However, despite the above, Greene King which I wrote up earlier in this year, announced a pre close trading update today in which they saw continued strong trading momentum. So it seems things may have improved a little in 2013 and into this year. In the statement the CEO also mentions their Leisure Tracker Report which you can *download it from here if you are interested in seeing how you compare. For example the average household in the UK spent nearly £75 ($126 / €92) on eating out and £40 ($67 / €49 ) on drinking out in March 2014. This also highlights some other interesting trends in how consumers are choosing to spend their money.
Otherwise the business highlights from the statement were:
· Retail like-for-like (LFL) sales up 4.1% and up 4.8% in the last 16 weeks
· 22nd consecutive quarter of LFL sales growth
· Food LFL sales up 5.0% and room LFL sales up 6.8%
· Average EBITDA per pub in Pub Partners up 5.0%
· Core brand own-brewed volumes (OBV) up 4.6%
· Expect to meet market expectations for the full year
They said they expect to meet the market's full year expectations for profit, cash flow and the balance sheet, with further improvement in ROCE and a further reduction in leverage. Meanwhile the chief executive, Rooney Anand, on the outlook said:
"Looking ahead, we see the UK's economic outlook improving. Throughout the downturn wage growth lagged inflation but this quarter has seen that change for the first time since the recession began, which bodes well for the future. Customers, though, are still spending carefully, as highlighted by our most recent Leisure Spend Tracker report*. Hence we remain cautiously optimistic for the forthcoming financial year."
So he seems encouraged by the recent signs of improvement in the economy and I guess they could be a beneficiary from the World Cup and extended opening times on England's match days that has been allowed, but I'm not expecting us to be in it for very long! Greene King (GNK) seems a like a solid hold as part of a diversified income portfolio on around 13 to 14x P/E with a yield in excess of 3% and trend growth of around 7% expected.
This one has come back sharply recently (15% or so in a month) despite good results, presumably on profit taking and some worries about the development of a bubble in the UK housing market. While this may be the case in London, it seems to me that the market is now starting to broaden out further away from London.
This was confirmed by a survey of estate agents and surveyors from Hometrack yesterday, which showed demand still outstripping supply and prices continuing to rise.
Now while this is not good for everyone, it should be good for national house builders like Bellway (BWY), so I have used this as an opportunity to add to my holding. it is looking over sold but is currently below its 200 day moving average. It is also still cum the interim dividend of 16 pence which gives a yield of just over 1% and it is forecast to pay a dividend which will represent a yield of just over 3%, 3x covered and they have little if any debt.
I think it should still be well supported operationally by the broadening out of the housing market and price rises more generally. Interest rate rises still seem to be off the agenda until next year at the earliest, although new tougher mortgage applications could I guess put a dampener on demand in the short term. In addition as I have written about before the sector should also continue to benefit from the governments Help to Buy Scheme being extended out to 2020.
I mentioned in a previous post how to research short sellers, directors dealings and keep up with RNS announcements. As a result of the service I suggested for tracking directors dealings I was able to pick up the fact that the new CEO and COO of Cineworld (CINE) both picked up nearly £150,000 worth of stock. This seems encouraging given how the shares have moved recently and it is usually positive when senior directors buy in. This one is still cum a 6.4 pence final dividend for a 2% or so yield on that alone while trading on around 14 to 15x earnings with a full year yield of about 3.5%.
From the same report recently I also picked up that there had been a number of senior directors at Interserve (IRV) who had been seeling. However, director sales are less instructive as there are often other reasons involved and in this case they had all cashed in some options and sold. Nevertheless not a great sign although the shares still look relatively cheap on around 11x this years expected earnings with a 3.5% yield.
You can read a full list of recent significant director deals here and sign up for a free e-mail alert there for yourself if you want.
News is a bit of a commodity and available 24 hours a day on television these days, there are even channels like Bloomberg devoted to business and markets with lots of annoying talking heads. Not my cup of tea really and if you are a busy person or want a life then I guess you might not have time for all this.
However, in investing it is important to keep abreast of news developments relevant to the business world and to look out for things which might involve your investments or point you towards new investment opportunities. Now there are numerous sites on the web out there which can help with this and I have listed many on my Reading List which can be accessed from the menu at the top of the site.
The other way I like to do this using the web / technology is to listen to business based news broadcasts from that ancient technology called Radio. I do this via pod casts which I get automatically downloaded each day to the media player on my old world desk top PC. However, I assume if you are a commuter or someone who goes out jogging then you could probably do this on your smart phone or portable audio player.
The broadcasts I listen to and other are from the BBC:
1) Best of Today - From Radio 4 - This gives you lots of the features from the early morning news show including Business with Simon Jack, all very pukka and a good variety of topics covered.
2) Wake Up to Money - From Radio Five Live - Which features similar content to the Radio 4 Business section but in greater detail. It features an old geezer, Mickey Clarke, who is a lot less posh, quite funny and bit more down to earth, plus another younger person called Adam Parsons to keep him in check.
3) World Business Report - From BBC World Service - The latest business and finance news from around the world, not one I listen to as it comes out later in the day and I have better things to do by then.
4) Money Box & Money Box Live - From Radio 4 - featuring Paul Lewis with in depth features on personal financial issues. Not a regular listen for me but sometimes I listen to it if it has a topic of interest to me personally, but I guess others may find it more useful.
5) Business Daily - Another From BBC World Service - Which they describe as the daily drama of work and money. Again not one I really listen to but there it is of interest to you.
Finally, if audio is not your thing, in case you are not aware of it, something called RSS feeds are a really useful way of keeping up with news and updates from web sites. There is one on at the top of my site which you can use to subscribe for updates if you want and although I'm new to it I gather Twitter can be used for this too.
This is one that has been whacked recently by the tax changes announced in this years budget. Consequently as a result it is looking interesting as it is very over sold on the back of the downgrades to profits that arose from the budget changes. The valuation is also looking quite interesting as it is trading on around 11 to 12x earnings for the next couple of years with a forecast yield of about 3.7% at a price of 334 pence. It is also cum the final dividend of 7.9p until 30th April 2014 which represents a yield of 2.36%. So that's the brief background - what did they have to say in the IMS today about current trading?
The headline was one of strong underlying growth but with football margins apparently hitting margins. Otherwise key headlines from the results are reproduced below:
· Continued outstanding growth in Online Sportsbook turnover, up 39% with mobile up 78%
· Gross win margin performance hit by two substantial loss-making weeks driven by football results
· Strong Online gaming net revenue growth, up 16%, benefiting from 142% growth in mobile
· Largely completed roll-out of Eclipse gaming machines into half the Retail estate
· Improving Australia KPIs with unique actives +22%, new accounts +8% and cost per acquisition -11%
· Strong US performance with wagering +23% and Operating profit4 up 188%
· Mobile Sportsbook and Casino launched in Italy
The bottom line from this was that operating profits were down by 14% despite turnover being up by 7% versus last years strong first quarter. This seems to be just one of those periods when results have been "punter friendly" and in the longer term the house or book maker usually wins. They also stress their diversification into overseas territories like Australia, Italy, Spain and the US and the growth in their on line business and mobile based channels.
They mentioned regulations that they have now complied with and the tax changes from the recent budget. it seems the tax change is not without consequences and may end up raising less revenue than the government thought as the Company said on these issues the following:
"As regards UK Retail, we have now successfully implemented the ABB's voluntary Code for Responsible Gambling and are pleased with the progress to date. However, as a direct result of the Government's unexpected announcement about an increase in Machine Games Duty to 25%, we have reviewed shop profitability and will be closing a portfolio of 109 shops this year, putting c420 shop employees at risk of redundancy. This is particularly disappointing as, through the economic downturn, we have worked hard to grow our Retail base but this further planned increase in indirect taxation makes this action necessary."
While on the outlook they said:
"Looking ahead to the rest of 2014, it is positive to note Online had recouped much of its shortfall against internal expectations following week 2 before we were hit again in week 12. While there is no guarantee we can make up the difference, we continue to believe the increased customer confidence from such wins should be good for business, especially in this World Cup year. We are very well placed to take advantage of the World Cup opportunity, coming in the second quarter, with an unrivalled football product range, the most downloaded Sportsbook app in the UK and a leading mobile gaming offer for cross-sell." They also flagged a 1% increase in their guided tax rate for the current year so probably more downgrades to come from that and the disappointing results in these numbers. Aside from this they mentioned that their net debt for covenant purposes had fallen in Q1 to £710 million from £796 million.
Summary and Conclusion
With these results being difficult and the Company uncertain as to whether they will make up the shortfall in the rest of the year and more downgrades likely - it is probably too early to rush out and buy this one. With the uncertain outlook and forecasts under pressure it is probably best ot base valuation off of earnings power of around 27 to 29 pence or say 28 pence for the sake of argument. This would leave it on around 12x at 334 pence with a yield of 3.7% or so from a 12.45 pence dividend forecast. So it looks reasonable value, but probably lacking a catalyst in the short term. Probably OK as a long term buy / hold and maybe the World Cup, not unexpectedly, might provide a boost this year.