Thursday, August 30, 2012


Good morning. Another busy day for results, far too many for me to cover, but as usual I'll pick out the 3 or 4 that look most interesting to me.

I am pleased to see that the inept Chairman of Lighthouse (LGT), David Hickey has today resigned (before he is pushed). This is the Chairman who tried to de-list Lighthouse against the wishes of its shareholders - a pretty stupid course of action. Let's hope the Directors of other small caps learn the lessons from this case that de-listing;

1) Destroys shareholder value (typically a share price will halve, or more, when it is announced that they are to seek a de-listing,
2) Is only ever justified in the most extreme cases where the mkt cap is tiny, the company is loss-making, and strapped for cash,
3) Where all other options have been exhausted, and
4) Where shareholders have been consulted and agree with the course of action.

In my opinion when a company lists on the Stock Market, then that is permanent, other than in the circumstances noted above. Therefore it is good to see a Director who failed to look after shareholder interests get pushed out.

It has been obvious for a long time that JJB Sports (JJB) is moribund (as I've been saying for a long time, including Tweeting about it yesterday - see the panel on the right to follow me on Twitter, @paulypilot). It has had an extraordinary series of refinancings, and 2 CVAs to ditch many loss-making shops, but to no avail.

Their RNS this morning more-or-less throws in the towel, saying that a formal sale processs is now underway through KPMG. Nobody in their right mind is likely to take it on as it is, therefore I believe the inevitable outcome now is that the profitable stores will be sold to the highest bidder for not very much, and that the amount raised is highly unlikely to be enough to cover the creditors. Therefore these shares are worth nothing (as has in reality been the case for a long time). Sad, but that's life. JJB has been crushed by the competition, Sports Direct, JD Sports, discount general retailers, and the internet.

Shaft Sinkers (SHFT) whose name always sounds like it should be a DJ or dance act, announce disappointing interim results. Revenue (which is mainly underground construction in South Africa) fell 10.6% to £100m for the 6 months, but a sharply lower gross margin added to their problems, and profit before tax has collapsed from £6.2m to £1.1m. Ouch.

However, the outlook sounds OK, and they are paying a 2.4p interim dividend, saying they are confident. Might be worth a look once the dust has settled, but likely to sell off on the back of these poor figures I would imagine. The Lonmin situation is presumably a significant risk too, given that SHFT mainly operates in South Africa?

Interims from Churchill China (CHH) look OK - turnover flat, EPS up 25%, although the profit growth is not terribly meaningful, being based on a very small figure (bugger-all plus 25% is still bugger-all!). It's an H2 weighted business.

However, they have maintained the interim divi at 4.8p, so the yield looks fairly attractive at around 4-5%, although the PER looks a bit toppy to me around 14-15.

Interims from £17m mkt cap Pilat Media (PGB) don't look very good, with turnover down a bit, and underlying operating profit almost halving to £0.6m.

Interims from CAPE (CIU) look pretty grim - adj EPS is down 67% to 7p. However, they reiterate full year guidance (which seems to be around 32p according to Digital Look), and have maintained the interim divi at 4.5p. So if those figures are right, then it looks potentially interesting on a fwd PER of around 6, and divi yield of around 7%. There's a fair bit of debt though. I might put this on my watch list, but no more than that at this stage.

Macfarlane (MACF) results look reasonably good, but the size of the debt + pension deficit put me off. Interesting to note though that they've managed to continue paying divis despite this.

Looks like a soft start - FTSE100 futures are currently down 20.

1 comment:

  1. Hi Paul,

    You might want to have a look at the ownership structure of SHFT - made it a no-no for me.