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Bellway (BWY) the UK national house builder has announced final results to 31st July 2014 today. As expected given their recent updates and news flow on the sector they reported some very strong numbers which you can read in detail at the link above. The earnings and dividends both came in slightly ahead of forecasts by about 4 to 5%. Other highlights were:
However, they were fairly cautious, as usual, about the outlook projecting just a 10% increase in volumes despite a record order book. This suggests limited room for upgrades to earnings at this stage as forecast already assume turnover rising to that extent or more, unless the reported margins today are higher than analysts had in their forecasts or if they expect further price mix benefits next year. The shares have responded positively this morning and I continue to like them as they still look good value on around 8x P/E with a 4%+ yield which is 3x covered, expected to grow strongly and is backed up by a strong balance sheet, a conservative management and a decent industry background. Meanwhile one of my readers (thanks Arthur) pointed out in a comment on a previous post that Anglo Pacific Group (APF) had made it onto a near 10% yield. Well today they have made an announcement about their important Kestrel royalty agreement with Rio Tinto. The bottom line on this is that it improves their cash flow and they also stated: "We are pleased to see an increase in forecast production from our royalty lands at Kestrel. This is positive news for our cash flow profile and further underpins the Board's commitment to maintain our dividend for the current year." So it might be interesting as a contrarian play on mining assets / prices, trading as it does at a discount to book value, with cash on the balance sheet and a new well regarded management team plus a near 10% yield. I guess though there is some question mark about the sustainability of this going forward, but maybe therein lies the opportunity? But be aware the NAV and revenues here are certainly not set in stone, but in their recent interims when they maintained the interim dividend the company did set out a reasonably positive outlook as follows: "We remain confident in the long-term demand fundamentals for base metals and bulk commodities, which should positively impact on Anglo Pacific's royalty portfolio. We continue to be confident in our ability to acquire additional royalties that will generate strong and sustainable cash flows and allow us not only to improve our dividend cover, but also to increase our dividends per share in the longer-term. In the short term, the outlook for the remainder of 2014 remains subdued and the Group expects lower adjusted earnings until production from Kestrel returns to our private royalty lands in the second half of 2015. The current price environment in our targeted commodities, coupled with limited financing avenues for operators in this sector, presents opportunities for the Group to grow our royalty portfolio. Your Group remains debt free and, along with a committed dividend policy, remains a lower risk, mining focused investment for investors who believe in long-term global GDP growth." Stock is up 12% this morning on the back of the announcement so may not be the best day to buy it but might be one to put on your watch list and pick up if it drifts off again especially as they do not go XD the interim of 4.45 pence until 27th November 2014.
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A note for you today on three stocks that provide income underpinned by different assets / operations. Yesterday we had Anglo Pacific (APF) which from its announcement about a placing describes itself as: "A global mining royalty company. The Company's vision is to create a leading international diversified royalty company with a focus on base metals and bulk materials. The Company's strategy is to build a diversified portfolio of royalties, focusing on accelerating income growth through acquiring royalties in cash or near-term cash producing assets. It is an objective of the Company to pay a substantial portion of these royalties to shareholders as dividends. Further details can be found on the Company's website at www.anglopacificgroup.com." In the announcements yesterday they raised gross proceeds of £10 million by placing shares representing about 5% of their issued share capital at 180 pence. The recently appointed executives and directors also subscribed and now own around 9% of the equity between them. This was done to help finance the acquisition of a royalty in something called the Maracás Vanadium Project for up to $25 million, for which they get a 2% net smelter return royalty interest on all mineral products sold from the area of the Maracás Project to which the royalty interest relates. This is in line with the new managements strategy of expanding their portfolio with high quality base metals and bulk commodity mining projects that have existing or near-term production. You can download a presentation about this acquisition here and about investing in royalties and the new management team's strategy here. I like this one as it is a way of playing commodities but with reduced cost risks as their royalties tend to be related to production volumes, although obviously production outages or delays are a risk. It trades at a small discount to its year end book value of 196 pence and offers a decent 5.7% yield, although it is not very well covered or forecast to grow that much in the short term, but it has grown by 5.5% per annum over the last five years. Meanwhile moving on to today we had a final results announcement from LondonMetric (LMP) a UK property REIT which has invested in commercial and residential property in the past. In the last year or so they have now shifted the emphasis of the portfolio to out of town retail and distribution assets. The highly experience Chairman Patrick Vaughan commented on the property market outlook by saying: "I believe we are somewhere in the middle of the cycle for UK commercial property in which an improving economy, the availability of reasonably priced credit and strong competition for supply makes the investment market very competitive, but I am confident that we will maintain a high level of investment and build on the activity this year for future outperformance and further excellent returns for our shareholders." The NAV on this one (a key metric for property related shares) came in at 121 pence up by 11 to 12% so the shares, like many other property companies these days trade at a premium to this, trading at around 145 pence reflecting some of the expected growth to come. The other attraction is the yield which based on the declared unchanged dividend of 7 pence gives a yield of 4.8% which they say is fully covered by contracted rental income. Other key things to watch on these type of funds is the debt or the loan to value ratio which here came in at a reduced level of 32% versus 43% last year and had a weighted average cost of 3.9%. So they should be making a decent return over and above that. The other swing factor is occupancy levels or voids, rental increase potential and lease lengths. They have 99.6% occupancy, 32.6% of rent roll benefiting from fixed uplifts and unexpired leases averaging 12.7 years. So all fairly solid if a little dull, but a reasonable way of getting exposure to commercial property if you want to) with an experienced management team that gives you a decent yield, although it has not grown in the last couple of years but is forecast to edge up by around 2% this coming year. Finally, today we had Preliminary results from Pennon (PNN) the water utility and waste recycling group. Which as it is fairly self explanatory I won't go into too much detail. The headlines were that the regulated side was good and has got it plans for the next regulatory period - K6 approved already. While the waste side Viridor saw profits down around 19% due to difficult market conditions in recycling and investing for future growth especially in energy from waste facilities. They increased the dividend by a useful 6.5% in line with their RPI +4% guidance that has been in place in the current five year regulatory period (K5). We will not know about the future dividend policy until next year as they said: "The Board will review the dividend policy for the K6 period following the Final Determination for South West Water and will make an announcement at the 2014/15 Preliminary Results." So some uncertainty there until things are finalised but at least we know their plans have already been accepted so hopefully their shouldn't be any nasty surprises. Indeed, the last time I wrote on this one I referenced their document about the latest regulatory round which given that their proposals have been accepted, seemed to suggest that they would expect to deliver around 5% dividend growth, which at the current level of starting yield should give a total return of 9% assuming an unchanged rating. So overall another reasonable yield of around 4% from this one but with a little uncertainty as to the level of growth going forward. In fact I was a bit surprised to see it was as low as 4% so I guess it could drift off from here unless there is another bout of demand for defensive stocks. Any way sorry it was such a boring note today and well done if you got this far - but hey who ever said income investing was exciting? So as a reward if you did get this far see the following which carries on my recent dog theme and sums up what I have been saying here - enjoy, hopefully it will brighten up an otherwise dull day. 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