News & Tips: International Consolidated Airlines, British American Tobacco, Direct Line Insurance, Capita Group, Royal Bank of Scotland, Coal of Africa, Sound Oil & more

Equities picked up over the pond in late trading yesterday after soothing words from Ben Bernanke, and this has fed through into a positive start in Europe this morning, which The Trader Dominic Picarda is backing to continue.


British Airways and Iberia owner International Consolidated Airlines (IAG) has reported a small operating loss of €23m for 2012 after taking a hit for restructuring costs at Iberia. British Airways itself made an operating profit of €347m and group revenues for the year rose by almost 11 per cent to €18.1bn. Our recommendation is under review.

Direct Line Insurance Group’s (DLG) first annual results as a listed company showed a 9 per cent improvement in operating profit with all five of its divisions turning a profit in the year. The company says it is on track to achieve £100m of cost savings by 2014, but does caution about the competitiveness of the UK motor insurance market and potential threats from legal reforms. We maintain our sell rating.

Another sell recommendation, outsourcing giant Capita (CPI) accompanied results today with news of a two year extension to a £30m a year training contract with the civil service. Results showed a return to marginal organic growth.

Faroe Petroleum (FPM) has acquired a 25 per cent interest in the Pil prospect in the Norwegian Sea and a 50 per cent stake in the Lowlander discovery in the North Sea. Buy.

British American Tobacco (BATS) reported a 1.6 per cent contraction in volumes after industry-wide falls in some more mature markets but its four core brands grew their volumes by 3 per cent with Lucky Strike the clear winner with an 11 per cent rise in volumes. Currency movements hampered reported revenues, which dipped by 1 per cent but improved margins helped to drive operating profits 15 per cent higher to £5.4bn. We keep our buy.

Engineering specialist Ricardo (RCDO) has enjoyed a strong performance, boosted in the latter part of 2012 by the acquisition of AEA. Half year results to 31 December produced revenues of £100.3m, up from £92.2m and profits of £7.3m, up 16 per cent from the previous year. Buy.

Kurdistan-focused oil business Genel Energy (GENL) says it produced 44,500 barrels of oil per day (bopd) during 2012 and its current net production capacity has grown to 80,000 bopd. The company is also active in exploration across various jurisdictions in Africa. Full year results for 2012 showed revenues of $333.4m and profits of $75.9m. We keep our buy rating.

Hedge fund giant Man Group (EMG) has issued results which illustrate the tough year the company has suffered with funds under management of $57bn, lower than the same time last year. Redemptions over the year topped $20bn and were not offset by new sales or investment performance. Meanwhile the company has taken a further $746m hit from goodwill impairment regarding the GLG acquisition. We keep our sell recommendation.

Broadcast equipment specialist Vitec (VTC) saw revenues dip marginally during 2012 but profits improved significantly as the company enjoyed improved margins. Further action is planned in 2013 to tighten up its cost base. Buy.


Royal Bank of Scotland (RBS) has booked a stonking £5.17bn loss for 2012, boosted by a further £450m set aside for Payment Protection Insurance claims, which makes RBS’ total pot £2.2bn. The company was also hit during the year by charges relating to the Libor fixing scandal. Meanwhile, management has confirmed plans for a partial flotation of the Citizens Bank in the US within the next two years.

Severfield Rowen (SFR) has announced plans to raise £47.9m gross through a rights issue to repair its damaged balance sheet.


Coal of Africa (CZA) says its output will be hit after a rail accident closed down a key freight rail route in Mozambique.

Sound Oil (SOU) is to carry out an asset swap with Compagnia Generale Idrocarburi regarding four licences they previously held joint share in. Both companies will take full control of two licences each.


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