Voyager RNS Log WC 18/02/2018
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.
The key for the colouring of text within these notes:
Text in normal black: just my thoughts.
Text in blue italics: direct lifts or copy & paste from the RNS issues by the business.
Text in green: loosely, the investment principles that I feel comfortable with.
Red is a disclaimer in that what I write is NOT investment advice.
Monday 19/02/2018: Dart Group: DTG: Mkt Cap £964m: RNS Trading Update:
Current Financial Year (FY18)
Due to the continued success of our growing Leisure Travel business and a more normalised pricing environment after the heavy discounting in the market over the past year, the Board now expects Group underlying profit before taxation() for the year ending 31 March 2018 to be materially ahead of current market expectations.
The Group will publish its Preliminary Results for the year ending 31 March 2018 on 12 July 2018.
Next Financial Year (FY19)
The Group continues to develop and build its businesses.
Looking ahead to the year ending 31 March 2019, forward bookings in our Leisure Travel business for summer 2018 are presently satisfactory. We also remain encouraged by the performance of our two new operating bases at London Stansted and Birmingham airports.
Our Distribution & Logistics business, Fowler Welch, continues to focus on growing its revenue pipeline and developing existing and new business opportunities.
It is still early in the leisure travel booking cycle and we remain cautious on pricing. However, given the satisfactory forward bookings and the execution of our growth strategy, the Board currently expects the Group's trading performance for the year ending 31 March 2019 to be broadly in line with the current financial year.
My View: well nothing to dislike there and I would say that materially means in the order of maybe as much as 10% higher than market expectations. Some investors may be a touch phased by the comments looking into FY commencing April 2018 and whilst the forward booking process does offer some visibility, we have yet to enter Q1 of 2018/19 as yet. Therefore to my mind, the comments are absolutely fine and I am pleased to continue my association with DTG that goes back to about the 200p level a few years ago: I will continue to hold.
Tuesday 20/02/2018: Bodycote: BOY: Mkt Cap £1.8b: RNS Re Long Term Safran Agreement
BODYCOTE ENTERS INTO AGREEMENT WITH SAFRAN
LONG-TERM CONTRACT FOR MANUFACTURING SERVICES
Bodycote, the world's largest provider of heat treatment and specialist thermal processing services, today announced that the company has entered into a long-term agreement with Safran, an international high-technology group and tier-1 supplier of systems and equipment in the Aerospace market. Bodycote's global network will support the agreement, operating initially from strategically located facilities in France and Belgium.
Under the agreement, Bodycote will provide manufacturing services which include thermal spray coatings, electron beam welding, hot isostatic pressing (HIP), heat treatment and others to Safran companies and their key strategic first-tier suppliers. Bodycote's processes and technologies are used to prolong the working life of critical components and provide in-service protection from factors such as abrasion, temperature and wear.
The agreement ensures that manufacturing requirements will be met by a quality-focused supplier to support the growth in Safran's civil aerospace programs. These programs include but are not limited to CFM LEAP for Safran Aircraft Engines, helicopter engine programs for Safran Helicopter Engines and landing gear systems for Safran Landing Systems. Bodycote's international network of thermal processing and other specialist services offers security and mitigates risk in the supply chain.
My View: whilst accepting that it’s not the sort of RNS that can offer any quantification in terms of revenues or profit, it’s nevertheless an encouraging announcement from BOY. I like Bodycote and have considered them to be a quality outfit for many years: decent returns of capital, decent FCF, no debt and a quality supplier. Very boring and steady but that’s nice in my opinion, who needs excitement! Happy to continue to hold.
Wednesday 21/02/2018 No RNS Relevant to Portfolio
Thursday 22/02/2018: Zytronic: ZYT: Mkt Cap £85m: RNS AGM Trading Update:
Further to the outlook statement given in the preliminary results announcement, current revenues and profits over the first four months of this financial year remain broadly in line with the equivalent period last year. "
The Outlook t the time of the interims on 12/12/2017 said:
The current year has started with orders, revenues and trading along similar levels to that of the prior year, which, together with our strong balance sheet and cash generation, provides a sound base for further growth in dividends and shareholder value. The focus on growth this year will be from expansion in local sales representation in the USA and the Far East, and we shall keep shareholders updated on the progress, and any material developments, over the course of the year.
My View: It was rather fond “thank you and goodbye for now” departure from ZYT at the opening bell as at best it looks like the progress in revenues and profits have plateaued for ZYT and the stock looks to be ex-growth. Note that ZYT was one of my major holdings up to October 2017 but the price seemed to really rise overly much in my view reflecting over expectation amongst investors. When I initially bought ZYT it could rightly be described as a high-quality growth business. Now whilst I still see ZYT as a quality business it is now appearing to have lost that growth label and whilst it had bags of cash on the balance sheet it’s valuation now looks a little toppy for a small cap dividend paying stock that maybe carries too much risk at the current time, especially as a very significant percentage of its revenues, come from four main customers. So, at the opening bell, I sold my last batch having done some heavy slicing in October 17. ZYT has done very well for me since my original purchase a few year ago and I was happy to both top up along the way and also continually reinvest my dividends but the statement “current revenues and profits over the first four months of this financial year remain broadly in line with the equivalent period last year” is in my opinion a mild profits warning. Lovely company and I may well return someday but for now, it’s protection of profits and capital. Coincidentally, taking the “at the opening bell” sale price and the XD to come matched the previous day’s close price; the benefits of early trading following a somewhat disappointing RNS!
Note, take a look at the data below from the excellent SharePad and whilst there is still a lot to like, together with recent RNS announcements it suggests to me that growth may have stalled.
Thursday 22/02/2018: D4t4: Mkt Cap £51m: RNS Regarding New Contract Wins
D4t4 Solutions Plc (AIM: D4T4), the AIM-listed data solutions provider, is pleased to report a number of new contract wins in key vertical sectors for its Data Management and Data Collection business areas. Following the release of D4t4's half year results to 30 September 2017 and the Company's contract wins announcement on 27 December 2017, the Company has recently converted a number of further significant opportunities from its strong pipeline of potential business.
My View: At the end of November 2017, I sold the majority, about 80%, of my D4t4. I just did not like the comment in the half year results with a real bias to H2 with H1 being disappointing. I felt there just seemed to be too much uncertainty in the company and maybe I had got this one wrong so for me it was best to take a manageable loss and preserve capital. However, I still retain a fairly small position with D4t4 and the news flow couple with director buying is enough to encourage me to continue to hold my remaining shares. Within this RNS there is no financial quantification of what the contracts mean to H2, remember H1 was poor with "better things to come in H2" and I find that somewhat disappointing. To my mind after a rather poor set of interims back in November 2017, they really should have taken the opportunity to update investors on H2 expectations.
Friday 23/02/2018 No Significant RNS for Portfolio Shares.
Glad I An Not There: sadly this weeks award goes to an absolute beacon of reliability from my days as a little lad in short trousers. At that time the AA was an absolute pillar of service & reliability, I used to dream of becoming an "AA motorcycle hero when I group up”. Well just like another fond childhood memory, Hornby trains, how things change. In June 2014 the AA was the subject of an IPO and had a very decent start on the markets with its share price appreciating by about 70% in the subsequent year. Despite good returns on capital, I could never be persuaded to invest simply to that enormous red flag of massive debt; to my sceptical mind, it was a flotation destined to make others rich but not the shareholders in the long run. The debt pile was always totally horrid whichever way you look at it: Net Debt to EBITDA over 7, debt to EV of over 75% which goes up to 85% when you take into account the large pension deficit. At the time of writing these notes and taking into account the reduced market cap following the profits warning, the debt to EV has gone to an astonishing 83%.
On 21/02/2018 the AA released an RNS Strategy Review which was in effect a profits warning and a fairly massive reduction in the dividend. In itself the dividend cut is understandable but in terms of the overall debt, a mere drop in the ocean. I have no idea if the AA will survive without raising capital but overall, it’s not a place I would choose to be. Having said that, I should qualify my views on debt by saying that an easily manageable debt situation is fine but to my mind, the AA debt is simply crippling.
Will AA service, will Hornby survive or will they follow the fate of that other iconic memory for my childhood, Jamboree Bags! I also not that the unfortunate Neil Woodford is a major shareholder in AA. Now, without doubt, Woodford is a decent investor but like all investors, continued success is simply not guaranteed and when one of his shares runs into problems it's simply difficult to impossible for him to discharge his holding in the way that the average private investor may do. Just one of the advantages us private investors have over the big boys.
Incidentally, anybody who wants to do a follow up by looking in the rearview mirror with TalkTalk and my approach to getting out on less than good news may find the share price graph of TalkTalk interesting in reaction to poor news: “profits weighted towards H2”, “Cyber attack” etc offering plenty of opportunities to sell since mid 2015 and avoid the stepwise car crash of the share price. It was stock I held for quite a while and whilst selling a little early late in 2014, took some very decent profits. Had I been a holder in mid-2015, I would have long since fled. Why did I sell when I did? Well as a customer, when things went wrong I had really dreadfully frustrating service from the overseas “I must go through my checklist” customer service desk; as an investor the dropping down in returns on capital; overall losing conviction in the business. Protection of capital is paramount; if in doubt, get out “We can't control the winds - but we can adjust our sails”.
Finally, for this week, you may find of interest the following link to an article in the Guardian about restaurants and the crowded marketplace: www.theguardian.com/lifeandstyle/2018/feb/22/casual-dining-crunch-jamies-italian-strada-byron-struggling
Personally, I have totally withdrawn from investing in any food or pub chains several months ago. They have been decent enough to me in the past but we are at a time of rising basic wages for staff (a good thing for the low paid staff), incredibly tight margins and near saturation of the marketplace. Maybe one to return to another day but for now, they won't enter my portfolio.
Whatever you are doing this weekend, try to stay warm as we have it appears a very cold front coming in from the East; oh how I look forward to sitting on my cold plastic seat at Kenilworth Road on Saturday.