Voyager RNS Log WC 21/01/2018
After the hectic last week of many RNSs from the portfolio, this week started quite sedately with nothing to report for either Monday or Tuesday; I honestly don’t mind a little quiet once in a while as it gives you time to both reflect and get on with other things in life.
In terms of new investments, I have been wrestling with my conscience about not buying shares in Israeli companies. Am I unreasonably biased? Well after various historic dabbles with investments in Israeli companies I generally have not been left with a taste trust or confidence. So, I asked myself why was I considering breaking a rule and buying into Taptica? Well it would surely be on the grounds of what I term as a special situation i.e a business where something possibly game-changing is really happening, good RNS stories etc. with a nice “ahead of expectations trading update in early January: could I overcome my bias? Well the answer which was possibly influenced by the excellent McMafia on BBC was “don’t, at least not just yet”; just can't get that comfy feeling. No, I am afraid my “no-go” countries which include the bulk of Africa, Russia, Israel & China plus a few others, remain as they were. I know fellow investors will quote companies that have done well but equally from those countries I could quote Emblaze, Telit, Putin’s RusPetro, Stella Diamonds in Africa and various Chinese AIM rubbish; just why put your cash at risk?
I have been adding a few bits & bobs to the portfolio in the last few days but these have been in the form of Investment Trusts, an area of investment I have been very keen on for many many years. I will have to get my bum into gear at some time in the next quarter and do an article dedicated to investment trusts and my approach to these terrifically underrated investment vehicles.
Well, that’s enough rambling on, let’s have a look at this week’s RNSs that are relevant to companies within the Whittler universe.
As ever, although I may get keen about a stock, what I put into print here is purely me sharing my rambling thought process and NOT INVESTMENT ADVICE to either buy or sell a particular stock.
Monday 22nd January 2018: No RNSs for whittler stocks
Tuesday 23rd January 2018: No RNSs for whittler stocks
Wednesday 24th January 2018: Bodycote: BOY: Mkt Cap £1880m: RNS BODYCOTE CONFIRMS EUROPEAN EXPANSION IN HOT ISOSTATIC PRESSING
NEW MEGA-HIP VESSEL SCHEDULED FOR 2018 DELIVERY
Bodycote is pleased to announce that its Sint Niklaas, Belgium, Hot Isostatic Pressing (HIP) location will take delivery of a new "Mega-HIP" unit which will be operational by the end of 2018.
The new high pressure, high temperature Mega-HIP is Nadcap capable to meet the growing demand of the European aerospace market over the next five years and beyond. This investment will significantly increase Bodycote's Nadcap HIP capacity globally, in addition to the substantial increase in Nadcap capacity which Bodycote completed in 2017. These recent investments highlight Bodycote's commitment to expand its global HIP capacity to meet market requirements.
In addition to aerospace, Bodycote HIP serves clients around the world in markets as diverse as medical, power generation, marine, nuclear, automotive and electronics with both HIP services and its Powdermet(R) technologies. The recently launched Powdermet(R) technologies incorporate new, patent-pending techniques that combine 3D printing with well-established net shape and near net shape (NNS) techniques. This new hybrid technology dramatically reduces the manufacturing time and production cost of a part compared to producing the same part using 3D printing alone.
My View: well not exactly shooting from the HIP, the announcement looks positive for Bodycote and on another day may well have added a couple of pence to the share price but Mr Market was not in his best mood on Wednesday; no real issues in my opinion just uninteresting market noise taking the markets down a touch. I think that BOY is a lovely quality business and the share price itself had appreciated by about 18% since the middle of December. Until there is a recession, I am just going to sit on my hands with BOY and hopefully let the quality continue to play out.
Wednesday 24th January 2018: WH Smith: SMWH: Market Cap £2340m: RNS Trading Update
The Group delivered a good performance in the period with total sales flat year on year and like-for-like sales down 1% for the 20 weeks.
Total sales in Travel were up 7% with like-for-like sales up 3%. We have continued to see good sales growth across all of our key channels and gross margin continues to grow in line with plan driven by category mix management. Our store opening programme in the UK is on track and we expect to open around 15 new units this year. Our new large airport stores in Gatwick and Stansted opened in the period and are performing well with good feedback from both landlords and customers.
Our International business continues to grow and we now have 249 units open, including 2 of the 10 units we have won in Changi Airport, Singapore. We expect all 10 units there to be open this spring.
In High Street, total sales were down 5% with like-for-like sales down 4%, in line with expectations. Gross margin was up year on year although slightly less than anticipated, in part reflecting the lower sales of high margin spoof humour books compared to the same period last year when humour books had a particularly strong performance. However, we continue with our cost efficiency programme and now expect full year cost savings to be in the region of GBP12m, slightly ahead of target.
My View: well not exactly a trading update from my favourite boring business that will get the punters excited but the real interest in the business for me is the Travel which in 2016 weighed in with 66% of the groups PBT and rose to 69% of group PBT in 2017. According to the TU, travel is continuing to grow both by expansion and like-for-like in 2018. Overall, I am happy to continue to hold.
Thursday 25th January 2018: No RNSs for whittler stocks.
A nice chance to start a slow cooker large batch of Bolognese; if you take care with the selection of the ingredients, the quality really comes given time in the slow cooker; a bit like investing really!
Friday 26th January 2018: No RNSs for whittler stocks
Well, that’s a very short RNS log this week but it at least gives one a chance to draw breath after such a lot of scribbling last week. I am quite glad I ditched Galliford Try last week as the Carillion news broke; that swift action really protected my capital as since the sale the price has drifted down a further 12% as I write. I should say that I think GFRD is a very decent company and in all probability, I will return to invest in GFRD again but for now, I simply protect my capital.
In my opinion, two fairly simple rules apply in this case:
On to next couple of weeks and we may well see a trading update from OTB, maybe JE., KWS and results pencilled in for FDEV & AMO.
This weekend my incurable hattersitis take me to the delights of Cleethorpes where the Grimsby ground is situated with just about every old iron girder corroding nicely is the salty atmosphere. What a dog of a journey it is but needs must etc. Whilst I am not the greatest fan of fish & chips, even I have to say they are a bit special up there so I guess I will be digging into some.
I hope you have a good weekend and should you find the time to read something really interesting, then over I slow cup of coffee, I would highly recommend a read of Terry Smith’s Annual Letter To Investors published a few days ago; a great read in my opinion.
Voyager RNS Log WC 14/01/2018
This week has proved to be quiet a busy week after the lull over the festive season and things are picking up pace now including the arrival of those blasted new years resolvers in the pool at 6:30 am; are they a blasted nuisance or am I just getting grumpy towards them. Hang on, I have always been grumpy to such transient creatures but never mind a couple of really hard frosts by early February usually sees them retiring back to the comfort of the duvet for another 11 months. For me, the pattern stays the same every working day with a swift mile in the pool followed by initial interrogation on the iPhone of portfolio RNS’s; hopefully seeing no bad news then on with the day.
I have always found that ploughing length after length in the pool gives me a great quiet time to think things through. When I was part of the rat race it used to be work issues, now it’s more about writing footy or investment stuff or another passion, good quality food. I absolutely hate the world of convenience food; whoops, did I mention I own shares in Just Eat; no moral fibre me! Anyway, enough of this Jeremy Clarkson stuff, what’s been going on in the markets relevant to shares within the portfolio?
As ever, although I may get keen about a stock, what I put into print here is purely me sharing my rambling thought process and NOT INVESTMENT ADVICE to either buy or sell a particular stock.
Monday 15th January 2018: Spectra Systems (SPSY): Mkt Cap £39m: RNS: Licensing Agreement and Supply Agreement + Revised Expectations
Licensing Agreement and Supply Agreement
Spectra Systems Corporation, a leader in machine-readable high-speed banknote authentication and brand protection technologies, is delighted to announce that it executed on Friday an exclusive, worldwide, licensing agreement for one of its existing products which is in use by 18 central banks through an existing licensee, a major supplier of banknotes worldwide.
The licensing agreement will extend the rights to the underlying technology, which has been in use since 2003, in perpetuity and generate $11.2 million in royalty payments over the next five years. The payments will be settled in eleven equally spaced payments.
In addition, Spectra also executed a Material Supply Agreement with the same licensee to provide them with covert materials exclusively for a period of ten years at reduced rates relative to the current agreement. The Board anticipates that the supply of material, which does not incorporate minimum quantities, will generate a total revenue of approximately $1.5 million -$2.0 million over the next five years.
It is estimated however that the combined licence and supplied material sales will generate a contribution per annum from this product through 2023 which is approximately 2.7 times that of the current agreement, based on the minimum purchase requirements in that agreement and experienced in certain recent years.
Based on the execution of these agreements, Spectra is expecting that both its revenue and particularly its profit before taxes for the year ending 31 December 2018 will significantly exceed market expectations.
My View: simply put, how beautiful as the work has been put in, the product delivered and it’s now almost as simple as counting the cash as it arrives from the customer. It’s not a big company and usually, I draw a line about having any more than one investment below a Market cap of £50m as such stocks can be very illiquid when you want to make an exit and sometimes only quote to very small normal market size. However, I really took a like to this one last October and nabbed a few for my special situations portfolio. Incidentally, for those who like the highly regarded Stock Ranks (SR) approach pioneered by Ed Croft’s Stockopedia team, SPCS has an excellent SR of a 95 and nicely gaining momentum. I am happy to continue to hold and should there be a little pull-back, which I expect there to be, add a few more.
Monday 15th January 2018: Bodycote (BOY): Mkt Cap £1882m: RNS Us Tax Legislation & Trading Update
US Tax Legislation
Bodycote notes the enactment of the Tax Cuts and Jobs Act in the United States on 22 December 2017 reducing the statutory rate of US Federal corporate income tax to 21%. Whilst work is ongoing to review the full future impact of this new US tax legislation on the Group, it is expected to give rise to a significant non-cash tax credit for the Group in the year ended 31 December 2017 as a result of the revaluation of US net deferred tax liabilities.
Subject to final audit and confirmation of final tax computations, the effect of this one-off revaluation of US net deferred tax liabilities is expected to add c. 5p to EPS for 2017.
Bodycote also announces that trading in the final quarter of 2017 was better than anticipated and the Board now expects full year 2017 headline operating profit to be towards the upper end of market expectations (company compiled analysts' estimates range: GBP117 million - GBP126 million).
Bodycote intends to announce Full Year Results on Tuesday 6 March 2018.
My View: well any regular readers of this RNS log will know that I rather rate this high-quality business. Maybe it’s not the most exciting beast on the market, even possibly a touch boring but we now know that profits will be towards the top end of expectations and when you look at the range quoted above, that looks rather good to me. Again what a nice SR of 88, can’t be bad and I am very happy to continue to hold.
Monday 15th January 2018: Looking in another area we see the very sad news about Carillion a share that was valued at way over 300p for many years and now suspended at 14p and in what appears to be a terminal stare. The numbers have looked poor for a couple of years now yet I suspect some may have been sucked in by the generous and unsustainable dividend that has nowhere near been covered by FCF for the majority of recent years along with debts. This had a knock-on effect to a company within my portfolio: Galliford Try (GFRD) who mid-morning following the collapse of CLLN, put out the following RNS:
Joint Venture with Carillion plc
Galliford Try plc (the "Group") notes the announcement by Carillion plc this morning. The Group is in joint venture with Carillion and Balfour Beatty on the 550 million Aberdeen Western Peripheral Route contract. The terms of the contract are such that the remaining joint venture members, Balfour Beatty and Galliford Try, are obliged to complete the contract. Our current estimate of the additional cash contribution outstanding from Carillion to complete the project is 60-80 million, of which any shortfall will be funded equally between the joint venture members.
The companies will discuss the position urgently with the Official Receiver of Carillion and Transport Scotland, to minimise any impact on the project.
My View: firstly on CLLN where for investors caught up in the debacle one can only have limited sympathy as the signs were there for all if they cared to read the newsflow and look at the numbers. Yet the knock-on goes across many, many small businesses caught up in the web of subcontracting for the giant Carillion that CLLN lived within. Contractor business viability, jobs pensions all very sad stuff. Rather like being on a rowing boat being towed along by the Titanic; my sympathies to all innocent parties involved. Then we come to the knock-on effect for the likes of GFRD (Mkt Cap £970m) working with CLLN on major joint ventures. This casts a fair doubt on what hit there may be to GFRD’s bottom line this year and possibly also next year and it’s a doubt and risk I did not feel comfortable in carrying so an unemotional exit as soon as the GFRD RNS hit the market; funds intact and in fact exiting with a few % profit but, more importantly, reducing risk of further downside.
Whilst on the subject of CLLN, just a thought: Very predictably, history does repeat itself and we can learn from the past if we choose to do so. Any readers remember the collapse of the once £1bn valued company Jarvis back in 2010? There are lessons there and again with CLLN; the tipsters being so terribly wrong and the toxicity of unsustainable debt. I remember in the days when I used to look at what the experts had to say, the absolute number of well-followed experts who recommended Jarvis as a super stock “super stock”, one to hold forever. Yes, right: such things inspired the article I published in July 2017 about the “share detectives” titled Watching The Detectives.
Tuesday 16/01/2018: International Greetings: IGR: Mkt Cap £259m: RNS Trading Update
Strong trading delivers earnings upgrade
IG Design Group plc, one of the world's leading designers, innovators and manufacturers of gift packaging, greetings, stationery, creative play products and giftware, announces an update for the third quarter, which covers the Group's Christmas trading period to 31 December 2017.
The Group is pleased to report that following the positive performance reported over the first six months ending 30 September 2017, trading has continued to be strong up to and throughout the Christmas period.
In line with the strategy to further diversify the business, the Group expects to deliver record revenues in FY18 with the continued expansion of its global footprint outside the UK which the Board expects will account for over 70% of sales by destination. All regions are on track to achieve year on year revenue and profit growth and we are therefore pleased to upgrade the Group's full year performance with diluted earnings per share(1) expected to be ahead of current market expectations and delivering strong year-on-year growth. We continue to see strong cash conversion across the Group and expect average leverage for FY18 to follow the progress made in recent years and be significantly below an average of two times.
Latest initiatives highlighted in our Half Year Results Announcement remain on track to drive future revenues in FY19 and beyond. Additionally, as a result of the level of the Group's US earnings the Board expects earnings per share to benefit in FY19 and beyond from the recent US tax legislation changes. Furthermore, the US tax rate change is expected to translate into lower tax payments, thereby enhancing the cash generation of the Group.
My View: simply what’s not to like? As I said last week in this log, my view on this quality business has not changed since I commented on the interim results at the end of November 2017 and in fact are even more positive taking into account the quality acquisitions and a touch of tax generosity from our mate Trump. I am happy to continue to hold the investment which has delivered a return of well over 100% for me in the last 18 months. Personally, I think this very sound well-managed business will gain further investor support after this RNS and in my opinion, continue to appreciate in value. Again a very decent SR but I won’t quote numbers as I don’t want to offend Ed as I have already quoted two CRs above.
Wednesday 17/01/2018: RNS: Henderson Smaller Cos Investment Trust: HSL: Mkt Cap £672m: Half-year Report.
I do like good quality investment trusts and HSL is, in my opinion, a high quality IT delivering year on year, in fact, the half-year report shows that for the 5 years to 30/11/17 the share price appreciated by 159% and by 304% in 10 years. Not exactly sluggish and by far outperforming the FT All Share TR and that’s why I use it as one of my benchmarks to judge my own performance.
Below I have included a listing of the 60 largest holdings in the HSL investment trust and whilst there is the odd dud, it contains a lot of quality stocks: again a demonstration of the benefits of a basket of stocks: see an earlier blog I did about me being a basket case. Just click/tap on the listing to enlarge the view.
Thursday 18/01/2018: RNS: NewRiver REIT: NRR: Mkt Cap £977m:Third Quarter Company Update
Convenience-led portfolio remains well positioned to deliver growing and sustainable cash returns
Paul Roy, Chairman, commented: "NewRiver had a good third quarter, with our convenience-led, community-focused portfolio again performing well and significantly outperforming the wider UK retail market.
Our occupancy has remained strong at a record level of 97%, supported by affordable average rents of GBP12.70 per square foot.
Finally, our like-for-like footfall was up over the quarter by 0.5% and 1.9% during December, significantly outperforming the national benchmark. The strength of our key metrics underpin our growing dividend, which increased by 5% in the third quarter.
Looking ahead, our conservatively geared balance sheet is strongly positioned to exploit accretive opportunities over the coming months and we remain confident in our ability to deliver growing and sustainable cash returns to our shareholders from our convenience-led, community-focused portfolio."
My View: regular readers will know that I really like some boring businesses that do some of the unexciting work within my portfolios. In this case, NRR forms part of my high yield portfolio offering a 6.7% yield together with an attractive capital appreciation. It’s been trading at the bottom end of its trading range in the last couple of weeks and I am tempted not only to continue to hold but also bag a few more to the high yield portfolio: Edit: added more.
Thursday 18/01/2018: Air Partner: AIR: Mkt Cap: £79m: RNS Trading Update
TRADING STATEMENT - AIR PARTNER HAS GOOD SECOND HALF PERFORMANCE
With two weeks to go before the end of the financial year, Air Partner is pleased to report that it has had a good second half. This has been driven by continued performance across all product lines within the Broking division, including strong results in the US and in Freight. In Consulting & Training, the forward pipeline remains encouraging.
Underlying pre-tax profit for the financial year ending 31 January 2018 is expected to be not less than GBP6.4m, which compares to GBP5.1m reported in the same period last year and ahead of market consensus of GBP5.9m. The Group retains a strong net cash position.
The acquisition of SafeSkys, a leading Environmental and Air Traffic Control services provider to UK & International airports, announced in September, is performing in line with expectations and we are excited about the long term prospects for this business under our ownership. SafeSkys operations relocated to our London Gatwick HQ in November 2017 and integration has now completed.
Air Partner has had another encouraging year and the Board is confident about future prospects.
My View: AIR is one of my top 10 holdings and it continues to perform very well after a sluggish period from July 2015 to July 2016 but sometimes apparent quality takes time to be proven and recognised by the markets. AIR like all shares does not move up in a straight line and in fact, suffers far more turbulence than most other stocks within the folio. I rate it as a very attractive business and one which has had a very good share price appreciation of over 50% in the last twelve months. Maybe even after such a decent trading update, it will again consolidate for a while before hopefully making further strides forward. I will continue to hold.
Friday 19/01/2018: Bonmarche: BON: RNS Trading Update:
Sales for the 13 weeks ended 30 December 2017 decreased by 5.5% against the corresponding period in FY17. Store LFL sales decreased by 9.7% and online sales increased by 28.5%. Sales for the 39 weeks ended 30 December 2017 increased by 0.9%; store LFL sales decreased by 2.8% and online sales increased by 35.5%.
The clothing market became more challenging during the quarter
There remains uncertainty as to how trading conditions will evolve as we enter our final quarter. We do not anticipate material changes in the underlying market conditions, and in this short term outlook, the weather represents the most significant uncertainty due to its effect on consumer shopping behaviour, with the risks equally weighted on the up and downsides. At the end of the third quarter, the Board's view of the likely outcome for the full year remains in line with previous expectations.
We have a number of self help initiatives in progress or planned for FY19, which are expected to deliver profitable like for like sales growth in stores, and the continuation of strong sales growth online.
My View: well not the best of trading updates I thought whilst sitting still wet in the changing room at the pool; best do my usual stuff and sell at the bell and hopefully escape with a handy total return. The store's sales were not at all pleasing, however, the online increase is quite encouraging. However, going back to the interims, the online sales only accounted for about 11% of the total turnover and therefore whilst the % increase look great, we are working from a fairly low base. Now this small holding (less than 0.5% of the folio) sits with IG and my attempts to sell at the screen prices of 117, 116, 112 all failed and within 10 minutes the stock was off by -30%. Time to sit on hands and wait until the panic is over and then exit hopefully still on the profit side. Sometimes Mr Market just will not let you sell easily as a stock is taking a tumble. I will update next week.
It’s Glad I am Not There time CLLN, CAR, UTW, DTY : well we have already discussed CLLN above. So how about the once upon a time popular stock Carclo (CAR):
Trading Update and Board Changes 15/01/2018
Carclo plc ("Carclo" or the "Group"), the global manufacturing group, announces a trading update for the year ending 31 March 2018.
The stronger second half performance across the Group, anticipated at the time of the Interim Results in November last year, is not now expected to be achieved. Accordingly, the Board now expects the Group's performance for the current financial year to be significantly lower than previously planned.
The Board expects the Group's profits for the year ending 31st March 2018 to be significantly lower than its previous expectations. In addition, as a consequence of some of these delayed projects and lower customer orders, the Board has now reduced its profit expectations for the 2018/19 financial year albeit these revised expectations will still represent healthy year on year growth.
The Board announces today that, after 14 years as Group Finance Director, Robert Brooksbank is leaving the Group on 31 March 2018 to pursue other career and business opportunities.
In addition, the Board announces that Michael Derbyshire will retire from the Board at the Group's Annual General Meeting in July 2018 after nearly six years as Chairman and over 12 years as a Non-Executive Director.
My View: Thankfully not one I came anywhere near holding. Couple of things that I don’t like and rightly or wrongly, send alarm bells slightly ringing. Firstly I get a bit touchy when a CFO leaves at the time of bad news being released to the market; might he pure coincidence but who knows for sure. Also the term “ to pursue other career and business opportunities”, simply says to me that he has been given the push. Secondly, over the years I have become acutely aware that when companies say “things will improve in the second half of the year” or words to that effect, then unless it’s signed up contracts in the bag, the improvement stands a fair chance of not happening at all. Now I should say that I am not a Carclo in-depth follower as the numbers simply don’t attract me and even when they paid a dividend it was for the most part hardly ever covered by FCF. Just not one for me.
Of course, we then have perennial disaster prone UTW announcing on Wednesday 17/011/2018 that announced a final results update. Well, hang on, no real numbers as such but rather an announcement that they have a further delay in respect of its full-year results for the year ended 31 July 2017 ("FY17"). Honestly, sounds like there was more cooking going on there than in Breaking Bad. Incidentally, I did look at this share a couple of years back but was rather put off by the smoke & mirrors feel of their approach to accounting. Surely if the business were really to be that attractive and revenues/profits were genuine, then the directors would have much more skin in the game would have been mopping up shares at the depressed values that have plagued the business, particularly over the last twelve months. Also having had some exposure to such companies when working with a utility business, I struggled to visualise the sustainability of the business model; enough said.
Also on Friday 19/01/2018, we have a stinker of a trading update from Dignity: DTY a stock I sold at the bell on 13/11/2017 when they released a trading statement I just did not like; not a disastrous statement but nevertheless one that just did not make me feel in the slightest comfortable. I did have a medium sized position in the stock and thankfully escaped relatively unscathed: if in doubt, get out!
Pre-close Trading Update and Market Positioning
Dignity, the UK's only listed provider of funeral related services, confirms that its results for the period ended 29 December 2017 will be in line with market expectations. Its preliminary results will be published on 14 March 2018.
While the pre-arranged and crematoria businesses are performing strongly with no change to the Board's expectations for these businesses, the Board is keen to address the continuing acceleration of price competition facing its funeral business. The Board is therefore taking decisive action on its funeral pricing strategy with a view to protecting market share and repositioning the Group for future growth. Consequently, the Board believes that the results for the period ending 28 December 2018 will be substantially below the market's current expectations
My View: well it’s obvious that they are facing stiff competition, cough, cough, and thankfully my unemotional selling side save me from any horrible loss having sold on 13/11/2017 when the share price was £23 about 150% higher than at the time of writing these notes. A company that a few years ago had impressive numbers but things are subject to change.
I will repeat of a few golden rules mentioned in earlier whittling on, apologies if it gets a bit boring:
Before closing, I should mention that I have made two new purchases this week and also a top-up of an existing holding NewRiver REIT. The new purchases are of stocks that I have previously owned and discussed on the whittler.
Firstly Gear4music, G4M was repurchased after previously selling for a decent profit at the end of May last year. A few days ago they released a very upbeat trading update which was followed by rather bullish brokers note. One for the special situations pot.
Secondly, I bought back into Portmeirion PMP a stock I had previously sold when they were experiencing sales challenges in Korea. Since that time my worries have been somewhat quelled and certainly, the Wax Lyrical acquisition appears to be bedding down nicely. It’s not a big initial position as I still have a few reservations about their Korean market but we will see.
Have a good weekend and as ever, happy investing.
Voyager RNS Log WC 7/01/2018
After the pre-Christmas lull and the end of year festivities, it’s time for the first RNS log of 2018. Quite a few IT changes in the Whittler household firstly with a Microsoft Surface Pro, what a lovely little machine that is, and a new i7processor with SSD desktop with both machines getting me on the net within 15 seconds of startup and of course able to run ShareScope which along with SharePad, gets used a lot by me.
At the same time, I have moved to 200Mbps broadband and due to the thick walls on my very old property, have installed a mesh wifi with 3 three mini relayers. I now get absolutely crazily fast wifi that’s hard to believe in terms of speed and stability especially in the mountains of Cambridgeshire!
What’s all this got to do with share dealing and investments? Well, over the years I like most of us have had occasional poor broadband performance or indeed outage of the service. My last outage was with TalkTalk a couple of years ago and it took two weeks for them to get BT in to replace the broken line: I just can't operate as I wish in such an environment.
Anyway, enough of this IT waffling on, let’s get to some shares stuff starting with this weeks RNS’s that affect stocks within the Whittler universe:
Monday 8th January 2018: No RNS announcements affecting shares within the portfolio.
Tuesday 9th January 2018: RNS Persimmon: PSN: Trading Update:
Persimmon plc announces the following update ahead of its Final Results for the year ended 31 December 2017, which will be released on 27 February 2018.
Revenues for 2017 of GBP3.42bn were 9% higher than the prior year (2016: GBP3.14bn) with legal completion volumes strongly ahead by 872 new homes (6% increase) to 16,043 (2016: 15,171). The Group's average selling price increased by 3% to c. GBP213,300 (2016: GBP206,765).
Since the launch of our Group strategy in 2012 we have made a significant contribution to increasing UK housing supply by opening 1,189 new selling outlets and delivering 80,726 new homes to the market during which time we have increased our annual production by over 70%.
We continued to experience healthy customer demand for new homes through the autumn sales season and the value of our forward sales at 31 December 2017 of c. GBP1,355m was 10% ahead of the prior year (2016: GBP1,234m). Second half legal completion volumes of 8,249 were 455 stronger than for the first half of the year (H1: 7,794), an increase of 6%.
We anticipate our pre-tax profits for the year will be modestly ahead of market consensus.
My View: Nothing to get overly anxious about this trading update in my opinion and for me, it has been a Brexit beauty which has given me a well over 90% return since that wonderful day after Brexit. In my mind, a totally stupid referendum in asking people to vote on something about which they have little understanding of the implications or the economics and emotions rule the day. If the referendum was about which sauce you should have on your sausage sandwich, red or brown, then the issues would be easy for everybody to understand but that’s a sandwich; this if life for decades to come. Anyway, rant over and I am simply grateful on a selfish front to have loaded up with bargains post Brexit. Oh yes, back to Persimmon, I am happy to continue to hold.
Tuesday 9th January 2018: IG Design Group: IGR: Completion of Acquisition:
Acquisition of a leading Australian greetings card business
IG Design Group plc, one of the world's leading designers, innovators and manufacturers of celebration, gifting, stationery and creative play products, is pleased to announce that it has completed the acquisition of the trade and certain assets of Biscay Greetings Pty Limited ("Biscay"), a leading greetings card and paper products business based in Australia, as previously announced on 21(st) September 2017.
The acquisition, made through Design Group's Australian Joint Venture Artwrap, was satisfied by a cash consideration of AUD8.9m using local debt facilities. The consideration represents 2.7x EBITDA for the year ended 30 June 2017 although an injection of working capital of up to AUD3m will also be required. In the year to 30 June 2017 Biscay generated sales of AUD13.4m with an operating profit before tax of AUD2.9m.
Biscay provides greetings cards and related products to an extensive base of almost 2,000 customers through regional, wholesale distributors, and independent retail channels across Australia and New Zealand. With an established and strong reputation for design and excellence in product and customer service that complements the existing attributes of Design Group Australia, this acquisition provides opportunities for even greater engagement and cross-selling with all key National and Independent retailers throughout Australia and New Zealand.
Commenting on the acquisition, Paul Fineman, Chief Executive, said:
"Following our recent announcement of a robust half year performance and strong profit growth in Australia, we are delighted to complete this acquisition which complements Design Group's existing operations in the territory.
"The acquisition almost doubles the Group's significant market share in the value channel of the Australian greetings card market, adds to our capabilities in this growing and higher margin category and further diversifies the Group geographically. At the same time, it provides cross-selling opportunities and thus an even more compelling proposition to existing and new customers "
My View: well not exactly new news as the proposed acquisition was announced to the market on 21st September 2017 but nevertheless it’s worth commenting again that the acquisition appears to be attractive for the further expansion of IGR. My view on this quality business has not changed since I commented on the interim results at the end of November 2017: I am happy to continue to hold the investment which has delivered a return of well over 100% for me in the last 18 months.
Wednesday 10th January 2018: RNS Taylor Wimpy: TW.: Trading Update:
We will report FY 2017 results in line with our expectations, and we expect to achieve further growth and performance improvement in 2018. For FY 2017 the Group will deliver an improved operating profit* margin of c.21.2% (2016: 20.8%) and a return on net operating assets** of over 32% (2016: 30.7%). We will pay a total dividend in FY 2018 of c.GBP500 million, subject to shareholder approvals, and reiterate our intention to make further material capital returns in 2019 and beyond, with details to be provided at our Strategy Day scheduled for H1 2018.
We start this year in a strong financial and operational position with significant embedded value in our short term landbank and strategic pipeline. Whilst we are aware of potential political and economic risks, we expect to demonstrate further progress in 2018 against our medium term financial targets, whilst also driving further operational improvements where we can add value, including customer service and product quality.
My View: well looks solid if not explosive but as ever some investors may have been looking for something a touch more exciting. I rather expect TW., PSN and other housebuilders to fluctuate for a while but feel happy enough to hold for the moment and continue to take the very attractive dividends whilst at the same time, being mindful of the cyclical nature of the business.
Wednesday 10th January 2018: RNS Amino Technologies AMO Contract Win:
DELTA selects Amino for end-to-end multiscreen cable to IP service transformation
Amino Technologies plc (LSE AIM: AMO), the Cambridge-based provider of digital entertainment solutions for IPTV, Internet TV and in-home multimedia distribution, today announces that DELTA, the Netherlands-based provider of internet, TV, telephony and energy, is deploying Amino's MOVE TV delivery platform to provide a full end-to-end solution to deliver multiscreen entertainment services.
My View: Now technically the news makes interesting reading but it’s difficult to judge what impact the contract win will have in terms of profits. All we know is that AMO tell us “this contract will not have a significant incremental impact on the Company's revenues in the current financial year”. Maybe not the most helpful of RNSs just a little guidance would not have gone amiss.
Wednesday 10th January 2018: Frontier Developments: FDEV: RNS Trading Update and Notice of Results
For the six months to 30 November 2017, the Board expects to report a sustained level of performance compared to the record results achieved for financial year 2017 (the twelve months ended 31 May 2017), with revenue of approximately GBP19 million in the period compared to GBP18.1 million for the six months to 30 November 2016 and GBP19.3 million for the six months to 31 May 2017. Both Elite Dangerous and Planet Coaster continue to perform well.
Frontier released Elite Dangerous on PlayStation 4 in June 2017. The launch was smooth and stable, which the Company believes illustrates the capabilities of its development and publishing teams, and the scalability of its infrastructure, such as the proprietary COBRA game engine. The successful launch boosted sales of Elite Dangerous, contributing to strong revenue generation during the period. The Company also released content updates for Planet Coaster and Elite Dangerous, and hosted a well-attended first Frontier Expo event in October 2017. Trading through the holiday period (Thanksgiving and Christmas) was in line with the Board's expectations, with both Elite Dangerous and Planet Coaster performing well in price promotion events.
Taking the above factors together, the Board anticipates that Elite Dangerous revenue will normalise down from the first half to the second half of the financial year as PlayStation 4 sales settle to a post-launch run-rate, but that underlying run-rate sales (including downloadable content) will sustain at healthy levels. As a consequence, the Board remains confident about achieving its expectations for the current financial year ending 31 May 2018.
My View: FDEV is a highly rated share in terms of price and maybe the impatient trading types were looking for “above market expectations”. FDEV can be somewhat of a volatile stock and initially the traders probably sold a few but the stock ended up the day 4.4% down. I don’t have a massive holding of FDEV in my special situations portfolio and whilst it has done fairly well, I feel it is a tad too risky/elevated to add any more at the moment.
Thursday 10th January 2108: RNS boohoo.com: BOO: Trading Update:
Group revenue growth for this financial year is now expected to be around 90%, ahead of our previous guidance of around 80%, which was raised from 60% at our interim results in late September. We now expect group adjusted EBITDA margins to be between 9.25% and 9.75%, narrowing the range from the 9% to 10% as guided at our interim results.
Mahmud Kamani and Carol Kane, joint CEOs, commented:
"We are delighted to report another set of strong financial and operational results, with record sales in the four months to December across all our brands. The Black Friday period was our most successful ever and we traded well throughout the period under review. boohoo has continued to perform well, delivering strong revenue growth on increasingly challenging comparatives last year. PrettyLittleThing has continued to deliver exceptional results and Nasty Gal is making excellent progress in its first year. Our focus remains on the customer proposition: offering the best range of the latest fashion at affordable prices, coupled with great customer service."
Note: I will not attempt to go into the full details of the TU here but rather refer readers to the notes of the excellent Paul Scott who is an expert commentator in the sector and has a substantial holding in the business: LINK: www.stockopedia.com/content/small-cap-value-report-thu-11-jan-2018-tsco-mks-john-lewis-boo-gmd-card-ao-gmd-lrm-296228/
My View: I repurchased back into BOO a couple of weeks before Christmas. I had made decent profits on BOO earlier but jumped off the ride way too early and had been toying with the idea of reinvesting; hence the purchase after a drop of over 30% since the September 27th interims, mentioned above in bold. Whilst at the time of December repurchase, I did not see the stock as a totally compelling purchase, it nevertheless warranted inclusion in my special situations portfolio: so let’s see what happens from here. Undoubtedly BOO has been demonstrating exceptional growth in terms of revenue and profits the valuation has continued to be dramatically high. If the company continues to grow, then the valuation will be justified but as is the case with many stocks on mammoth valuations they have to continue to deliver to justify the share price.
Friday 11th January 2018: RNS XP Power: XPP: Trading Update:
The Company had a good finish to the year, in line with the Board's
expectations, as the strong order intake reported in the third quarter drove
robust revenue growth in the final quarter. Encouragingly, the momentum in
order intake continued into the fourth quarter and geographically, both order
intake and revenue growth has been strong across all regions.
Order intake in the fourth quarter of 2017 was GBP46.8 million, 24% ahead of Q4
2016 on a reported basis or 32% ahead in constant currency. This resulted in
order intake for the twelve months ended 31 December 2017 being GBP184.3 million,
an increase of 38% over 2016 on a reported basis, or 31% in constant currency.
Revenue in the fourth quarter of 2017 was GBP43.2 million, 16% ahead of Q4 2016
on a reported basis, or 23% in constant currency. Revenue for the twelve
months ended 31 December 2017 was GBP167.0 million, an increase of 29% over 2016,
or 22% in constant currency.
We are encouraged by the continued strong order intake experienced across the
business during the second half of 2017 and the overall book to bill level for
the year. We enter 2018 with positive momentum and therefore expect to grow
orders and revenue in 2018 above that in 2017.
My View: Note the company also goes on to say that the acquisition Comdel, is performing in line with management expectations. I like XPP and originally wrote about the company back in April 2016 marking out what really attracted me to the business. Since that original purchase, the price has appreciated by well over 100% and I continue to feel comfortable in holding the share that continues to demonstrate good returns of capital invested and good free cash flow.
Friday 11th January 2018: RNS: Somero: SOM: Trading Update
The Board is pleased to report that the Company delivered strong, profitable growth and healthy cash generation in the six months since 30 June 2017 exiting 2017 with its strongest trading month of the year. As a result of the strong H2 performance, the Board now expects 2017 revenues will be slightly ahead of market expectations of $84.7m, EBITDA will be comfortably ahead of market expectations of $26.0m driven by the volume increase and effective operating cost management, while net cash at 31 December 2017 is expected to be not less than $18.5m, well ahead of market expectations of $16.5m.
Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market.
In addition, considering the Company's continued, healthy cash generation and strong year-end financial position, the Board plans to review the Company's cash position alongside cash requirements for 2018 as part of its review of the final dividend for 2017. While no decision has been made with regard to future dividends, including any special dividends, the Board has concluded the growth and increased complexity of the business necessitates an increase to the level of net cash to be maintained by the Company to a minimum of $15m at 31 December each year going forward. A decision on the use of excess cash above the increased net cash reserve will be announced as part of the 2017 earnings announcement scheduled to occur on 14 March 2018.
My View: what a dull boring business SOM, you just can’t get less exciting that pouring flat concrete surely. Yet it’s the numbers that drew me to SOM back in 2015 with again good returns on capital, decent cash free flow and a well-covered dividend; at that time the price was around 100p. I suspect there is also a special dividend to be announced by SOM within the next few months. The business looks to be well on track to deliver again in 2018; a good company that I am happy to continue to hold.
That’s all for this week and moving into the weekend, I am off to Chesterfield to see the Hatters; a few years since I have been to Chesterfield and they have a new stadium since my last visit. I wish a good weekend to all readers and as ever, happy investing.