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Headwinds and Challenges Impact Reckitt Benckiser

Travis Perkins TPK The real truth about the state of the UK economy is beginning to bite. With like for like third quarter sales growth falling to 2% and an uncertain UK outlook, TPK is to close over 30 branches and 10 distribution and fabrication centres. In addition challenging market conditions led to Plumbing & Heating sales falling by 3.9%, a performance which management regards as unsatisfactory. Like for like sales growth for the nine months of the year to date stands at 2.7% which adds emphasis to the 3rd quarter decline.

Reckitt Benckiser RB has been impacted by  expected third quarter headwinds and other challenges which reduced the quarter’s like for like growth to 2% which became 17% if you take into account sterling devaluation. RB looks like yet another company whose day has been saved by the benefits provided by collapse of sterling. India and China produced strong growth but Brazil proved challenging. The target for full year like for like growth  still remains at 4%.

Rentokil RTO is pleased with its 3rd quarter performance which produced like for like growth of 3.1%which was increased to 16.6% by contributions from acquisitions and compares to 2.7% for the year to date. Pest control had an excellent quarter with like for like growth of 5.9% whilst emerging markets shot up by 20.4% and growth markets by an even higher 26.3%. Europe on the other hand was tough in parts and particularly France.

Foxtons FOXT reduced activity in the London property sales market hit Foxtons hard in its third quarter with sales revenue down by a third. It believes that the London market  remains very attractive and presents a huge opportunity for growth but it can not quite bring itself to provide any facts to justify its belief.

Hotel Chocolat Group HOTC  which was admitted to AIM in May almost doubled last years statutory pre tax profit from £2.9m to £5.6m and expects a strong Christmas with what it describes as its “more cocoa, less sugar” policy.

OMG plc OMG expects revenues for the year to the end of September to reach £29m., ahead of market expectations after what it describes as a successful close to the year

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Beware London Property & South American Mining

Foxtons (FOXT), London’s leading estate agency, says it had an encouraging second half and that 2015 as a whole was solid, which is presumably why the share price has collapsed over the past 8 months. The truth about the London property market and it is good news, (except perhaps for Foxtons) is that Land Registry figures to 31st October show a fall of 11% in Greater London sales for the first 10 months of the year.

Despite London’s troubles Foxtons is facing the future with courage. Group turnover rose 4% in 2015 and the shareholders are being rewarded with a special dividend of 6.23p bringing the total dividends for the year to 11p, a rise of 13.4% for the year.

The share price has nose dived from 285p last June to yesterdays 165p but has now risen 4p on today’s update. However if London’s huge property bubble has only just started to deflate, there could be more trouble in store for the share price.

Another cautionary tale this morning comes from Herencia Resources (HER) which illustrates the dangers of AIM and of mini mining companies with bases in South America.  Five years ago Herencia, with its two major projects in Chile, was one of the most talked about shares on AIM. It was going to make shareholders extremely wealthy and indeed it did and that was supposed to be only the beginning, compared to what would happen when it got into production. In the last few months of 2010 and the beginning of 2011 the shares surged from 73p to £4. Indeed if you got in early in 2009 you could have bought  for 40p, your money would have nearly doubled when the big rise started and by the time the peak was reached at the start of 2011 you would have seen it grow tenfold.

But it didn’t last.  It never does, although the excitement and the enthusiasm continued for a couple of years or so, unless you got out very quickly, your huge profits quickly evaporated.

Herencia shares have in recent months been trading at 5p or less and it looks like the death knell has been sounded this morning with the news that contracts have been signed which  mean that 100% of its two major projects in Chile could be disposed of for just over $5m. Still loyal shareholders are up in arms and screaming of betrayal and another scandal on AIM.

The lesson is of course, that if you must by shares on AIM and in particular shares in tiny mining companies in South America, or wherever and you are lucky enough to make a fortune, take it whilst the going is good.

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