From UK-Analyst.com: Thursday 31st January 2013
The Markets The British banking system looks set to face a fresh set of compensation claims, this time relating to the mis-selling of complex interest rate hedging products sold to small businesses. This adds to a string of banking scandals including the mis-selling of Payment Protection Insurance, rigged global benchmark rates and breaches of anti-money laundering rules. The Financial Services Authority said that 90% of the 173 interest-rate swaps it investigated did not comply with all of the regulatory requirements. Anthony Browne, Chief Executive of the British Bankers' Association, said, "The announcement today will give clarity to businesses and will enable the banks to put in place the steps needed to resolve each case for customers". In Europe, German Chancellor Angela Merkel is optimistic that she could help to clinch a deal on the EU's long-term budget ahead of a summit next week in Brussels. Leaders failed to reach an agreement at the last summit back in November, but Merkel is more positive now and commented, "I am very optimistic that on the question of the long-term EU budget, we will be successful, that we will get an agreement". Staying in Europe, German sales fell by 4.7% in December year-on-year in the biggest drop since May 2009. In addition, consumer sales in France slipped by 0.1%. The dip in Germany was blamed on weak consumer confidence as uncertainty around the economy continues. However, there is more positivity surrounding 2013 amongst analysts. Gerd Hassel, Economist at BHF Bank AG IN Frankfurt, said, "December data is a setback, but confidence has improved since then and declining uncertainty about the debt crisis is feeding into consumer sentiment." At the London close the Dow Jones was down by 20.39 points at 13,890.03 and the Nasdaq fell by 4.29 points to 2,734.42. In London the FTSE 100 decreased by 21.18 points to 6,301.93; the FTSE 250 finished 23.63 points down at 13,022.91; the FTSE All-Share fell by 10.43 points to 3,298.13; and the FTSE AIM Index slipped by 1.70 points to 731.40.  Broker Notes Seymour Pierce retained its "sell" recommendation on baby goods retailer Mothercare (MTC) with a target price of 200p. The broker noted recent announcements made by the firm and believes that they highlight the "mammoth" task the group has in front of it. Seymour Pierce remains understandably cautious over the overhaul in management and by the fact that its Australian business has gone into administration. However, the underlying rationale that underpins the broker's "sell" stance is that it believes the store will struggle to compete in an ever increasingly crowded market place, with players such as Tesco launching its own baby clothing range. The shares were down by 14p at 312p. Canaccord Genuity reiterated its "buy" stance on Heritage Oil (HOIL) but lowered its target price to 380p. The broker is convinced that the group has the ability to develop the reserves at its newly acquired project in Niger after an impressive capital markets day. Cannacord is also excited about the firm's plans to increase production from 35-40,000 bopd to 50-60,000 bopd within the next year, driven by new drilling projects, as the firm expects to add one oil rig every six months up until six rigs are operational. The shares lost 4.8p to 199.2p. Daniel Stewart maintained its "buy" recommendation on healthcare group BTG (BTG) with a target price of 430p. The broker noted that revenues for the full year ended 31st March 2013 are expected to be at the top end of its guidance of between 205 million pounds and 215 million pounds and is impressed with the operational progress the group has made in recent months. In addition, Daniel Stewart is also excited by the revenue opportunities attached to the recent EU and US label extensions which were granted to its prostate cancer-fighting Zytiga product. The shares climbed by 11.5p to 332p.
Blue-Chips Pharmaceutical giants AstraZeneca (AZN) revealed a 15% drop in revenues to $27.97 billion (17.7 billion pounds) for 2012, primarily driven by a period of significant patent expiry and tough market conditions worldwide. The second largest drug maker in the UK also attributed the downturn in revenues to the disposals of its Astra Tech and Aptium businesses. Worryingly, the company expects this trend in revenue decline to continue and has forecast a mid-to-high single digit percentage decline in revenue for 2013 as well as a slump in profits amid increased competition from lower-priced generic medicines. The shares dropped by 99.5p to 3,053p. Annual profits at Royal Dutch Shell (RDSA) fell by 5.6% to $27 billion (17 billion pounds) despite an increase in fourth quarter profits for Europe's largest oil company. In the company's "upstream" exploration and production business, profits fell 1by 4% to $4.4 billion (2.8 billion pounds) despite a 3% increase in oil and gas production in a performance significantly under the 10% year-on-year rise in profits forecast by Deutche Bank. Shell also pointed to lower prices for its synthetic crude oil as explanation for the slump, in particular the 19% dip in revenues came from from its Canadian synthetic crude oil. The shares decreased by 64.5p to 2,241p. TV giants British Sky Broadcasting Group (BSY) posted a 5% increase in revenues to 3.53 billion pounds for the six months ended 31st December 2012, coupled with an 8% increase in profits to 647 million pounds. BSkyB added 88,000 net new customers to its services in the final 3 months of 2012, a figure significantly above analysts' forecasts of 58,000, while weekly on-demand downloads increased by 150%. Earlier in the week Goldman Sachs issued a "strong buy" recommendation on the shares with a target price of 1,040p. The shares gained 7.5p to 817.5p.
Mid Caps British bingo hall and casino firm Rank Group (RNK) reported a 4% fall in pre-tax profits to 31.3 million pounds for the six months ended 31st December despite a 5% increase in revenues. The company blamed marketing layouts for a poor performance from its online gambling arm Blue Square Bet and higher operating costs for the underperformance from its bingo halls. The group also issued a profits warning, claiming that the recent heavy snow resulted in a substantial drop in customer visits to its venues and estimates this will translate into a 3 million pounds reduction in year-on-year revenue for 2013. The shares lost 2.5p to 150.4p. Pub operator Mitchells & Butlers (MAB) announced that like-for-like sales were down by 0.3% for the 17 weeks ended 26th January despite an improved festive period. The main catalyst for this downturn in performance was the challenging conditions thrust upon the company due to the heavy snow, with many customers opting to stay at home. This news comes after broker Panmure Gordon retained its "sell" stance on the firm with a 225p target price. The shares were up by by 37.7p at 333.7p. UK food producer Cranswick (CWK) revealed that total sales were up by 8% for the three months ended 30th January, an increase which was driven by a positive effect from the acquisition of Kingston Food, acquired on 29th June last year. In more positive news, the group confirmed that it has won a 30 million pounds deal to become Asda's main fresh pork supplier and has bought a site in Hull to meet this new surge in demand. The shares increased by 22p to 960p. Small Caps & AIM Cloud based software group Zoo Digital (ZOO) revealed that it has seen a significant contraction in its blue-ray production services pipeline due to the postponement of a large order for DVD's and Blue-ray titles. Subsequently ZOO now expects to report revenues in the region of $10.6 to 11 million dollars (6.7-7 million pounds), which falls short of expectations. In reaction, the firm has reduced staff to align costs with revenues, is currently working to diversify its revenue streams and is focusing on the licensing of workflow and productivity software. The shares plummeted by 3.75p to 11.75p. Diagnostic company Mediwatch (MDW) revealed a 5% decline in sales to 10.1 million pounds and a 42% plummet in pre-tax profits to 179,000 pounds for the year ending 31st October. The drop in revenues has come despite the group's expansion into new territories such as Western America, Canada and Asia. Furthermore, Management stressed that the company remains on the lookout for "appropriate" acquisitions as a means to returning it to growth in the short-term. The shares fell by 0.22p to 2.4p. Virgin Australia has moved a step closer to taking control of airline Skywest* (SKYW) after receiving approval from the Australian Competition and Consumer Commission (ACCC). The approval relates to a 98 million dollar (62 million pounds) bid for Skywest that was submitted back in October, equating at current prices to 22.5 cents (14.2p per share) a share. Virgin would like to complete the acquisition as it is consistent with its strategy of expanding regionally in Australia, enhancing its presence in the growing fly-in, fly-out market for miners in the west of the country. The shares inched up by 0.8p to 28.8p.
Servoca (SVCA), the outsourcing firm, reported a 11% decline in revenues to 42.5 million pounds, as gross profits fell by 10% to 12 million pounds for the year ended 30th September 2012. Divisionally, revenues from the group's healthcare sector fell by over 6 million pounds due to a severe cut back in spending from the NHS. ON a brighter note Servoca said that its education recruitment business is set for a substantial improvement in profitability as a result of the foundations it has established this year. The shares lost 0.29p to 3.33p. Enegi Oil (ENEG) has agreed to farm out 50% of Block 3/23 in the UK North Sea to Azimuth, the oil and gas exploration firm. The block in question was only acquired by Enegi 3 months ago and contains the Malvolio prospect and other smaller potential opportunities. In return for the 50% interest in the block Azimuth will provide all the geological, geophysical and reservoir work to assess the hydrocarbon potential of the area within the first 12 months of the agreement. The shares jumped by 0.62p to 11p. Peru-based mineral exploration firm Mariana Resources (MARL) has been granted a 90 day extension to assess the potential of the Condor de porphyry gold-silver-copper project in Peru. The extension could be a pre-cursor to a potential earn-in deal with Condor Resources that could see Mariana eventually acquire 51% of the project. Separately, the firm announced that it is undergoing a strategic review of its projects in the Santa Cruz region of Argentina with a view to asset sales or joint-ventures. The shares increased by 0.25p to 4.5p. * Skywest is a corporate client of Rivington Street Holdings, the ultimate owner of UK-Analyst. | 
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