Back from the beach with a...

...tan after an extended break - because I can. While I was away we had trading update announcements from the following stocks that I have covered in the past:

XPP
Interserve
EMIS
RPC
CCC

These all seemed OK to me but if you are interested and missed them click the names for the announcements.

Otherwise we had a US acquisition from Imperial Tobacco which also seems sensible, earnings enhancing and brought them an established e-cigarette brand. However, I note it leaves them a distant third place in that market and as it is debt financed it still leaves their balance sheet fairly stretched which has I believe led one of the rating agencies to put them on watch for a downgrade to their credit rating.

Otherwise I noted that a couple of the price targets I set on slightly doggy / dodgy stocks have been hit while I was away. Firstly the old dog Man Group has risen to the 120 pence I thought it could get to on the back of their recent acquisition, despite the wobble in the market in my absence. While Plus500 hit my 350 pence target intra day and has since seen a bit of a bounce as they put out an announcement stating they knew of no reason for the substantial fall in their share price.

In a similar space we had results from IG Group (IGG) yesterday which saw profits and earnings up modestly as expected against a subdued market background and helped by their cost cutting efforts. However the main pleasant surprise was a big jump in the final dividend as they raised their payout ratio from 60% to 70% which meant the full year dividend was up by 21.1% to 28.15 pence rather than the 23.9 pence which had been expected. They pointed out that they have continued to build on their long term track record and have managed to raise profits in every year since they listed in 2005 which is not bad given the events of 2008 and 2009. The increased dividend (and share price) leaves them on around 15x with a 4.5% net yield on the latest full year dividend. I also like the look of the logical proposed extension of their services into stockbroking - although it remains to be seen how compelling or competitive it will be when it launches in September. 

Today in this extended catch up we have had an update from a decent IMS from Intermediate Capital Group (ICP)
which saw assets under management (AUM) increase by 2% as new third party money helped to offset realisations by older funds. They also talked about continued investment for direct funds, improving ROCE via the £100 million share buy back which they have done £13 million of so far and their longer term aim of re-gearing the balance sheet to a range of 0.8 - 1.2 times, over the course of the next two years. The shares have finally made some progress from the 400 pence level where I recommended them to about 420 pence today although they have gone ex the 14.4 pence final since then for a total return of 8.6% so far - but I still think there is more to go for here.

Provident Financial (PFG) - announced some strong looking interim results which included a 10% increase in the dividend which is the sort of rate of increase I was hoping for when I wrote it up earlier in the year and after their final results. Today's interims in addition to the dividend increase saw profits up by 23% and adjusted earnings by 24.6%. This was driven by Vanquis Bank which delivered further strong growth through developing its presence in the under-served, non-standard credit card market with first-half UK profits up 36.1%. They continue to develop a Polish operation and incurred slightly increased start up losses of £4.6 million here in the first half versus £3.6 million last year. They are also flagged that the credit tools and infrastructure to support the development of Satsuma (their new on line instalment loan business) is on-track to be completed during the second half of the year. 

The Consumer Credit Division (CCD) remained more subdued with profits up 2.5% as customer confidence remains at a low level and, as planned, the tighter credit standards introduced in September last year have significantly curtailed the recruitment of more marginal customers into the business. As a result, CCD customer numbers and period-end receivables showed year-on-year reductions of 24.9% and 17.9% respectively. However, the marked improvement in the quality of the receivables book and the implementation of standardised arrears and collections processes have combined to produce a significant reduction in credit losses with the annualised ratio of impairment to revenue improving from 38.7% at December 2013 to  35.2% at June 2014. This also supported an increase in the annualised risk-adjusted margin to 62.9% at June 2014, up from 58.9% at December 2013. Thus with these actions plus the on going modernisation and cost cutting they are continuing to reposition the CCD as a leaner, better quality business focused on returns rather than growth. 

The shares are up today to nearly 2100 pence and up by nearly 25% from 1700 pence when I first wrote about them, but with strong mid teens growth forecast for this year they still seem worth holding onto on a 16x and 4.5%+ yield before any changes on the back of these numbers.

Finally, TalkTalk Telecoms Group (TALK) - had an IMS today which seems steady as she goes and suggests they are still on track to hit their medium term growth and profitability targets.