News Column

UK WINNERS & LOSERS: Serco Derailed By Loss Of Docklands Franchise

July 4, 2014

James Kemp



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

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FTSE 100 - WINNERS

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EasyJet, up 2.5%, and International Consolidated Airlines, up 1.4%. The airline companies are the two biggest winners in the blue-chip index after easyJet, Ryanair Holdings and Aer Lingus Group all announced that passenger numbers continued to rise in June. EasyJet said it flew 6.1 million passengers in June, up 10.1% on the 5.5 million passengers flown in June last year. Load factor also rose during the month, rising to 92.0% from 89.9% in the comparable month. On a rolling 12 month basis, the airline said passenger numbers to June 2014 were up 5.4% to 63.4 million, from 60.2 million recorded in June last year. Load factor for the 12-month period was also up, coming in at 90.1% from 89.2% in June 2013.



BT Group, up 1%. The company has said that the trustee of the BT Pension Scheme entered into longevity insurance and reinsurance arrangements to protect the scheme against costs associated with potential increases in life expectancy. The arrangements will provide long-term protection and income to the scheme should members live longer than currently expected. The trustee has set up a wholly owned insurance company, and the scheme has transferred longevity risk to this insurer, who has in turn re-insured the risk with The Prudential Insurance Co of America, a subsidiary of Prudential Finance Inc.

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FTSE 100 - LOSERS

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Sports Direct International, down 1%. The UK retailer's shares have given back some of the strong gains posted on Thursday, and is currently the biggest faller in the blue-chip index. Sports Direct closed up 5.6% on Thursday after investment bank Jefferies said that it expects the company's full-year results on July 17 to detail strong top-line growth, and healthy underlying pretax earnings.



GlaxoSmithKline, down 0.5%. The pharmaceutical company is among the heaviest fallers in the blue-chip index, even though it said, alongside Theravance Inc, that the Japanese Ministry of Health, Labour and Welfare has approved its Anoro Ellipta treatment for chronic obstructive pulmonary diseases. Under the terms of their 2002 agreement Theravance will pay a USD10 million milestone payment to Glaxo following the approval.

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FTSE 250 - WINNERS

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AVEVA Group, up 3.1%. SociÉtÉ GÉnÉrale has initiated AVEVA with a Buy recommendation and 2,650 pence price target. SocGen believes that the demand outlook in the company's marine and nuclear sectors is improving and expects this to help AVEVA generate double-digit organic growth over the next three years. It also sees long-term growth opportunities in the company's enterprise solutions division - primarily from its data management software AVEVA NET - and assigns a value of 300 pence to 400p to this segment, which it believes is not currently priced in. Additionally, SocGen sees AVEVA as a potentially attractive acquisition candidate.



William Hill, up 1.8%. The bookmaker has appointed James Henderson as its new chief executive officer to drive the business both internationally and online, replacing Ralph Topping, who is stepping down at the end of July after more than four decades at the company. Henderson, who has been with the company for 29 years after starting out at the company as a trainee manager, is currently William Hill's group director of operations, overseeing the UK retail business, online, and William Hill in Australia and the US. William Hill said it plans to drive the business forward online and abroad, having established a good presence in Australia, the US and continental Europe.



St Modwen Properties, up 1.7%. Liberum Capital has increased its target price on St Modwen to 443 pence from 432p, saying that the 6% net asset value growth recorded in the company's first half is a prelude to accelerating growth. The 6% net asset value growth reported by the company in the six months to end-May is broadly in line with the rate of growth in the 2013 full year, says Liberum analyst Jon Stewart. This, however, is expected to accelerate over the next 12 months, with forecasts showing 60% NAV growth between November 2013 and 2016 estimates, underpinned by a diverse range of factors, the analyst adds.



Hiscox, up 1.2%. Berenberg has raised its rating on Hiscox to Hold From Sell as it believes the insurance group will pay a special dividend at the end of the year. "We continue to view the shares as fully valued, but believe the company maintains an excess capital position beyond its needs which will see a further special dividend distribution of 35.0p per share," Berenberg said.

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FTSE 250 - LOSERS

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Serco Group, down 0.8%. The support services company has been unsuccessful in its rebid for the franchise to manage, operate and maintain the Docklands Light Railway in London. It said it has been informed by Transport for London that it was unsuccessful in its rebid after operating the DLR since 1997 under two franchises. The current franchise, which was due to end on September 14, has been extended to December 7, at which point the service will transfer to the new franchisee, French transport group Kelois Amey Docklands. Serco said that the DLR contract generated revenue of approximately GBP90 million, or 2% of the group's overall revenues in 2013, at a margin that was significantly below the average level the group achieves on its contracts.

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AIM ALL-SHARE - WINNERS

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North River Resources, up 21%. The mineral exploration and development company said it has signed a USD12 million project equity agreement with Greenstone Resources, providing it with the equity capital to re-open the Namib mine in Namibia, and bring the site back into production. It said the funding packaging will allow it to restart the company's Namib lead and zinc project, and that site preparation and advanced construction planning will begin immediately.



Formation Group, up 19%. The company said that the total balance of GBP18.4 million owed related to the Aldgate East Property Development has been received by JV Finance Ventures Ltd, in which Formation holds a 36.88% interest.Of the payment received by JV Finance, Formation expects an entitlement of GBP6.8 million. To date it has received GBP1.6 million. It has used GBP590,000 of this to fund the purchase of a property at 161 Iverson Road in April. The remaining funds will be used to fund future purchases of development properties, or may be used as working capital.



Chariot Oil & Gas, up 5.7%. The oil and gas exploration company's shares have jumped after it said it had signed a farm-out agreement with Australian exploration and production company, Woodside Petroleum Ltd, for the Rabat Deep prospect offshore Morocco. It said under the terms of the farm-out agreement, Woodside will acquire a 25% working interest in the Rabat Deep Offshore permits I-VI in Morocco, in return for paying 100% of Chariot's 3D seismic data costs incurred in Rabat Deep, back costs on the block and a carry on additional data acquisition. There is also an option for Woodside to fund the costs of an exploration well to an agreed cap for a further 25% equity interest and operatorship.



Noricum Gold, up 4.9%. The gold exploration and development company said it has continued to be pleased with the results of its soil-sampling programme at the Schonberg precious metals projects in south-central Australia. The company is nearing the end of the soil-sampling programme, having taken 1,811 samples from four target areas across the licence area. Multiple gold and copper in soil anomalies have been delineated, and will continue to be refined through coming work, the company said.

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Source: Alliance News


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