Thursday, July 19, 2012

Thu 19 July 2012 - Morning report

Good morning.
Lots of results today, including predictably impressive results from Sports Direct (SPD), with underlying EPS up 11.4% to 18.7p. More evidence that great companies do well, even in a recession. They're crushing competition like JJB Sports. Shares look up with events at 294p though. No final dividend, which is surprising.

Sports Direct is a fabulous example of how a company will go from strength to strength if you properly reward & incentivise your employees! Instead of just paying minimum wage robots, SPD pays out a generous bonus scheme to staff, and just look at the results! We could do with more of that intelligent thinking in corporate Britain. Showering the rich with huge bonuses, and paying the troops an inadequate salary to live on, is not a recipe for a successful or happy company or country.

It looks as if time is finally running out for JJB Sports (JJB) with an AGM report which details terrible trading (cash margins down 16.6% for 24 weeks ending 15 Jult 2012), and the begging bowl looks to be out again.
Surely shareholders can't be so stupid as to pour even more money down the drain here? It needs to just be put out of its misery, which I suspect will now happen fairly swiftly - unless JJB manage to pull off their speciality of sourcing gullible and wealthy Americans to refinance it again?

Automotive engineer Ricardo (RCDO) puts out a bullish update, saying that profit should be at the upper end of analyst expectations. Shares are on a PER of about 13, which looks about right. Yield is around 3.5%. Net cash. Might be worth a look, but doesn't seem huge upside on those figures.

API Group (API) shares have performed very well in the last couple of years, and today they've issued a positive trading update - traded strongly in Q1, and on track to meet full year expectations. A very detailed note came out from Equity Development recently, and the company is in play, so might be worth a look. Forecast PER is only 6, so it looks cheap at first glance.

Walker Greenbank (WGB), the luxury furnishings group, might be worth a look, as recovery seems to be underway there. Although quite why they announce an RNS for a "substantial order" of $156k from a hotel in Texas, in the context of a group with turnover of £74m, seems odd to me. Surely that is just in the normal course of business, and does not warrant an RNS? Looks a bit desperate. Although it does go on to say that sales in the US are up 15% year to date. Shares are on a fwd PER of 7.5, so could be worth a look.

Running out of time here, there are so many announcements to read!

Halfords (HFD) have put out an IMS. Looks pretty bad, with Q1 group LFL sales down 5.2%, although they do show how the drop is concentrated in April & May, and has levelled off in June. Their autocentres (car repairs) seem to be doing well though. Unchanged interim divi of 8p. Guidance is for full year PBT of £62-70m, below current consensus of £76m. I don't like this business - seriously over-priced product, so the PER of 6 looks justified. Could go lower today? I don't like chasing high historic divi yields for businesses that are struggling, as sooner or later the divi is pulled. I'll be watching from the sidelines with this one.

Lots more updates, I might follow up with another post once I've had a cup of tea!

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