Wednesday, September 12, 2012

Wed 12 Sep - KGF, HOME, ALY, THT, AVG

Good morning, let's try a new font! (I'm bored with Verdana, so we'll have Helvetica today).
Another busy morning for interim results. Large cap (£6.5bn at 272p/share) retailer Kingfisher (KGF), owner of B&Q, reports a £68m (15%) fall in interim profits, due to adverse currency movement £25m, record wet weather in UK/N.Europe £30m, and £10m for the roll out of new products (that one's a bit lame!). Will be interesting to see what (if any) read across there will be for Homebase owner, Home Retail Group (HOME), which regulars will know has been a firm favourite of mine from the recent lows of 70p to its present 97p (trading statement tomorrow, 13 Sep from HOME).

KGF have followed the current trend for giving a programme of common sense profit improvement ideas a cheesy name - in this case they refer to it as "Creating the leader". They've even got a second cheesy name for their customer service ideas called, "Better Homes, Better Lives", so someone in Marketing at Head Office has obviously gone on some courses & drank too much coffee! I jest.

HOME reported in Q1 that sales at Argos were flat, and that profit for the group would be in line with market expectations. So if they even report continued flat sales in Q2, then that should trigger a re-rating. So fingers firmly crossed for tomorrow.

Laura Ashley Holdings (ALY) issues remarkably solid results - I thought this brand was a hangover from the 1980s, but apparently not. In the 26 weeks to 28 July they delivered impressive LFL UK sales up 3.9%, when most are struggling to get into positive figures at all that is impressive. They have net cash of £27.8m, and pay a maintained 1p interim divi. LFLs accelered in the current period so far (8 Sept). Over 40% of their product is manufactured in the UK, so a business worth supporting. Outlook is "confident". The shares look reasonably good value too, on a current year fc PER of about 11.

A third retailer reporting this morning is Thorntons (THT), the struggling chocolatier.
At 27p/share the mkt cap is £19m, but the results for 53 weeks ended 30 June 2012 don't look good. They scrape in just above breakeven at the pre-exceptional level, at £0.9m profit (prior year £4.3m), not good on £217m turnover. The bigger problem though is net debt, which has risen to £29.1m. How do you repay debt if you're not making any money? There is also a £29.1m pension fund deficit. There is no dividend. It is difficult to see any value at all in the equity, given the net debt & pension fund deficit, unless you believe a strong trading turnaround is in the pipeline. A glimmer of hope is that they have a strong order book for commercial customers.

£22m mkt cap component manufacturer, Avingtrans (AVG) has had a good year ended 31 May 2012, with turnover up 21% to £44m, and fully diluted, adjusted EPS up from 5.5p last year to 7.5p this year. At 85p the shares look reasonable, although bear in mind that net debt is up to £8.4m, so over a third of the mkt cap. Big rise in final divi from 0.4p to 1.0p, although that's still quite a low yield. Might be worth a further look?

Cracking results from housebuilder Barratt Developments for y/e 30 June. But given how ludicrously overpriced UK housing still is, propped up by a shortage of supply & record low interest rates, I can't bring myself to look at this sector. Far too high risk in my opinion.

Reckless punt of the day is Chariot Oil & Gas, which I have had a dabble on at 31p, following my friend Paul Curtis, who is a genius in this sector, who Tweeted to say he's bought in around that price.

Gotta dash, am on an IT course today to learn WordPress. Have a good day!

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