Tuesday, August 21, 2012

Tue 21 Aug - JPR, TNI, HAT, PTY, CPP

Good morning! Johnston Press (JPR) announces interims to 30 June 2012 which confirm my view that it is a zombie company, with such excessive levels of debt that the equity can only be considered worthless.

The contrast with Trinity Mirror (TNI) is stark. Whereas TNI is paying down its net debt so fast that it should become net cash positive in 2014, JPR is struggling to just service the debt, with very little reduction in the total.
In a declining sector, this must surely eventually be terminal for JPR? Therefore my bargepole is close to hand. I think shareholders here are deluding themselves that they own a viable business. Whereas the reality is that it suits the Banks to prop it up, since then they don't have to make a provision against the loans which cannot possibly be fully repaid from cashflow (in my opinion) which is likely to shrink over time. Net debt is about 360m, versus 30m interim cashflow, but most of the cashflow is swallowed up just paying interest. There's also a 100m pension deficit for good measure.

I'm having trouble with my data provider again this morning (Morningstar), and must say that I'm getting pretty sick of the poor service from them given the annual fee for premium services that I pay. It's very slow to load, sometimes won't load at all, and the data is poorly laid out. What a pity that Hemscott was taken over by Morningstar, it was so much better before that.

Pawnbrokers H&T (HAT) announce interims which don't look too great - operating profit has fallen from 10.9m to 8.1m on lower margins. But they do reiterate full year expectations to be in line. The balance sheet looks strong, and the shares look good value, however I'm just not comfortable trying to make money out of other peoples' misery, so won't be investing in a pawnbroker.

Parity (PTY) has issued interims which look pretty uninspiring to me, 43m turnover and breakeven underlying profitability, makes you wonder what the point is? Moving swfiftly on ...

CPP (CPP) interims show underlying operating profit down 23% to 19.2m. They look a rather spivvy business, insuring mobile phone handsets & the like (e.g. card protection policies). Also looks messy - with an FSA investigation, and a risk of not being able to renew its bank facilities. That said, if those factors are resolved then the shares look cheap, and I like the chart shape being formed.

OK that's it for this morning, although I missed yesterday's results, so will try to catch up later.


  1. Agree re JPR, with a 10% all-in interest rate on the debt, I don't see how they can bring it down to manageable levels. Half the revenue and operating profit of TNI and yet it trades on a higher enterprise value?

  2. Good point Quinch. I didn't realise they paid 10% on the debt - confirms my view that it's now effectively a zombie company controlled by the banks. Equity therefore worthless.

  3. Absolutely agree with your comment re Hemscott/Morningstar. Basically Morningstar took one of the best systems for working with fundamental data and totally ruined it, for no apparent reason. Funny old world....