News Column

UK WINNERS & LOSERS: Legal & General Leads On Confidence In Annuities

May 7, 2014

James Kemp



LONDON (Alliance News) - The following stocks are the leading risers and fallers within the main London indices midday Wednesday.

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FTSE 100 - WINNERS

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Legal & General Group, up 3.2%. The group said it expects to write more than enough bulk-purchase annuities to offset an expected decline in the individual annuities market in the wake of UK regulatory changes, and reported a 21% increase in quarterly net cash generation. It reported net cash generation increased to GBP301.0 million in the quarter to end-March from GBP249.0 million a year earlier. Operational cash generation increased to GBP297.0 million from GBP281.0 million. It said bulk purchase annuity premiums increased to GBP3.05 billion from GBP357.0 million, boosted by a GBP3.00 billion deal for the ICI Pension Fund announced in March. However, individual annuity sales fell by 40% to GBP244.0 million as people cancelled GBP15.0 million annuities taken out prior to changes made in the Budget.



EasyJet, up 2.5%. The low-cost airline said it flew more passengers and filled more of its planes in April compared with the previous year thanks to this year's late Easter, but its passenger numbers also grew strongly over the 12 months to the end of April. It said it flew nearly 5.8 million passengers in April, up from nearly 5.3 million a year earlier, while its load factor, a measure of how many seats it fills on its planes, rose to 89.8%, from 86.7%. Easter, a key trading period for airlines like easyJet as more people fly over holiday periods, fell in April this year and in March in 2013. However, easyJet also showed strong growth for the rolling 12 months to the end of April, which balances out factors like Easter. It flew 62.4 million passengers in the latest 12 month period, compared with 59.9 million in the previous 12 months. Its load factor was 89.7%, up from 89.1%.



G4S, up 1.9%. The security company said that it has performed in line with its plans during the first quarter of 2014, boosted by a series of contract wins. It said revenues were up 4.8% on the first quarter in 2013, with organic growth up 5.0%. During the first three months of the year, G4S said that it won new business contracts with annual revenues of more than GBP440 million, including retail and services customers in the US, retail customers in Brazil, port security consultancy in the Middle East, cash solutions contracts in the Netherlands and significant new business with the UK Government. Since then, the firm has been boosted by the UK governments positive assessment of its Corporate Renewal Plan - an integral part of the group's wider corporate transformation plan.



ITV, up 1.4%. The television broadcaster has agreed to acquire a controlling stake in Leftfield Entertainment Group for USD360 million. It said it acquired 80% of the US reality entertainment group from Founder and Chief Executive Brent Montgomery, in a deal that it expects to add to earnings from day one. It said that the deal has already gained regulatory approval, and that it makes ITV's US studios the largest unscripted independent producer in the US.



BAE Systems, up 1.3%. The defence, security and aerospace company said that, excluding the impact of foreign exchange rates, it has traded in line with expectations so far in 2014, while its UK business continues to benefit from long-term stable contracts in the maritime and military air sectors.



Royal Bank of Scotland Group, up 1%. The bank's shares have risen following some positive price target revisions. Nomura has increased its price target to 315.00 pence from 300.00p, while S&P Capital IQ has raised its target to 350.00p from 330.00p.



Vodafone, up 0.7%. The group has renewed its strategic global alliance with French telecommunications firm SFR. The renewed deal is for a further four years and will see the companies continue to provide fixed and mobile telecommunications services to multi-national customers in France as well as roaming services for consumers travelling in and from the country. The agreement reaffirms SFR as Vodafone's strategic partner in France and builds on the cooperation which has existed between the two companies since 2002. A significant number of Vodafone's multinational customers are either headquartered or have a satellite office in the country, making France an important enterprise market for the FTSE 100-listed firm, it said.

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FTSE 100 - LOSERS

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Experian, down 6.2%. The company reported an increase in full-year pretax profit profit, but said it faces a number of constraints on growth in the short-term. "In the short-term, we face a number of one-off headwinds, most notably a subdued trading environment in Brazil over the World Cup and the revenue impact of the changes we are driving in North American Consumer Services, which together will constrain growth in the first half," Don Robert, chief executive, said in a statement. The group also has appointed a new chief operating officer after Chris Callero decided to stand down at the company's annual general meeting in July.



WM Morrison Supermarkets, down 6.1%, J Sainsbury, down 2.3%, Tesco, down 0.9%. Reuters has reported that rising pressure on Britain's biggest supermarkets to lower prices in response to growing competition from discount chains has led to the lowest growth in the grocery market for 11 years. "A report by market researcher Kantar Worldpanel showed the UK grocery market continuing to polarise, with the big four - Tesco, Asda, Sainsbury's and Morrisons - being squeezed between discounters Aldi and Lidl and upmarket players such as Waitrose," Reuters said. Sainsbury's shares had jumped earlier after it reported higher pretax profit for its recent financial year, as the group's convenience stores and online offering continued to drive the group forward.



CRH, down 3.3%. The Irish building materials group has reported a 10% increase in European like-for-like sales in the first four months of the year, as economic conditions across the region continued to improve, but it said it has experienced problems in the US. Like-for-like sales during the period for its Americas operations were just 2% ahead of 2013 as many regions, particularly in the eastern half of the country, experienced very cold conditions which limited early season building activity for the second consecutive year. Looking ahead to the second half, the company said it expects earnings before interest, taxation, depreciation and amortisation to be somewhat ahead of 2013, when it amounted to EUR1.08 billion. Although Jefferies analyst is Sam Cullen is surprised by the decline in share price, he says that it may be attributable to this "fairly cautious guidance".



Rolls-Royce Holdings, down 1.4%. The engineering company has signed an agreement to sell its energy gas turbine and compressor business to German engineering firm Siemens AG in a deal worth GBP785 million in cash. The business being sold supplies aero-derivative gas turbines, compressor systems and related services to customers in the oil and gas and power generation sectors. Rolls-Royce said that on completion of the transaction it will receive a further GBP200 million for a 25-year licensing agreement, granting Siemens access to relevant Rolls-Royce aero-derivative technology for use in the 4 to 85 megawatt power output gas turbine range.



Barclays, down 1%. Both Citigroup and Deutsche Bank have lowered their price target for Barclays. Citigroup has cut its target to 315.00 pence from 345.00p, while Deutsche has cut it price target to 300.00p from 320.00p.



HSBC Holdings, down 0.8%. The bank reported a 20% drop in first-quarter pretax profit amidst a continuation of the bank's strategic efforts to cut costs and focus on businesses with good returns. It said first-quarter pretax profit fell to USD6.79 billion, from USD8.43 billion in the corresponding quarter a year earlier. Revenue, calculated as net operating income before loan impairment charges, fell to USD15.88 billion from USD18.42 billion. Operating expenses were reduced to USD8.85 billion from USD9.35 billion.

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FTSE 250 - LOSERS

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CSR, down 4.1%, Henderson Group, down 3.6%, Partnership Assurance, down 3.1%, Countrywide, down 3%, and AG Barr, down 2.7%. The companies are some the heaviest fallers in the mid-cap index after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payout.

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AIM ALL-SHARE - WINNERS

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Accsys Technologies, up 9.8%. The environmental science and technology company has reported strong growth in revenues and narrowed its losses in its recent financial year. It said its overall loss for the year to end-March was reduced as expected, due to higher revenue and improved profitability. Total revenue for the year increased by 78% to EUR33.5 million, up from EUR18.8 million the prior year, boosted by sales to Medite Europe Ltd for the manufacture of Tricoya and Accoya wood elements, which it said was driven by both existing and new customers.



Corero Network Security, up 9.1%. The company has announced the appointment of David Larson, previously chief technology officer for Hewlett-Packard Networking, to the role of CTO and vice president, product for Corero.

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AIM ALL-SHARE - LOSERS

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Petro Matad, off 28%. The oil exploration company said its 2D seismic studies in Mongolia have confirmed some oil prospects, but its shares have fallen as it said it continues to search for development partners in the region, leading it to focus on cash preservation. The company said it continues its ongoing farm-out process for interest in its blocks and, although it has met with a number of different companies, no agreements have been made and finalising a deal could take some time. As such, the company has set out a range of measures to preserve cash and maximise funds for operational activities in the hope that it can achieve a partner in the future. Petro Matad said its non-executive directors have foregone their usual fees and will receive certain payment in shares, whilst its executive directors and some other employees have agreed to trade a portion of their salary to participate in a share-award programme.



EKF Diagnostics Holdings, down 23%. The company has seen its shares plummet after it said reimbursement by Medicare for its recently acquired Selah Genomic's drug metabolism genetic biomarkers panel has been reduced for the states where Palmetto GBA is the J11 Medicare Administrative Contractor; North Carolina, South Carolina, West Virginia and Virginia.  Reimbursement by Medicare has been reduced to USD495 per sample from USD941. Despite this, the cut in reimbursement level has no impact on management expectations for EKF as a whole, the firm said.



Richland Resources, down 16%. The gemstone company said its production and grades improved in the first quarter, but its total sales fell and the effect of illegal mining activities continues to blight its Merelani tanzanite mine. It added that its average grade more than doubled during the period to 199 carats per tonne from 97 carats per tonne, but this rate remains low due to lack of high-quality production from its subsidiary TanzaniteOne Mining as a result of the illegal mining.



Alecto Minerals, down 10%. The gold mining company said its initial cyanide leach tests at Gourbassi East have shown the potential for low-cost recovery at the Kossanto gold Project in Mali. It said that seven samples from drilling at the Gourbassi East site taken in December 2013 have shown high gold recoveries from 60% to over 90% in both oxidised and primary sulphide-bearing mineralisation after cyanide leaching tests. Cyanide leaching is a low-cost metallurgical technique in which ore is converted to water soluble metal complexes to separate its low-grade gold content.

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Source: Alliance News


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