A busy day for announcements today and catching up from yesterday, Aberdeen Asset Management (ADN) had a trading update which showed the expected outflow of assets. This however was perhaps not as bad as feared and reflects their efforts to diversify into what they describe as solutions (alternative assets and hedge funds etc.) is now 43% of the business. They seem to accept that things will, unsurprisingly, remain tough for them given market volatility, their emerging markets exposure and performance issues, but they did flag cost cutting plans to offset the effects of these. Thus this one may be interesting as a contrarian play if you were bullish on the market recovering in the short term from here as it now trades on around 10x PE with an 8%+ yield, although the Scores tend to favour the likes of Jupiter Asset Management (JUP) & Schroders (SDRC) given their better trading.
Meanwhile yesterday RPS Group (RPS) flagged that it's full year results will be within the range of forecasts despite the big downturn, as expected, in their oil related businesses. They did however take a non cash write down on that side of the business, but more seriously they also saw a write off for bad debts of up to £7m which hit the shares hard yesterday. So again another one that is struggling against difficult market conditions, but again it might be worth a look again once the dust has settled given their efforts to diversify the business via on going acquisitions which is what they have tended to do over the years. Whether they can maintain their record of 15% dividend increases remains to be seen.
Today we had a trading update from Matchtec (MTEC) - which was a bit difficult to interpret because of last years Networkers acquisition and while some of the like for like numbers looked mixed year on year, they did say that they are trading in line with expectations. There also seemed to be an improvement in most lines against h2 last year so it seems like a steady improvement is on track as is the integration of the acquisition and a couple of former Networkers executives are due to leave later in the year as this process completes. They continue to look good value on around 10x with a 4.65% yield, but the shares themselves continue to lack momentum and it doesn't seem like there is enough in this announcement to get them going. So a strong hold, but without a catalyst for a re-rating in the short term continued patience will probably be required.
Paypoint (PAY) - also had a trading update today via a downbeat interim management statement. I say down beat as they are again flagging the effects of the mild winter on energy top ups going through their system, extra costs for their Parcel+ JV and the delay in and lower proceeds from their on line business disposal. So it seems like a year of consolidation for this one in terms of the business with earnings now forecast to be slightly down year on year. This has had a knock on effect on the share price, which continues to languish and is down again this morning on the back of this statement. Thus, despite appearing to be a quality business, they seem to be continuing to de-rate as they seem to be struggling to demonstrate growth in the short term. It may however be getting more interesting as on current forecasts for next year it is coming down to less than 13x (still not bargain basement) but with a growing 5%+ yield, but again patience will be required on this one and probably worth waiting to see if there are more downgrades again after this update.
Renishaw (RSW) - another Compound Income Scores portfolio stock reported half year results. These are also difficult interpret, but this time because of a boom that they experienced in the Far East last year. Consequently headline profits are down sharply, but adjusting for last years boom they say that underlying figures are, in the main, ahead on a like for like basis. The bottom line was that on the outlook they reiterated their profits guidance of £85 to £105m that they had set out back in October last year and that they remain confident about the outlook for this year and the future. I note however, that they left the interim dividend unchanged, although they did this last year before increasing the final. I guess they may do the same this year but forecasts are for only around 1.5% growth in the dividend on the back of earnings falling back so I guess it could also be flat at the full year too.
I have to admit I was pleasantly surprised that the result were OK and the outlook maintained as given their operational gearing and all the talk of economies slowing in China and elsewhere I feared that they might have come out with poor results and reduced guidance. The shares are nevertheless off this morning, having bounced ahead of the announcement as this appears to be another quality stock under going a de-rating which has thus far brought it down to a still not cheap 15 to 17x depending on which year you look at and a not too generous but reasonable yield of 2.7 to 2.9%. So again a quality hold for the longer term I would say, but given the rating and the possibility of an economic slowdown being in the offing, there may ultimately be better buying opportunities for this one along the way.
Finally SSE the energy utility business which is in the news today for finally cutting it's gas prices from March, also announced an IMS. The main point of interest in this was that they confirmed their intention to raise their dividend this year and beyond by at least the rise in RPI, which is nice but may not be that much this year given low inflation. It is quite good though on a starting yield of 6% and although the cover is pretty thin that is probably more acceptable on a utility business.
Phew that's it for today, off to prepare for a podcast with Justin Waite at Sharepickers tomorrow. I will try and put something up about the stock I'll be talking about and a link to the podcast tomorrow afternoon once it goes live, if I have time. Otherwise look out for a month end update on the CIS portfolio and the market timing indicators over the weekend or early next week.
Lots of results from my kind of stocks and too many for me to go into great detail. So look out for results and updates from the likes of Britvic (BVIC), Nichols (NICL) & Unilever (ULVR) in the food, drinks and personal care area. Britvic & Nichols have both made add on acquisitions which should enhance their growth prospects. There is also a small (5%) placing from Britvic to help fund their Brazilian deal and it looks the best value of these stocks on a mid teens PE compared to 20x+ for the other two.
Aberdeen Asset Management (ADN) have reported more fund outflows reflecting investor worries on emerging and far eastern markets and less favourable investing conditions generally. They do however flag their strong balance sheet and diversification efforts but the market doesn't seem to like it.
Meanwhile after my DIY efforts yesterday and my purchases from Screwfix which is owned by Kingfisher (KGF) I see their results seem OK with even France finally showing some signs of life. Bloomsbury Publishing (BMY) have also had a good start to the year in what is a quiet quarter for them any way. Finally SSE has reiterated their earnings expectations and promised dividend increases at least in line with RPI going forward from the current full year dividend which gives a yield of 5.5%.
That's all for now as I am preparing to do a piece with the ADVFN Podcaster Justin Waite at Sharepickers.com today. So I'll try and do a quick update later with what I'm covering and details of where you can listen to it if that is of interest to you.
Lots of updates and items of news relevant to stocks that I follow today so I'll try and keep it brief in the main.
· a good strategic fit with the Connect Group's existing core competencies in time sensitive specialist distribution;
· a business with a strong track record, well positioned for further growth, and able to build upon its leading position in a market with sustainable growth characteristics;
· in line with the Group's ambition over the medium term to derive at least 50 per cent. of profits from outside of newspaper and magazine wholesaling;
· adds value to the organic revenue growth opportunities for the Enlarged Group, in particular via provision of a national distribution network;
· the opportunity to achieve pre-tax cost synergies across the Enlarged Group of £2.0 million per annum within three years and the potential to generate revenue synergies from shared infrastructure;
· creates significant value for shareholders:
o EPS accretive in year 1 and substantially accretive by year 3
o Post tax ROIC above cost of capital in year 1 (9%)
· in addition, the strong cash generation of Tuffnells supports the Group's progressive dividend policy.
I would say it seems like a reasonable deal which moves them to 38% of profits from outside their news distribution business on a pro forma basis and well on the way to their goal of 50%, plus it adds onto their other recently announced distribution business. The rights issue may also help to make the balance sheet look more healthy (depending on the assets it brings versus the price paid) and provide more distributable reserves to help maintain their progressive dividend policy.
However on the dividend they are unusually paying it on the rights shares too and as a result adjusting the final payment due next year. They explain this as follows:
Connect paid dividends per Ordinary Share of 9.3 pence and 8.6 pence for the years ended 31 August 2013 and 31 August 2012, respectively. The proposed final dividend of 6.6 pence per Ordinary Share for the year ended 31 August 2014 announced on 15 October 2014 in Connect's Preliminary Results Announcement will be adjusted to reflect the impact of the Rights Issue in connection with the Acquisition. The proposed final dividend will be adjusted to 6.0 pence per Ordinary Share to reflect the bonus element associated with the Rights Issue and both Existing Ordinary Shares and New Ordinary Shares will be entitled to receive this dividend.The proposed final adjusted dividend of 6.0 pence per Ordinary Share is subject to approval by Shareholders at the Annual General Meeting on 4 February 2015 and, if approved, will be paid on 6 February 2015 to Shareholders on the register of members of at close of business on 9 January 2015.
Following the Acquisition, Connect intends to maintain its existing progressive dividend policy, having regard to the availability of distributable reserves and cash, and taking into account the Enlarged Group's working capital and investment requirements.
Seems like a reasonable deal which furthers their strategy and should boost their earnings down the line and potentially bolster the balance sheet too so all in all seems sensible. But in contrast to Essentra I'm a bit surprised they are issuing equity at such cheap levels. So if you didn't get in before I suspect the usual fall on the back of it going ex rights and in the run up to the payment may give you an opportunity to get in at levels around 150 pence again and may even close the gap on the chart in the low 140's - something to watch out for I would say.
Finally, if you have made it this far and having spoken earlier about a hospital pass, as a reward to you if you are reading this on the web I offer a video of Top 5 Rugby Tackles gone wrong at the end of this post.