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IG Group Holdings plc IG reports record revenue, operating profit and earnings for the year to the 31st May with strong growth across all regions and products. It is proposed that dividends for the year be increased by 34%, with a final payment of 33.5p per share bringing the total to 43.2p. The outlook for 2019 is not as bright as revenue will be lower than in 2018, reflecting the impact of the regulatory changes in the UK and EU. Operating expenses are also expected to increase. A return to growth is expected in the following year.
Unite Group plc UTG The first half of 2018 has been another active and successful period with reservations at record levels. 91% of beds already reserved for the 2018/19 academic year and like-for-like rental growth is expected to be within a range of 3.0-3.5%. Profit before tax for the six months to the 30th June rose by 70% and the interim dividend is to be increased by 30%.
Drax Group DRX Performance in the six months to the 30th June was impacted, by two unplanned outages. Despite this last years statutory operating loss of £61m. was turned into a profit of £12.m and the statutory loss before tax of £104m fell to £11m. The reported basic loss per share which stood at 21p in the first half of 2017, fell to 1p. per share. The interim dividend is to be increased to 5.6p per share, a total of £22.4 million compared to 2017’s £20m. The full year dividend is expected to total £56m
Fevertree Drinks FEVR Enjoyed further strong UK growth in the six months to the 30th June. Revenue rose by 45%. andaAdjusted EBITDA by 35% and the interim dividend was increased by 40% to 4.22p per share. The major progress made in the first half leads the company to believe the outcome for the full year will be comfortably ahead of expectations.”
Tesco plc TSCO The competition and Markets Authority has given its blessing, or unconditional final clearance, as they say in the city, to Tesco’s proposed merger with Booker Group. Completion of the merger is expected in March after shareholders meetings in February.
I can’t help thinking that Tesco will rue the day when management decided that this was the way forward and perhaps the only solution it could find to try and save the day. It indicated that management had continued to lose touch and failed to realise that retail as we had known it over the last 150 years or so, since Mr. Sainsbury opened his first shop and Mr Marks opened his stall on Leeds Kirkgate market, is dying a slow death. The first nail in the coffin came from the planners who decided it was better to force the major retailers out of city centres and replace them with charity shops. It also meant that the big developers could then legally bribe local authorities by building new by passes for them free of charge so that shoppers who had gone into city centres by bus, could shop in soulless new shopping complexes and malls which nobody wanted in the first place. and which they could only get to by car,. thus enabling local politicians and other jobsworthies to grab themselves a headline or two by screaming how bus services had been decimated and people were going out of town to shop.
The whole shopping experience became unpleasant and customers retaliated by staying at home, with the car in the garage, the central heating on and most important of all, the computer on. The second nail in the coffin had arrived and it was called Amazon. The days is not now far off when it will be, “pop down to the Amazon pet and get us a pack of Tetleys and a bag of nuts, will yer.” If Walmart is wilting under the onslaught of shopping by computer, what chance is there for Tesco whose response to the internet age was to announce it was stopping delivery to Greece of clothing and other items bought on line.
Drax Group DRX has suffered an unplanned outage on its rail unloading facility at Drax Power Station. Whilst it is anybody’s guess I think that is supposed to mean that the trains have broken down or stopped running or that the unloading facility itself has crashed. Any road up as they say in the nether regions of Selby, we are not educated enough to be told exactly what an outage is but it is going to last until some time in January and it is going to cost a pretty packet, about a 10m reduction in EBITDA for 2017.
Severn Trent SVT is so mired in jargon that it has started creating new words which are so obscure and meaningless that it has had to add a little dictionary at the end of today’s update. What is wrong with plain English ? Even HMCR now uses it to good effect. Is it beyond the wit and intelligence of Severn Trents senior management to do the same.
Can they not really do better than ODI outperformances, totex efficiencies, business plans for AMP7 and methodology consultations for PR19. In fact senior management seems so besotted with this nonsense that it had difficulty in finding anything about which it could update us.
Drax Group DRX managed to turn last years interim profit before tax of £184m into a thumping loss of £83m, and saw underlying earnings per share collapse from 4.2p to 2.2p. so not surprisingly management is taking action. Firstly it is claiming that this transformation is due to the maintenance of operational excellence across the group. Secondly it is more than doubling dividends for the 6 months to the 30th June from last years 2.1p per share to 4.9p. To be fair the figures do include unrealised losses of £65m due to foreign exchange hedging – so that’s alright init ?? Just as a sideline net debt surged from £85m to £372m. Never mind, that dividend increase should ensure that jobs are safe.
RPC Group RPC will announce at todays AGM that the current share price of the company significantly undervalues its performance to date and its future prospects. Revenues for the quarter to 30th June have been well ahead of the same period last year and have also exceeded management expectations. An inaugural share buy back program of up to £100m. is to be launched.
Wizz Air Holdings WIZZ has produced a record first quarter performance with profits rising by 50% to a record £58m, as passenger numbers rose by 25%. There is however some caution expressed about prospects for the second half of the year.
Cello Group CLL enjoyed a good first half with strong overall and like for like growth from Cello Health in the 6 months to 30th June. Expectations are that full year results will also be strong.
Ashley (Laura) ALY Blames demanding trading conditions for having to warn that full year net profit before tax will fall below market expectations. Like for like retail sales in the 6 months to the end of December fell by 3.5% and profit before tax fell from £11m. to £7.8m. As a sign of the times online trading held steady. Whilst management tries to take comfort from some positives which it claims to see, it can no longer live off the fact that it was once a great British brand name. The world has moved on since then. The question is whether the Board can do the same.
Avation AVAP enjoyed a 51% rise in profit before tax for the half year to the end of December, after a rise of 43% in lease revenue. Profit after tax was even better with a 65% rise and earnings per share were up by 46%. At the year end the fleet consisted of 40 aircraft with an average age of 2.8 years compared to 5.2 years at the end of 2015 reflecting the acquisition of new aircraft. The remaining lease time had risen to 7.8 years compared to 2015’s 5.7 years. More new aircraft will be added to the fleet in 2017. The share price has risen by 50% since the end of August and now stands at 199p.
Huntsworth HNT expects results for the year to the end of December will be ahead of management consensus, following good 4th quarter trading, strong growth at Huntsworth Health and continuing favourable exchange rates.
Drax Group DRX is cutting its full year dividend by some 50% from 5.7p to 2.5p after a fall of 54% in underlying earnings per share for the year to 31st December. EBITDA declined by 17%. Drax has now achieved 65% renewable energy power generation, which it claims is a good performance in a challenging commodity environment.
Trifast TRI After a strong 3rd quarter performance, the return of growth to its business in Asia and foreign exchange tailwinds, the Board now expects that full year results will be ahead of expectations. The Board also feels that the company is strong enough to meet head on, any impact from Brexit and global political and macro economic factors. So there is a rare statement of strength and determination from one UK company which appears, unlike many, to have no intention of failing to cope with challenging circumstances.
Drax Group Plc (DRX.L) through its subsidiaries, engages in the generation and sale of electricity in the United Kingdom. Based in Selby, it owns and operates Drax Power Station, a coal-fired power station in North Yorkshire. This power station has an output capacity of 4,000 megawatts. The company also sells by-products of the electricity generation process, such as ash and gypsum; and levy exemption certificates, renewables obligation certificates, and sulphur dioxide emissions allowances. It sells electricity generated through the electricity wholesale market.
In the run up to preliminary results in February, on December 6th 2016, Drax published a trading update, and announced a conditional agreement to acquire Opus Energy Group Ltd and four Open Cycle Gas Turbine development projects. CEO Dorothy Thompson said the company continued to expect full year EBITDA to be around the bottom of the range of current market forecasts, but added that the Opus acquisition marked “an important step in delivering our strategy, contributing to stronger, more predictable, long-term, financial performance, through greater diversification of the businesses, delivering more opportunities right across the markets in which we operate.”
The investment opportunity at DRX had been flagged up by the VectorVest system as the stock started to drift lower around 280p during November 2016. The stock appeared on a number of metric indicators, including Relative Value (RV) and Relative Timing (RT) metric tables. RV is an indicator of long-term price appreciation potential, and DRX has an RV of 1.32, which is very good on a scale of 0.00 to 2.00. RT is a fast, smart, accurate indicator of a stock’s price trend that shows DRX RT rating at 1.63 – excellent on a scale of 0.00 to 2.00. Several other metrics highlighted the opportunity at DRX at the same time, with Value (the measure of a stock’s current worth) highlighting DRX at 452.49p per share, and therefore undervalued at its current Price of 366.80p per share.
A weekly chart of DRX is shown below with the share price graphed in candlestick format. Since December 2014 the share has been charting a large inverted head and shoulders reversal. This reversal was confirmed by a breakout of the “neckline” of the pattern in the last trading week. The target from the head and shoulders reversal should take the share towards the 500 level.
Many chartists would argue that the head of the reversal pattern is also a rounding bottom or cup formation. If so, then the handle of the cup and handle formation has given a strong buy signal in the last trading week as the 52 week high was exceeded.
Of note is the poor Relative Safety metric on VectorVest. At less than 1 this shows that there have been surprises and missed targets in the past. The opportunity looks good but solid and unemotional risk management should be in place and strictly adhered to.
In pursuing further diversification across its portfolio of businesses, DRX is clearly striking a chord with investors and major shareholders. Even though the stock now trades at year highs, the key VectorVest indicators show that all the key factors are in place for continued growth. Buy.
Dr David Paul
December 28th 2016
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On VectorVest a simple search using the Unisearch tool will quickly find shares that are undervalued with good fundamentals that have just issued a Buy recommendation. This will give the active trader a short list of many high probability trading opportunities each week. Traders now have the opportunity to spend five weeks discovering VectorVest’s unique simplicity, automation and independent guidance. Just £5.95 buys a 5 week trial to enable deep exploration, or how the system can assist in smarter trading in as little as 10 minutes a day. Powerful tools. Proven strategies. Unique Perspectives.
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As recently as mid January Stanley Gibbons (SGI) said that it would be comparatively unattractive to raise by way of new equity the 10m funding, which it desperately needed. So here we are less than 6 weeks later and guess what? The funding is being raised by way of new equity. Otherwise it would be unable to repay its additional overdraft facility of 6m., by the end of March.
The nonsense does not end there. The company now expects to make a full year loss of between 1 and 2m. due to lower revenues and failing to achieve the planned cost savings.
The auditors have resigned because the risks and uncertainties of doing the audit, exceed what they regard as acceptable. Unfortunately the board still seems to be in situ and senior management is still clinging on but for what purpose, one can only guess.
Ladbrokes (LAD) has slashed its 2015 dividend by 66.3% as profit before tax plummets by 46.4% and group operating profit by 35.7%. It claims that this is a good start to the delivery of its new strategy.
Drax (DRX) has decimated its final dividend with a cut from 7.2p to 0.6p meaning that 2015 total dividends have halved from 11.9p to 5.7p. Earnings per share are down 52% from 23.7p to 11.3p. The disastrous performance is all due to severe market deterioration and believe it or not, difficult regulatory challenges.
As on every bad day, there is some good news and of course it comes from the property sector, where else? Unite Group (UTG) which now has 46,000 operational student beds is raising its full year dividend by 34% to15p after profit before tax soared from 108.4m. to 388.4m and earnings per share rose by 66%
Croda International (CRDA) also delivers good news with record sales and pre tax profits. The full year dividend is being increased by 5.3% in addition to which a special dividend of 100p has already been paid. The company made strong progress, driven by innovation and by sales growth in all four divisions and in all its geographical regions.