News Column

UK WINNERS & LOSERS: Airline Stocks Nosedive On Air France-KLM Warning

July 8, 2014

James Kemp



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

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FTSE 100 - WINNERS

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Rio Tinto, up 0.9%, and Glencore, up 0.8%. The mining companies are up after Barclays upgraded its sector view to positive, from negative, saying that it believes "a number of factors are coming together that could potentially deliver a secular shift in returns from the mining sector." In the near-term, the Chinese promise of 7.5% GDP growth for 2014 implies further stimuli and a strong recovery in the second half, while US GDP growth also is expected to be strong in the second half of the year. Further ahead, the bank believes that a European recovery is "in the offing", and, while the impact of India's Prime Minister Modi is still uncertain, it is unlikely to be negative, given his ambitions to replicate China's infrastructure-led growth model. Individually, Barclays has upgraded Rio Tinto to Overweight, from Equal Weight, increasing its price target to 3,600 pence from 3,350p, while Morgan Stanley has raised its price target on Rio to 3,540 pence from 3430p.

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FTSE 100 - LOSERS

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International Consolidated Airlines Group, down 4.8%, and easyJet, down 2.6%. The airlines have fallen after Air France-KLM warned that overcapacity on some long-haul routes hitting yields, echoing a similar warning by Lufthansa last month. The Franco-Dutch airline reported a 2.9% improvement in traffic in June, with a 1.8% increase in capacity, but it has lowered its earnings before interest, tax, depreciation and amortisation target for the year as a whole as it warned about overcapacity affecting routes to North America and Asia.



Persimmon, down 2.1%, and Barratt Developments, down 1.8%. The housebuilders are underperforming for a second day in a row. On Monday a relatively positive update from Taylor Wimpey sent the sector lower, and on Tuesday a strong update from Bovis Homes has done the same. Bovis has outperformed the booming UK housing market in the first-half of the year, improving its average selling price by 11%, compared to underlying UK house prices which have gone up by 4% over the same period. Even so, the market has become used to constant forecast upgrades from the housebuilders in recent months and the most recent updates have failed to boost sector sentiment any further.



Marks & Spencer Group, down 1.6%. The retailer has reported a hefty drop in online sales for the first quarter of its financial year, which the retailer blamed on the transition to its new website platform and a cutback in promotions both online and in store. M&S reported an 8.1% fall in sales of its online business, M&S.com, for the 13 weeks to June 28. M&S management failed to give a clear reason for the sharp decline, telling journalists that the "settling in" of the new website has held back "re-registration and conversion rates". It said that fewer promotions online and in its stores also hit sales. Total sales across the group rose 2.3% in the quarter, while UK sales were up 2%, and on a like-for-like basis were up 0.3%, driven by continued strong food sales. The retailer said it remained cautious about the outlook for the business due to competition and promotional pricing in the UK retail sector, although it has seen some improvement in consumer confidence.

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FTSE 250 - WINNERS

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3i Infrastructure, up 0.4%. The company said its first-quarter portfolio income, or the dividends and interest it makes from its portfolio assets, increased by 8.9%, helped in part by a 29% increase in the value of shares in portfolio holding Adani Power Ltd.3i Infrastructure said that portfolio income totalled GBP19.5 millionbetween April 1 and June 30, compared with GBP17.9 million in the corresponding quarter a year earlier. During the first-quarter the company sold part of its stake in Indian thermal-power generating company Adani Power, with GBP7.4 million in distributions received by the 3i India Infrastructure Fund.

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FTSE 250 - LOSERS

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SIG, down 4.8%. The building products distributor is a big faller, even though it said it is expecting to report a strong rise in pretax profit in the first half of the year, as strong sales growth in the UK and Ireland helped offset a hit on revenue earned elsewhere due to the strength of sterling. The company warned that sales growth moderated in the last two months of the half, but kept its guidance for "good progress" for the year as a whole despite currency movements going against it. SIG said it expects to report underlying pretax profit of at least GBP40 million for the first six months of 2014, up from GBP33.6 million last year excluding the sale of its former German roofing and Miller Pattison businesses, as sales from continuing operations rose by about 6.5% to about GBP1.29 billion. It said its sales performance moderated in May and June, with like-for-like sales up 2.9% for both months combined. It blamed the stronger comparative figures for those months. It said like-for-like sales in the whole first half were up 11.5% in the UK & Ireland, 3.2% in mainland Europe, 2.1% in France and 5.1% in Germany.

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AIM ALL-SHARE - WINNERS

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Dods Group, up 18%. The information, events and publishing company has seen its shares rise after it reported a sharply narrowed loss, higher revenue, and said it would continue transforming the publishing and events operations to push up profitability. It reported a net loss of GBP1.3 million for the year to end-March, compared with a loss of GBP10.6 million in the 15 months to March 31, 2013. Revenue rose to GBP19.8 million, from GBP18.8 million for the 15 month period, and it cut administrative expenses by more than half to GBP7.3 million. Its like-for-like sales rose by 17%, or GBP2.5 million, while its gross profit margin increased to 29%, from 25%.



London Mining, up 14%. Barclays has upgraded the company to Equal Weight from Underweight, increasing its price target to 80 pence from 75p, saying that it believes the company's balance sheet stress and near-term iron ore price issues are now in the past.



Proteome Sciences, up 13%. Shares in the company have risen after it published a study along with King's College, London identifying proteins that could be used to predict the onset of Alzheimer's, a step towards developing a blood test for the disease. Proteome said that it was selecting commercial partners to combine these protein biomarkers in a blood test for the global market.



Leyshon Energy, up 12%. The energy asset company said its Pacific Asia Petroleum Ltd subsidiary has started a previously announced interim testing programme at the Zijinshan gas project in China, although it revealed that the initial programme will take longer and cost more than it had previously flagged. It said the contractor has been mobilised to the site and will start flow testing three zones in well ZJS7 shortly. The company said its partners have also committed to drilling well ZJS8 in the northern part of the licence area, the location of which will be decided after accounting for the results from the ZJS7 well.



Clontarf Energy, up 10%. The oil and gas exploration and development company, alongside Petrel Resources, said legal proceedings related to their Tano 2A exploration licence in Ghana have been temporarily adjourned for the second time in the last two weeks. It said the case has been adjourned until July 16 at the request of all parties, so that discussions can continue.



Urals Energy, up 7.8%. The company said Adler Impex SA has significantly increased its shareholding in the company after buying shares on July 3. Adler represents the interests of Roman Shvets, a Russian banker and industrialist with certain investments in the oil sector. The oil and gas exploration and production company said that Adler Impex now holds 112.6 million shares in Urals, a 44.59% stake from 25.08% previously. Shvets could not immediately comment on the decision but Urals said that Adler Impex remains supportive of Urals Energy's management and strategy.

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AIM ALL-SHARE - LOSERS

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Monitise, off 17%. The mobile banking and payments company has fallen sharply after warning that its shift to a subscription model meant revenue in its last financial year had come in below expectations and its loss for the year will be wider than the market expected. The company said its revenue in the year to end-June grew between 31% and 33%, below the 40% growth expected, due to a faster shift to its subscription model and the lower up-front revenue that entails. It said its loss before interest, tax, depreciation and amortisation will be between GBP32 million and GBP36 million, wider than a market consensus on Bloomberg for an Ebitda loss of GBP28 million. Revenue is expected to be between GBP95 million and GBP97 million.



Belgravium Technologies, down 10%. The company's shares are among the biggest fallers in the AIM All-Share index, as it reverses some of the strong gains posted Monday. Belgravium's shares jumped sharply on Monday after it said it had been approached by Trakm8 Holdings. Trakm8 Tuesday has confirmed that it has made a preliminary takeover approach to Belgravium.

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Source: Alliance News


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