News Column

UK WINNERS & LOSERS: BT Up, TalkTalk Down As OFCOM Drops Complaint

June 19, 2014

James Kemp



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

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FTSE 100 - WINNERS

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Rolls-Royce Holdings, up 5.6%. The maker of aircraft and marine engines has moved to appease investors unhappy with the company's recent outlook downgrade, saying it will return cash to shareholders through a GBP1 billion share buyback once the planned sale of its energy gas turbine and compressor business to Siemens AG goes through. It said the cash return reflects its strong balance sheet and because it isn't planning any material acquisitions.



BT Group, up 1.6%. UK telecoms regulator OFCOM has said that it has provisionally decided to drop FTSE 250-listedTalkTalk Telecom Group's complaint that BT had failed to maintain a sufficient margin between its wholesale and retail prices, as there is "no grounds for action". At the same time, OFCOM proposed new rules for BT Group PLC, restricting the way it charges operators for wholesale access to its superfast broadband network. Under the new proposals, BT is required to maintain a "sufficient" margin between the rate it charges for wholesale access to its network and the price at which it retails its own superfast broadband services, to allow other competing operators to match its price and make a profit.

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FTSE 100 - LOSERS

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Standard Chartered, down 0.3%, and Vodafone Group, down 0.3%. The two companies are among just a handful of blue-chip fallers Thursday, on the back of negative price target and broker recommendation revisions. Bank of America Merrill Lynch has downgraded Vodafone to Neutral from Buy, while Nomura has lowered Standard Chartered's price target to 1,580 pence from 1,610p.



Lloyds Banking Group, down 0.2%. The bank is set to value TSB BankingGroup PLC, the new bank it must divest to meet European conditions of its state bailout in 2009, at GBP1.3 billion when it prices the offer on Thursday, the Financial Times reported Wednesday, citing people familiar with the deal. The FT said that the order book was "well covered" at the midpoint of a 250p-270p per share price range. Lloyds is planning an initial sale of between 25% and 27.5% of TSB.

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FTSE 250 - WINNERS

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Xaar, up 5%. The digital inkjet printing technology company's shares have jumped following recent share price weakness. The company has been among the biggest fallers in the mid-cap index for the last two days after it warned on Wednesday that its revenue will fall in 2014 as it struggled to quickly expand the takeup of its technology. Xaar had said gross margins are expected to decline as it faces increased competition. Despite moving firmly higher Thursday, Xaar's shares are still down around 30% since their closing level on Tuesday, and approximately 40% since the end of May.



Man Group, up 4.8%. The company said it has agreed to acquire Numeric Holdings LLC, a Boston quantitative equity manager that had USD14.7 billion in funds under management at the end of May, for up to USD494.0 million, as it looks to diversify its flagship AHL fund and expand in North America. Man Group said it will pay an initial USD219.0 million in cash for Numeric, while up to USD275.0 million in either cash or shares could be paid to Numeric management and employees following the fifth year after the acquisition's completion, which is expected in September, depending on the business's run-rate profitability. Numeric is being acquired debt-free with USD3.0 million of excess net assets. It generated USD47.0 million in earnings before interest, taxes, depreciation and amortization in 2013.



Micro Focus International, up 4.2%. The software company has increased its total dividend for the year to end-April, as it saw pretax profit decline slightly despite revenue growth, hampered by higher operating costs. It proposed a total dividend per share of 44.0 cents, up 10% from 40.0 cents in the previous year. The company reiterated that its core objective is to deliver long-term consist returns to shareholders of at least 15% to 20% per year. Meanwhile, headline sales and earnings before interest, taxes, depreciation, and amortisation were slightly ahead of consensus forecasts, "with the anticipated uptick in second half licenses coming through," said Julian Yates, an analyst at Investec. Sales of USD433.1 million beat the consensus estimate of USD426 million, and Investec's USD425 million estimate, said Yates. EBITDA of USD192 million came in ahead of Investec's USD188.9 million and the consensus expectation of USD190 million, he added. Investec has upgraded Micro Focus to Buy from Hold, increasing its price target to 950p from 850p.



Go-Ahead Group, up 3.5%. The UK bus and rail operator raised its guidance for its current financial year, after its rail unit performed better than expected in the fiscal fourth quarter, and said it is expecting strong growth rates to continue in its next year. "As a result of lower energy costs and better than expected operational performance in the fourth quarter, we now expect second half rail operating profit to be ahead of previous expectations, with second half profits slightly lower than first half," the company said in a statement. While second half profit is expected to be slightly lower that the first half, Go-Ahead says it now expects it to be ahead of previous expectations.

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FTSE 250 - LOSERS

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TalkTalk Telecom Group, down 0.8%. The company is among the biggest mid-cap fallers after OFCOM said that it has provisionally decided to drop TalkTalk's complaint about FTSE 100-listed BT Group.

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AIM ALL-SHARE - WINNERS

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Venn Life Sciences Holdings, up 7.2%. The company said its innovation division Innovenn had secured a patent from the European Patent Office for its anti-acne complex. The complex reduces bacteria, inflammation, excess oil and blocked pores, Venn said. The patent will allow it to develop a new commercial anti-acne brand later in the year. Additionally, the company began commercial discussions on its human skin testing platform Labskin, and it expects to see the first revenues from the product later in the year.



Velocys, up 5.9%. The company's shares have risen sharply after it emerged late Wednesday that Russian billionaire Roman Abramovich had raised his stake in the business to 7.71% through his Ervington Investments vehicle and after Canaccord initiated coverage of the stock with a "Speculative Buy" and 400 pence price target. Abramovich's vehicle previously had nearly 7.8 million shares in the gas-to-liquids technology business, but now has just over 9.0 million shares, according to a filing to the London Stock Exchange late Wednesday.

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AIM ALL-SHARE - LOSERS

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Publishing Technology, off 40%. The software and services company announced that its results for 2014 would be below market expectations, and broadly in line with its results for 2013. It said its first half would likely show a loss due to additional product development expenses and deferred revenue, as it attempts to rectify issues with some of its current contracts.



Premier African Minerals, down 18%. The company's shares have fallen after it said it was going to have to repeat metallurgical studies on its RHA tungsten project in Zimbabwe, delaying a mining study update for the site. It said it had completed the initial mineralogical and metallurgical studies on which the RHA mining study update is being based. The mineralogical study indicated a high grade concentration and anticipated recoveries of about 88%, it said, but the metallurgical study sample showed recoveries of about 60%, below its expectations. "Additional metallurgical test work is now being undertaken, using new underground material samples, so as to enable optimisation of the tungsten crushing and milling processes," the company said in a statement. Premier said it now expects to complete the updated mining study for the site in August as long as it completes the additional metallurgical work on time.

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Source: Alliance News


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