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Today’s market overview

The relief over the avoidance of default in the US has been tempered somewhat by the fact that the problem has been merely kicked down the road a little, and not very far at that, hence the small sell off in equities this morning which suggests a resolution was priced in. The Trader Dominic Picarda still feels there are more gains to come as long as QE remains in place.

IC TIP UPDATES:

Cairn Energy (CNE) has confirmed that its first well in the frontier programme offshore Morocco will begin drilling shortly and will drill five wells in 12 months. Meanwhile a decision will be taken soon on whether to have another crack at Greenland through a joint venture. The company had $1.4bn in the bank at the end of September. Buy.

Sell recommendation. SABMiller (SAB) reports strong trading in Africa and good progress in Latin America and Asia-Pacific but tougher conditions in Europe and North America due to the weak consumer environment, although there was a marginal improvement over the second quarter. Total beverage volumes grew by 2 per cent in the opening six months of the year.

Mothercare (MTC) continues to grapple with weak UK sales, down 7.5 per cent in the first half or 1.4 per cent on a like for like basis. The company is still rationalising operations in the UK, shutting five loss making stores in the second quarter, in favour of faster growth overseas markets which returned 13.3 per cent growth in the first half. The Direct In Home business in the UK is also picking up from a relatively low base with first half sales up nearly 12 per cent. We maintain our buy rating.

BSkyB (BSY) enjoyed strong revenue growth in the three months to September, up by 7 per cent to £1.84bn but increased investment in the business plus higher costs from its flagship football contract meant cash profits were flat at £392m. The company is making progress with its ‘triple play’ strategy and added 110,000 new broadband customers in the quarter as well as 800,000 new paid-for subscription products, up 50 per cent on last year. We keep our buy recommendation.

Half year results from wholesaler Booker (BOK) showed a 2.3 per cent increase in like for like sales, which rose to 5 per cent when tobacco sales were stripped out. Total sales grew by 16.5 per cent to £2.2bn and pre-tax profit by 17 per cent to £58.1m. Buy.

Dechra Pharmaceuticals (DPH) says trading in the first quarter to September was in line with expectations with group revenues rising by 5 per cent. This was held back by problems with the phasing of export sales and a supply issue in the US. We keep our buy recommendation.

Simon Thompson recommendation. Polo Resources (POL) has announced the departure of non-executive co-chairman and founder director Stephen Dattels. Executive co-chairman Michael Tang will take over the full role.

Speedy Hire (SDY) says trading has been ‘satisfactory’ in the first half even though the UK and Irish markets for its tools and construction equipment hire remain relatively quiet. Overall revenue fell by 0.1 per cent in the first half but the second quarter showed an improvement on the first, recording 0.4 per cent growth. We maintain our buy recommendation.

Mobile payments specialist Monitise (MONI) has taken full ownership of its Asia Pacific joint venture after swapping First Eastern Mobile Investments’ 50 per cent stake for 20m shares, worth £11.25m. Buy.

KEY STORIES:

Drinks giant Diageo (DGE) posted a 3.1 per cent rise in organic sales in the three months to September after a 0.6 per cent rise in volumes. Strong performance in the US, up by 5.1 per cent, and Latin America and the Caribbean, up 10.9 per cent, outweighed weaker showings in Europe and Asia, down 1.1 per cent and up just 0.6 per cent respectively.

Cable & Wireless Communications (CWC) has announced that ex-British Gas managing director Phil Bentley will succeed Tony Rice as chief executive on 1 January 2014.

Poor trading at Rank Group (RNK), which posted a 7 per cent decline in like for like revenues in the 15 weeks to 13 October has prompted cost cutting measures and means the company expects half year results to come in ‘materially’ below expectations and full year results to also be affected.

Troubled directories business Hibu (HIBU) has announced that the first phase of its restructuring, which involved lengthy negotiations with its lenders, is over and this means chief restructuring officer Simon Freakley is leaving to be replaced by an operational restructuring officer, David Eckert. Meanwhile the chairman. Bob Wigley, and chief executive, Mike Pocock, have announced their intention to step down when the restructuring process is completed in early 2014.

Travis Perkins (TPK) continues to benefit from improving trading conditions with like for like sales up by 6.3 per cent in the third quarter, which leaves the company on track to meet its target of eps of around 100p for the full year.

Interserve (IRV) has been awarded a five year facilities management contract with the BBC worth £150m with the potential to extend it for a further four years.

OTHER COMPANY NEWS:

Distributor Bunzl (BNZL) has grown revenues by 12 per cent in the period since June with organic growth up by 2 per cent. The company has also acquired Pro Epta, a distributor of catering equipment in Mexico.

Soft drinks maker Britvic (BVIC) enjoyed the hot summer weather which helped to boost sales in July, contributing to a full year uplift in revenues of 12.8 per cent. The company has also managed to bounce back from the recall of its Fruit Shoot bottles and has restored sales of this brand to previous levels.

Retirement products provider Just Retirement, which specialises in annuities and equity release lifetime mortgages, has announced its intention to float on the Main Market in London. It is looking to sell £300m worth of new shares and other shares on behalf of existing shareholders and management.

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