurance software and outsourcing group Innovation (TIG) but moved its target price down slightly from 12p to 11.8p. The broker commented that the firm's goal to become a services rather than software business is moving on apace - but selling less software and selling more Software as a Service (SaaS) means less profit. Following the latest interim management statement on 18th August, the broker reduced its 2010 earnings per share forecast from 0.9p to 0.8p on the back of the economic downturn. The operational moves look to be correct, Panmure added, but "the company appears to be suffering from banana-skin-itis - before too long investors will look for a bid." Innovation shares finished flat at 10.5p.

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Arden Partners moved its recommendation for the oil and gas production facilities solutions provider Petrofac (PFC) from "add" to "neutral". The broker commented that the group has continued to deliver positive contract news-flow with 830 million dollars (538 million pounds) of awards from Kuwait in the last month and looks well placed to win its largest contract ever on the South Yolotan project during the second half of 2010. This would consequently have a notable uplift on Arden's current earnings forecast but it believes this has been well flagged to the market and, given current valuation, is largely reflected in the shares. Whilst the broker continues to believe in the medium term, given a 200 billion dollars (130 billion pounds) addressable engineering and construction market, on current valuation it thinks the stock is up with events and better value lies elsewhere. The shares slipped 37p to 1,355p.

Blue-Chips

An advert for telecommunications firm BT (BT.A) has been banned for misleading customers over broadband speeds. In a TV advert, a voice-over said BT is "rolling out up to 20 meg speeds" to give "consistently faster broadband". The Advertising Standards Authority, which received 17 complaints, said it had not seen sufficient evidence to support the claim and concluded that the advert was likely to mislead. BT shares fell back 2.6p to 132.6p.

Outsourcing firm Serco (SGRO) announced pre-tax profits up more than 20%, defying concerns that support services companies will suffer from swingeing government spending cuts. The group, which runs prisons in Australia and London's new cycle hire scheme, reported pre-tax profit for the first half to June 30 was 101.4 million pounds, against 83.4 million pounds last year. Revenue grew by 9.8% to 2,140 million pounds with its international businesses now accounting for almost 40% of that. "We continue to expect, in 2010, strong organic revenue growth and further progress towards our 2012 margin guidance, and, by the end of 2012, an increase in revenue to approximately 5 billion pounds," the company added. Segro shares finished 1.1p lower at 275p.

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Aggreko (AGK), the provider of temporary power, again upgraded its outlook for the year after posting a 23% jump in first-half profit, helped by contracts for major sporting events. For the six months to end-June 2010, underlying profit rose to 131.2 million pounds on revenue up by 16.7% to 585.6 million pounds. The trading performance was underpinned by the Vancouver Winter Olympics and the FIFA World Cup contracts. "We believe that we will make further good progress in the second half and that the outcome for the year as a whole will be slightly better than our previous expectations," Chairman Philip Rogerson said in a statement. Aggreko shares tumbled 83p to 1,346p as investors took profits following a strong run.

Tullow Oil (TLW) shares shed 59p to 1,238p subsequent to the oil and gas explorer and producer warning of likely delays to its projects in Uganda because of a tax dispute. The group paid Heritage Oil 1.5 billion dollars (0.97 billion pounds) last month for its interest in two Ugandan blocks, prior to bringing in China National Offshore Oil Corporation and Total SA as partners. Final approval has been held up until the issue of capital gains tax (CGT) between the Ugandan government and Heritage is resolved. "In the very short term, it is therefore anticipated that there may be some slow down in activity," the firm added. In a separate announcement, Tullow's first-half earnings in 2010 more than doubled from the comparable period a year earlier to 817 million dollars (530 million pounds) on increased crude and natural-gas prices. "The situation in Uganda is a major concern," commented Arbuthnot Securities. "The CGT issue needs to be resolved before we are likely to see any further activity and this could have a major impact on the valuation of these assets should the situation continue for a prolonged period of time."

Mid-Caps

SIG (SHI) shares climbed 2.3p to 93p as the insulation and roofing group announced first half pre-tax profit slipped 16% and warned on the impact of government austerity measures. The company reported an underlying pre-tax profit of 18.5 million pounds for the six months to end-June 2010, compared with 21.9 million in the same period last year. Sales in the first half decreased by 4% to 1.3 billion pounds despite picking up in the second quarter after cold weather affected the start of the year. "SIG's management remains cautious on how its markets will develop over the next few months...based on the continuing macroeconomic uncertainty and concerns about the potential impact of government austerity measures and credit availability," chairman Les Tench commented.

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Office landlord Derwent London (DLN) reported sustained growth in the value of its portfolio to 2.15 billion pounds, up by 10.3% since 31st December, soothing fears for a new real estate slump. The group reported pre-tax profits of 216.4 million pounds during the period against a loss of 223.3 million pounds a year ago, supporting its guidance for high single-digit dividend growth for the 2010 financial year. Chief Executive John Burns said he was hopeful the firm's signature strategy of providing affordable offices in the capital's burgeoning business hubs would offset any possible dip in demand for space as firms budget for slower expansion and greater-than-expected inflation. The shares rose 9p to 1,383p.

Forth Ports (FPT) reported an expected 29% rise in first-half profit, driven by growing container volumes and cost cutting initiatives. Britain's only listed ports company posted a pre-tax profit of 16 million pounds on increased revenue by 3% to 89.6 million pounds for the six months ended 30th June 2010. "Current trading continues to be encouraging," chief executive Charles Hammond said in a statement. "The ports' project pipeline is strengthening and there are greater opportunities to acquire or manage other port businesses." Shares in the firm finished 2p higher at 1,288p.

Small Caps, AIM and PLUS

Robinson (RBN) shares jumped 10p to 55p subsequent to the packaging manufacturer announcing a swing in pre-tax profits to 192,000 pounds for the six months ended 30th June 2010. This compares to a loss of 966,000 pounds in the comparable period a year earlier as revenue rose by 19% to 11.52 million pounds. The growth in revenues has been across all business units with the exception of the paperboard plant in Toronto. "We remain optimistic that we will be able to show good progress with both revenue growth and profit improvement by the end of the year," chairman Richard Clothier commented.

Corac Group (CRA), the energy efficient compressor technology developer, signed a new agreement with an independent exploration and production company in an attempt to increase production and extend the life of a depleted well in North America. The agreement has a maximum value of 1.5 million dollars (0.97 million pounds), based on achieving milestones during a period of eighteen months, with an upfront payment of 750,000 dollars (486,571 pounds). The project is to develop, build, test and field trial Corac's Downhole Gas Compressor with the aim of accelerating gas flow through artificial lift. The shares climbed 1.25p to 23.25p.

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PLUS Markets Group (PMK) shares perked up 0.2p to 1.875p following the London based stock exchange announcing the completion of its strategic review to diversify and increase the revenue base of the group and to reposition the company as a fully fledged stock exchange. It will now be offering commercially attractive primary and secondary market services to companies and investors as well as providing a pan-European venue for major market players to drive their trading and listing activity, the firm said.

Plant Impact (PIM), the crop nutrition and pest control company, started field trials in Brazil to test its technologies targeting calcium and nitrogen in plants with the agrochemicals company Syngenta. The trials will focus on the use of CaT - a calcium absorption technology for plants - and PiNT - a nitrogen uptake system that improves plant growth – with soybean, corn, cotton and coffee.  On the successful conclusion of these trials, the firm anticipates that the initial target market for its products will include Brazilian farmers with an aggregate total area of 3 million hectares of soybean, 1 million hectares of corn, 300 thousand hectares of cotton and 300 thousand hectares of coffee per year. Plant Impact shares sprung 1p to 16.5p on the news.

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African Medical Investments (AMEI) shares tumbled 1.25p to 9.25p on news the investment company's management agreement relating to the Airport Medical & Travel Vaccination Centre at Johannesburg International Airport has been terminated following the discovery of financial and administrative irregularities. As such, for the full year ended 28th February 2010, the group reported a pre-tax loss of 16.2 million dollars (10.5 million pounds) compared to a 2.9 million dollars (1.9 million pounds) loss a year earlier. This comes despite increased revenues to 4.6 million dollars (3 million pounds), up from 0.5 million dollars (0.32 million pounds) in the 2009 financial year. "In spite of the recent issues, we are highly committed to fulfilling our objectives," chairman Phil Edmonds commented.

Vislink (VLK), the technology business specialising in secure communication and services, swung to a disappointing pre-tax loss of 4.5 million pounds for the six months ended 30th June 2010 pushing shares down 2.5p to 16.25p. This compares to a profit of 0.48 million pounds in the comparable period a year earlier as revenue fell by 25% to 34 million pounds. Tim Trotter, Chairman of Vislink said: "We are cautiously optimistic that the first half of 2010 has marked the end of the slowdown in our markets...and that we may finally be seeing a gradual return to more normal trading."