Stupidly busy days for late July...

...as I guess financial reporting is more efficient these days and lots of companies are getting their figures out before the holiday month of August. So many to go though and other things to do meant I didn't have time to write up any yesterday.

In passing I note that a few companies which feature in the Mechanical Compound Income Scores Portfolio have had updates recently. If that is of interest to you the names concerned have included Jupiter Fund Management (JUP), Renishaw (RSW), and ITV which all seemed fine. While Schroders (SDR) have reported today increased in flows of £8.8bn  a 21% increase in their dividend.

Otherwise in recent days we have had some big yielding blue chips like Glaxo SmithKline (GSK) and Royal Dutch Shell (RDSA & RDSB)  have had results updates and confirmed their plans to maintain their dividends and hence their current 6%+ yields. While expensive consumer stocks like Reckitt Benkiser (RB) and Diageo (DGE) have had mixed updates with Reckitt's raising guidance but cutting the dividend post their demerger of the pharmaceutical arm. While Diageo had a small miss on their earnings but raised their dividend by a better than forecast 9% reflecting their confidence in the outlook for 2016.

Finally in brief amongst many others too numerous to mention today we have had interim results from RPS Group (RPS) which I wrote up in the past and got into when it was sub 200p when the news flow on their oil & gas (O & G) operations was better than expected. However I traded this one out for a decent total return earlier this year when the O & G news unsurprisingly started to deteriorate.

In today's numbers the O & G division and effects of currency translation to a lesser extent have led to around a 7% fall in their earnings in H1, although they did increase the dividend by their "normal" 15%. Despite this they flag that the division, after some judicious cost cutting, has remained profitable with double digit margins. They also highlight the success of their diversification efforts via their "normal" add on acquisitions and suggest they have plans for more after completing a refinancing and extension to their debt facilities. Their net debt was actually slightly down by £0.5m over the period to £72.7m (gearing of around 20%) despite the spend on acquisitions in the period and reflects their strong cash flow, albeit bolstered by a big positive swing in working capital (debtors & creditors).

Looking at last years H1 / H2 split it looks to me, given the fall in the earnings today, that there could be a risk of perhaps 5% downgrades today, unless the acquisitions are expected to offset this in H2 perhaps? This could take earnings down to say 20p which together with the "normal" +15% dividend of about 9.75p would leave it at this mornings 215p (-2.3%) on a reasonable looking 10.75x with a 4.5% yield 2x covered. Thus it looks like it is worth holding / revisiting if you think they can continue to manage the decline in their O & G division and offset this with diversifying acquisitions as they have done recently.

On the chart if you were to do a school boy trend line from the February low that would come in around these levels. But if that fails to hold then the 180p to 200p range might be a good area of support for a purchase / repurchase where it would then be on around 10x with a 5% yield.