Market Report: Amec slumps amid fears about growth
Thursday 14 February 2013
A sense of gloom has spread across the City, and engineer Amec did nothing to lift the mood with comments that were less than enthusiastic about the outlook for the company.
Full-year results weren't bad at all – the figures were in line with expectations. But Canaccord Genuity called its prospects "tepid", and Amec's prediction of low-mid single-digit growth in 2013 disappointed the market. Canaccord gave the stock a hold with a price target of 1,215p. Amec's share price responded by slumping to the bottom of the benchmark index and lost 82p to 1,042p – pushed down further by some profit-taking.
Canaccord's team was also left disappointed there was no sign of a £200m-plus buyback, to extend the recently completed £400m share buyback. Some investors might have felt compensated by the 20 per cent increase in the full-year dividend but generally the downbeat outlook, particularly for its oil services arm, pushed punters out the door.
The disappointment for Amec shareholders was echoed across the FTSE 100 and 250 indices as very weak European GDP data sent investors running scared.The benchmark index fell back 31.75 points to 6,327.36 and the mid-tier one lost 102.52 points to 13,500.47.
Angus Campbell at Capital Spreads said: "A reality check was given to investors after a load of dreadful GDP figures was released across Europe. This was enough to get anyone slightly nervous and press the sell button to bank some profit following the impressive gains."
Traders were also feeling slightly jealous of two mega-deals in the US – the American Airlines and US Airways merger, and Berkshire Hathaway's takeover of ketchup maker Heinz.
London is desperate for a deal, and traders stepped up their gossip for Kazakh miner Eurasian Natural Resources Corporation. Reports last month suggested that the group had turned down a bid from Alijan Ibragimov, one of its three founders. But traders persisted in repeating rumours that the group's largest investor and fellow Kazakh miner Kazakhmys, down 15p to 749p, could be thinking of bidding, or that commodities giant Glencore could even be taking a look. It might be all fantasy M&A but experts believe a share placing at the very least, could be on the cards. ENRC shares edged down 3.1p to 406.5p after strong gains earlier this week.
City scribblers did their best to come up with St Valentine's Day-related notes but Investec's James Hollins' verdict on Whitbread was distinctly unromantic. He referenced 1970s pop group 10cc's "I'm Not In Love", and evidently finds Whitbread unattractive. He rates the hotel-to-coffee brand, which uses comedian Lenny Henry to advertise its cheap Premier Inn hotel rooms, a sell – mainly because of its low free cash flow, falling long-term hotel returns and minor international hotel growth opportunities. He thinks the shares are trading at "premium multiples" but raises his target from 1,650p to 2,000p. The shares added 7p to 2,640p.
Cruise operator Carnival said costs for repairs and disruptions caused by a fire on board its Carnival Triumph liner would hit its first-half earnings, and the shares were adrift 75p to 2,500p.
Outsourcer Capita's £65m purchase of Northgate Information Solutions to boost its tech know-how didn't boost its shares price. News of the deal accompanied an 11p hit on the shares, which closed at 820p.
Shop watchers at HSBC reckon buying things from your mobile phone is such a big deal that the only retailers worth investing in are the ones with decent websites. But it is not too late to take advantage of the online spending spree. HSBC's analysts said start buying shares in retailers Next, Asos and N Brown because of their "high online revenue exposure and low sensitivity to bricks and mortar". They rate Next as "overweight", up from "neutral", and lifted the share-price target to 4,965p. Their research predicts two-thirds of our clothes and shoes will be bought online by 2020, with mobile phone shopping or "m-commerce" the key driver of growth.
Next shares rose 50p to 4,182p and AIM-listed online fashion retailer Asos sashayed up 42p to 2,778p.
Plus-size catalogue clothing outfit N Brown, who recently hired Angela Spindler as chief executive, put on 2.6p to 397.9p.
Avocet Mining downgraded the mineral reserve at its Inata gold mine in Burkina Faso and the shares slumped 26.5p to 25p.
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