Thursday, August 23, 2012

Thu 23 Aug - pt. 1 - JD., STVG, HYNS

A fairly busy morning for announcements, let's start off with 2 shares in my portfolio. Firstly, JD Sports (JD.) announce a positive-sounding deal whereby they dispose of their "Canterbury" rugby brand for a payment of a useful 22.7m (sorry, using old laptop with no pound signs, so all figures are in pounds sterling unless stated otherwise). If I've read the RNS correctly, then the payment seems to be settling inter-company debt, with only one pound for the equity.

It's a related-party transaction, where JD. sells Canterbury to its own majority shareholder, Pentland Group (which owns 57% of JD.). Given that Canterbury only made 0.4m profit, and there are logical reasons for the disposal, on the face of it this looks like a sensible move that raises cash for JD.. There is also another smaller acquisition for 50k.

I like JD. and think the shares look very good value on a cashflow basis. They acquired Blacks Leisure when it went bust, so once that's sorted out JD. should see a nice boost to profits, in my opinion. I hold shares in JD..

Secondly, I also hold a small number of shares in Scottish TV company, STV Group (STVG). Their interims to 30 June are out today, and the headline numbers look OK - turnover flat, but EBITDA and operating profit both up around 16%. Adjusted EPS is up 7% to 16p, so assuming no seasonality that's 32p annualised - which looks exciting when you see that the shares are only about 90p, so a PER of just under 3!

Obviously, with that kind of PER, there is a fair bit of net debt, at 55.9m, but that doesn't look outrageous to me, given half year EBITDA of 9.3m. So it's about 3 times annualised EBITDA - high, but not in danger territory in my opinion.

There is also a pension deficit, but it's unchanged at 23m after tax (30m before). Given the long-term nature of pension deficits, this looks manageable to me, with an 18 year recovery plan in place. There is no dividend, but that remains under review.

The outlook statement is a bit vague, but points to reduced advertising revenues. That should change once the economy is recovering, so this is potentially a cyclical recovery story. I probably won't be rushing out to buy more shares at the moment, but on the back of these figures I'm happy to keep what I've got.

Gosh, running out of time already, this hour between 7-8am goes so quickly!
What's next? Haynes Publishing Group (HYNS) is a company I've always liked, as their products (detailed repair manuals for cars) are so good, that they have that market niche effectively to themselves. I also don't believe this area is likely to go online, as having used their products many years ago myself to service and repair my unreliable student cars, they get so covered in oil & dirt, that nobody in their right mind would use their tablet in such circumstances.

I'll never forget the flat inspection from our halls of residence warden in 1989, when her jaw dropped to the floor on finding a 2-litre car engine in my bedroom, propped up on two of the kitchen chairs! "Well that's something I've not come across before in the last 25 years here, she exclaimed!". I was expecting to receive a hefty fine for breaching my lease, but she chuckled, "well at least you put down newspaper underneath it!", and left it at that!

Sorry, I'm rambling. Getting back to Haynes, the figures today for y/e 31 May 2012 are not good. Revenue down 9%, and PBT down 35% to 4.7m. Ouch. Basic EPS is down to 20p, although the final divi of 9.5p is maintained, for 15.7p full year divi. Therefore this should be seen as a cash cow, but I think the market is also now likely to treat it as a declining business (which I don't think it necessarily is), hence I would expect to see the shares (currently 190p) pole-axed today, as the only broker forecast for 30p has been missed by a mile. Although the big divis might provide some support.

A word of warning on HYNS - I seem to recall that there are 2 classes of share, hence the mkt cap is understated on some data websites, so be sure to verify that.

OK, I'll publish this as part 1, then do a follow-up report in the next hour or so as part 2, as there are some more results I want to look at.

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