Tuesday, August 7, 2012


Good morning, and quite a nice bull run we've been having recently, despite all the macro-economic gloom, with the FTSE now up to 5,800. Markets seem reassured that the Eurozone might finally pull their finger out and make this single currency work properly. Surely the main lesson from the 1930s was that  trying to eliminate deficits in a Depression doesn't work, but actually makes things worse by causing a long & painful deflationary spiral? Apparently not.

Car dealership group Pendragon (PDG) has drifted on & off my radar many times over the years. Their interims to 30 June are out this morning. £1.9bn turnover and £19m pre-tax profit, so a 1% profit margin, equivalent to 1.1p EPS for the 6 months. Full year broker forecasts are for 1.7p this year and 2.0p next year, and full year expectations are confirmed.

Can't say it excites me at a share price of 16, so that's 8 times next year's earnings, given that it has £221 of net debt, and a history of Rights Issues.
They do say that the dividend will be restored this year though. Their interest bill devours half operating profit, so that debt is pretty significant, and can't just be ignored. Balance sheet is still ropey, with negative £100m net tangible assets, so I'll pass on this one.

Electricians T.Clarke plc (CTO) put out interims to 30 June 2012. At 49.5p their mkt cap is £20.5m. Not great, with a wafer thin profit before tax of £0.5m (l.y. £1.4m) on turnover of £90.7m (£92.6m).Net cash is flat at £0.7m. Order book up significantly though, from £193m to £230m.

Interesting that they worked on iconic projects such as The Shard, Olympics Stadium, Westfield Stratford. Some nice reference sites there. The sting is in the outlook statement though, with a profits warning that margin pressures will mean full year profits highly likely to be significantly lower than expected. Oh dear. So expect a sharp fall in share price today, 20-30% would be my guess. Interim divi of 1p has been maintained though.

This is the type of business that needs a buoyant economy to make a decent profit, otherwise customers just squeeze the margins away by playing competitors off against each other in a downturn.

It's got a £12.1m pension deficit too. Possible longer term recovery play, but that might be some way off.

Walker Greenbank (WGB) shares have performed well in the last few years, surprising for a luxury furnishings company. Their trading statement this morning is positive, with sales up everywhere apart from mainland Europe (good old EU, what a great idea that was!) They confirm market expectations for the full year. That indicates a PER of 8.3 at 75p/share.

The balance sheet looks OK overall, but there is a £7m pension deficit (probably higher now), and debt which fluctuates throughout the year, but is minimal at year-end. Potentially interesting though - as a company that does well in a bad economy will tend to do very well once recovery is underway.

Gresham Computing (GHT) interim results don't look particularly exciting, with turnover up a bit to £6m, and PBT up from £0.6m to £0.7m. Historically this company has managed to hype itself up enough to attract a stratospheric rating, and it doesn't look cheap now, on a PER of 24 times this year's forecast, which they confirm. Too warm for me.

Stockbroker Share plc (SHRE) report unimpressive interims, with operating profit halved to £0.4m. Difficult to justify a £34m mkt cap, although it does have £10.6m of its own cash, and no debt. Balance Sheet looks good. Seems to be tying up capital for little reward though. I suppose it might be an interesting recovery play, operationally geared, but some of that already seems priced-in, so not for me.

Market research company YouGov (YOU) outs out an in line trading statement for y/e 31 July 2012. Can't get excited on a forecast PER of just under 17. Although at £7m, net cash is about 10% of the mkt cap.

Zotefoams (ZTF) results look OK, with basic EPS up 10% to 7.3p for the 6 months to 30 June. In line expectations for the full year. H1 is stronger half, so full year forecast is 11.8p, for a PER of 14.5, looks about right. Another one with a pension deficit, but only £4.7m. Maybe I just haven't noticed pension deficits so much in the past, but they seem to be everywhere at the moment, a real problem.

That's it for now, have a good day!

No comments:

Post a Comment