...as it has been a busy day for results today. Most of these I have covered recently when they announced year end trading updates so I'll just give brief comments today.
Firstly was Provident Financial (PFG) - the home credit and sub prime credit and instalment lender (click the name for previous posts or see the categories list at the side of the blog). They reported results which were probably just shy of best expectations with the dividend at 98 pence rather than 99 pence forecast, but then it was up by 15.3% which was better than expected at the start of the year. Thus not surprised to see the shares off a little first thing as they have had a great run and only look about average value albeit with a decent and strongly growing yield of around 4% which remains the main attraction of this one. The only real point of note is that I see they are scrapping their Polish Credit card pilot at little cost this year having seen start up losses of £10m there last year - so a small boost there.
Next onto boxes and firstly the cardboard variety as manufactured by Mondi (MNDI) amongst other things. In contrast to PFG their numbers seemed to be slightly ahead of expectations at the earnings level and as such the share have responded positively first thing. I note the dividend was perhaps 1c light of forecasts but was nevertheless up by 17% and well covered by earnings and cash flow. This one is obviously sensitive to general economic conditions (cyclical) and they say that the outlook for this to remain below average. They are also affected by exchange rate moves but these have tended to help them recently. They summed up by saying "Furthermore, the recently completed capital investments and ongoing projects should contribute meaningfully to our performance going forward. As such, we are confident of making further progress in the year ahead." The only other point I noted was that they flagged a little extra cost from planned outages this year which are expected to total €80m versus €55m last year. The shares have done well in the last year out performing by around 20% and they have re-rated somewhat as a result. Thus they look less compelling on around 15 to 16x next years earnings with a 2.7% yield, before any changes on the back of these numbers. The latest declared operating margin also leaves it on a fairish 7% earnings yield. Consequently the CI score has drifted back into the 60's as the shares have re-rated and as such they look like a hold up here and if you hold them I would suggest you need to keep an eye on economic developements for signs of weakness / recession emerging given their cyclicality.
Persimmon (PSN) was the other box provider that reported today and as expected reported very strong results and a welcome early payment (April rather than July) of this years planned return of capital of 95 pence. The problem here is that the share had travelled well before today's numbers so probably not surprising to see some profit taking as perhaps people think this might be as good as it gets perhaps. They are however committed to further capital returns over the next few years, although next years is only currently expected to be 10 pence, although this could be upgraded.
So with a fullish looking (for a house builder) PE of nearly 12x this years earnings and more limited yield support given the lower return of capital planned for next year I can see whey people would be taking profit up here ahead of the General Election uncertainty. Despite this the company say the year has started well and they still seem well place to prosper in the medium term so as I always say you pay your money and take your choice.
Finally digging deep into my reserves of endurance and as the coffee pot beckons just a quick mention for BHP Billiton (BLT) which reported half year results today. Not being a mining analyst I'll not get into analysing or debating the various possibilities for commodity prices. But in passing I note that they still expect an average investment return of greater than 20% for their portfolio of high-quality development options. In addition they say they expect to maintain or not "re-based" as corporates like to say these days, the dividend even after the planned demerger. This suggests that the 5%+ yield is safe for now but I note that earnings have been downgraded steadily in recent months and the cover is diminishing and will diminish further post the demerger. So if economies and commodity prices continue to struggle then this dividend could come under pressure in the medium term.