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.
...in the shape of Britvic (BVIC) & Marston's (MARS) who have both reported updates via an IMS and an AGM respectively.
Britvic suggested a continuation of challenging trading conditions in their core markets which they had alluded to in their previous update in November last year. Despite this they say they are still confident of delivering EBIT in the previously stated guidance range of £164m to £173m, underpinned by cost saving initiatives. I last wrote about this one back in October last year when the shake out in the market at that time had, I suggested, left it looking better value and that it was a reasonably defensive play at around 600 pence.
After today's update the shares seem to have taken the statement quite well, so may be something worse was expected so they are perhaps having a relief rally. This leaves them up by about 5% at pixel time to around 680 pence. So with the final dividend that went xd in December they have given a decent 15% or so return since the low in October - sweet, like some of their drinks. Talking of which I saw the other day they are going to stop making their full sugar Robinson's. This seems to be part of a relaunch aimed at addressing the obvious health concerns about sugary drinks.
Overall this leaves it looking fair value on around 14x & 3.5% yield now based on this years forecasts and a EBIT/EV yield of just over 7%. This puts it in the second quartile of the Compound Income Scores with most items looking fairly average, although it was looking oversold before today so maybe hence the pop. Thus probably a hold for me here rather than a buy now.
Meanwhile Marston's the brewing and pub company reported some good trading over the Christmas period in it AGM, with profitability in line with their expectations. In Destination and Premium, like-for-like sales were 2.0% ahead of last year with both food and drink like-for-like sales growth of 2.0%. In Taverns, managed and franchise pub like-for-like sales were 2.0% ahead of last year, with 2.7% growth over the Christmas fortnight and 5.8% growth on Christmas Day. While in leased pubs, profits were around 1% ahead of last year. Finally in Brewing, performance has been strong with Group Ale volumes up 4% in the year to date, underpinned by a very strong performance in the off-trade, with volumes up 8%.
This one has had a less fizzy share price than Britvic over the last couple of years as it has flat lined around the 140 to 150 pence region. This is as they struggled to progress earnings, although now for the next couple of years ahead they are forecast to see these rise by around 8% per annum. This feeds into expected dividend growth of around 5% per annum for the next couple of years too.
It therefore looks cheapish on 11.6x and 4.8% yield on this years forecasts but overall it does not score well on my scores ranking in the bottom decile due to its poor cover, finances and earnings revisions scores, where despite encouraging statements there have been downgrades since November. Thus it does not really pass my usual quality tests and as such I would not recommend it other than for the yield and some asset backing from their properties, although clearly there will be plenty more higher scoring candidates out there, cheers.
Briefly mention that we had a positive IMS from Provident Financial Group (PFG) so they still seem worth holding. While during my rummaging around I came up with a few interesting looking situation in some stocks I have written on in the past.
These included XP Power (XPP) which despite an decent IMS recently now looks interesting, although perhaps the business could be vulnerable to a slow down hitting their orders? However, they do tend to be on longer term programmes so I think they should be OK on around 13x with a 4%+ yield. The shares look oversold in the short term so could be one to watch if the market should come back again or if it can regain its poise.
If you wanted something a bit more defensive then you could do worse than look at Britvic (BVIC) which has also come back with the market and now sells on a reasonable looking 13x and 3.7% yield to September 2015 with this year's juicy final dividend to come in the near future which should itself offer a yield of around 2.2%. Technically, for what that's worth, the shares are over sold on RSI and there has been some positive divergence (see RSI link for explanation) on this as the shares fell recently (a positive sign) and I note that the gaps on the chart from earlier this year and late last year has now closed, as they often do, so I like the look of these down here.
As it is yet another "hottest day of the year" in the UK today I thought i would feature three drink related stocks which have had announcements today.
First up is a stock I have mentioned before in relation to benefiting from Company mishaps, namely Britvic (BVIC). They have reported a Q3 IMS today which reads quite well and in which the key point was that they suggest their full year EBIT is now expected to be towards the top end of the £148m to £156m range guidance. This was driven by a good performance in the UK and France, while Ireland was a bit weaker. They are also highlighting good progress in the US with Fruit Shoot continuing to build momentum. This one has done well for me and been re-rated a little as they have delivered a good profits recovery since the Fruit Shoot problems a few years ago and the failed merger with A.G Barr. They now trade on around 15x next years expected earnings to September 2015 with a yield of 3% at a price of 730 pence. This seems fair enough to me so I'm happy to hold it as part of a diversified income portfolio, but it doesn't look juicy enough for me to suggest you rush out and buy it.
If Robinson's Barley Water is not your thing then how about a pint of Marston's Pedigree? Marston's (MARS) have also announced a reasonable looking IMS today in which they reported overall LFL sales of 4.1% for the 41 weeks to 19 July 2014. Surprisingly they said the World Cup had been neutral as it hit food sales while benefiting wet sales and the take home trade in particular. I guess England's early exit didn't help either. They remain confident of meeting full year expectations and hope to open around 27 new-build pub restaurants in the current financial year. I have done OK out of this one having bought it for £1 back in 2012 when it was on a tasty 6% yield. It re-rated nicely from there but has rather sat there like a flat pint over the last year or so around the 150 pence level. This leaves it on around 11x earnings with a yield (the main attraction) of close to 5% which is expected to grow at around 4%. So I'm happy to hold it on that basis, although the debt is higher than I normally like to see, but I can live with that in this case given the nature of the businesses and the assets backing the debt.
Finally today we have had another drink related stock reporting today which is probably the best quality stock on AIM as a Carlsberg advert might say. In this case it is a company called Nichols (NICL). If you are not familiar with it Nichols plc is a highly focused soft drinks business. Its brand portfolio includes Vimto, which is sold in over 65 countries and Levi Roots, Sunkist, Panda and Weight Watchers which are sold in the UK. The Group has a leading market position in both the "Still" and "Carbonate" drinks categories. Click the highlighted name above for a link to more information about them
They have reported interim results today which showed another strong performance with double digit growth in profits, earnings and dividends which has often been the case with this one. Indeed I made several times my money on this one a few years back but sold out as the growth appeared to be slowing and the rating got too rich for my taste based on my 2% and 20x sell discipline. The shares did carry on rising for a while as they continued to demonstrate growth, but as this has slowed recently the shares have come back and de-rated a little. In these figures they say they expect the second half to be stronger and that the full year results are expected to be in line at this stage. They also took an £8 million exceptional in these figures for a legal case that they lost. This represents about 35% of their PTP and I note the stock has fallen by around 8% since this was announced. The balance sheet is however solid with net cash of £32.9 million versus the £340 million market cap.
So again this could be a case of an opportunity being thrown up by a company mishap perhaps? However, having said that the rating still looks quite high at around 19x this years expected earnings with a 2.3% yield before any changes on the back of today's numbers. Thus I'll leave it on my watch list for now but i wouldn't put you off if you are prepared to pay up for quality, cheers and keep cool if you can.
I have written in the past about how corporate restructuring's which lead to subsidiaries being de-merged can lead to good value opportunities. Today I thought I would touch on the opportunities afforded when Companies suffer a mishap. In these cases it is important to determine the cause, extent and likely cost of the mishap and try and decide if it will be a short term one off or something more lasting and damaging to the business and its reputation and prospects. You can then compare this to the price reaction to see if there is a value opportunity as a result.
A good example of a bad mishap which was actually self inflicted by the management and which had long lasting effects was when Gerald Ratner in a speech described one of his own products as "crap" - see a brief video and a more recent interview for more details if you are not familiar with this case. Obviously you would want to avoid a Company with this type of mishap!
A more recent example where the mishap was smaller, less damaging and ultimately not as costly was back in 2012 when Britvic (BVIC) had to recall some of their Fruit Shoot drinks due to a choking risk for children from a small part on the top. While this was potentially very damaging, it was handled very swiftly and dealt with well by the company and they were very up front about the costs. This type of recall is quite common in the food and drinks industry and the direct costs were fairly easy to calculate. Obviously the longer lasting damage to the product and the company were an unknown at the time and hence the market marked the share down quite heavily as you can see in the chart above. This afforded a great opportunity to pick up the shares and enjoy the recovery as the recall did not do any lasting damage.
The shares recovery was also helped along by their subsequent attempt to merge with A.G. Barr which failed due to monopoly considerations. However, the Company has continued to prosper since then and indeed reported some more good interim numbers today. In these they saw revenues up 4.7% with 3.9% from underlying growth and 0.8% from pricing. Margins increased by 0.6% to 9% helped by on going cost saving initiatives which are expected to deliver £30 million per annum by 2016. This led to earnings growth of 16.9% which is around the rate of growth that seems to be forecast for the full year. So probably no change to forecasts I guess as they have been rising gently recently and their indicated range for EBIT this year of £148 - £155 million seems to be reflected in consensus forecasts already. The dividend was increased by a useful 13% on last year, reflecting they say confidence in future prospects. Adjusted net debt fell to £479.4 million which compares to a market cap. of £1.8 billion and represents 2.6x EBITDA down from 2.9x all of which seems OK given the fairly steady nature of this one.
Overall, this one continues to deliver steady progress and has some good operating metrics. However the value is not as good as it was when the mishap happened and it seems fairly fully priced on approaching 17x and around a 3% yield so more of a hold than a strong buy I would say, although Mr. Market seems to be excited today as he has marked it up by 5% first thing on the back of this announcement, cheers.