Market Report: Weir Group proves resilient as profit guidance stays intact

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Investors heaved a sigh of relief as embattled Weir Group stuck to its annual profit guidance and announced another raft of job cuts.

The Glasgow-based company’s third-quarter trading statement reflected another few months fraught with anxiety for the valve and pump maker.

Order input fell 29% from the same period last year, with a hefty 58% drop from the struggling oil business.

Its North American oil and gas division bore the brunt of the cost-cutting as WTI crude prices dropped below $50 a barrel, meaning weaker demand for its parts.

Another 400 job cuts reassured investors that it will be able to cope with the downturn, saving it an extra £25 million.

The shares jumped 57.5p or 5.3% to 1132p, a rare rise for the stock which has almost halved this year to a five-year low.

Russ Mould, investment director at AJ Bell, said: “Some investors may be surprised to see Weir rise by more than 5% at the market opening after a weak set of order intake numbers for the third quarter, but the shares have already fallen by more than 40% this year so there is a lot of bad news already reflected in the price.”

It was a similar story for oil services firm Hunting, which warned that annual profits from continuing operations are likely to crash by 90%. The shares slipped 9.3p to 350.4p.

London’s stocks failed to pick up where their New York counterparts left off, edging down 5.29 points to 6356.51.

Direct Line was high up on the blue-chip leaderboard, accelerating 4.5p or 1.2% to 396p after Britain’s largest car insurer said it was on course to hit its targets for the year, having slashed costs by 7% so far this year.

The shares have raced 37% higher since January.


Traders took a punt on William Hill, which rose 6.7p to 323.8p as Barclays upgraded the bookie to overweight and suggested its shares could be £1 more expensive in 12 months’ time.

The housebuilders, which have been this year’s big winners, shrugging off stock market woes, slumped after downgrades from Liberum Capital.

Analyst Charlie Campbell said: “We believe the largest housebuilders’ valuations are too optimistic to withstand the gross margin pressure that we expect in the coming years.”

Taylor Wimpey, the Footsie’s best-performer this year with a 46% leap, retreated 4.83p to 193.37p after a downgrade to Sell.

The same treatment also hit Persimmon, 35p off at 1933p, and Barratt Developments, down 16.5p at 593.5p.

Over on the junior market, the restart of mining at its 75%-owned tantalum mine in Namibia boosted Kennedy Ventures, run by former England Cricket Board chairman Giles Clarke, by 1.5p to 7.5p — a 25% bounce.

Filing new patents covering its cholesterol-reduction product gave shares in life sciences minnow OptiBiotix a 4.25p booster to 61p.

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November 3, 2015 |
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