Diploma IMS

An international group of businesses supplying specialised technical products and services. They operate globally in three distinct sectors - Life Sciences; Seals and Controls. I have a holding in my growth portfolio (epic code: DPLM). 

Diploma issued their first quarter IMS today.  Group revenues for the period ended 31 December 2013 were 4% ahead of last year, although on an underlying basis, after adjusting for the impact of currencies, revenues increased by 6%.  This continues the stronger underlying growth seen in the second half of last year of 6% commented on here.  Operating margins remained in line with those achieved in the first quarter last year. 

By division the Life Sciences sector saw revenues grow 2% (8% ahead on an underlying basis); in the Seals sector, revenues increased by 4% and Controls revenues grew 8% ahead of last year.

Free cash flow in the quarter was ~£5m benefitting from lower capital expenditure as the Group's "Investment for Growth" programme reduces in scale.  Net cash funds increased to ~£22.0m at 31 December 2013 from £19.3m at the end of last year.

This looks to be a good first quarter and continues the momentum seen in the second half of last year.

Dialight directorate change

Supplier of light emitting diode (LED) solutions for industrial users. Applying leading edge LED technology, it produces retro-fittable lighting fixtures designed specifically for hazardous locations, obstruction signals and traffic signalling.  I have a holding in my growth portfolio (epic code: DIA). 

Dialight announced today that their Group FD Mark Fryer stepped down with immediate effect.  It is never a comfortable feeling when a key director leaves substantially earlier than his contractual notice (6 months in this instance).  Although he has stepped down from the Board today, he will remain with the company until the end of March, leaving shareholders to wonder why the company felt it necessary to have him resign his board position immediately, or why Fryer felt it necessary.

GlaxoSmithKline US FDA approval

GlaxoSmithKline a global healthcare company that develops, manufactures and markets pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products.  I have a holding in my income portfolio (epic code: GSK). 

GSK announced today that they had received U.S. FDA approval for Mekinist^® (trametinib) for use in combination with Tafinlar^® (dabrafenib) for the treatment of patients with melanoma that cannot be removed by surgery or melanoma which has spread to other parts of the body.


The original application was made in early July 2013, based on data from a phase I & II study.

Tesco trading statement

One of the world’s largest retailers.  I have a holding in my income portfolio (epic code: TSCO)

Tesco issued their Christmas & New Year trading statement today and performance, as in the 3rd quarter IMS, was weak.

Group sales in the six weeks to 4 January 2014 declined by -1.2% including petrol (-1.6% at actual exchange rates) and declined by -0.6% excluding petrol (-1.1% at actual exchange rates).

In the UK, total sales including VAT and petrol declined by -1.5% and by -0.6% excluding petrol, with like-for-like sales declining by -2.4%.  International sales declined by -0.7% (Asia -0.6% and Europe -0.8%) at constant exchange rates and -2.2% at actual exchange rates.

Management now expect to report full year results within the range of current market expectations of £3,157m to £3,416m for group trading profit.  The consensus mean was £3,330m.

Restaurant Group post-close update

The Restaurant Group plc (TRG) is engaged in the operation of restaurants and pub restaurants. The principle brands are  Frankie & Benny’s, Chiquito, coast to Coast, Garfunkel’s, Home Counties Pub Restaurants and Brunning & Price.  I have a holding in my income portfolio (epic code: RTN).

The Restaurant Group issued a strong post-close update, stating that profits for the 52 weeks to 29 December 2013 are expected to be ahead of the consensus of market forecasts.

Turnover for the year was 9% ahead of 2012 and like-for-like sales were 3.5% ahead; with operating margins expected to show an increase on 2012.

New openings were ahead of the previous year with 35 restaurants opened in 2013 compared to 28 in 2012.  Management stated that trading at these new sites had been excellent and they are set to deliver strong returns. The Group expects to open between 36 and 43 new sites in 2014.

The full year results will be announced in early March.

 

Greggs trading update

The leading bakery retailer in the UK, with almost 1,700 retail shops throughout the country.  I have a holding in my income portfolio (epic code: GRG).

Today Greggs issued a positive trading update - for the 2013 year total sales were up 3.8% and, although like-for-like (LFL) sales were down 0.8%, the fourth quarter showed an improving trend with LFL sales up 2.6%.


For the Christmas and New Year trading period (5 weeks to 4th January) total sales were up 4.8% and LFL sales up 3.1%.


Greggs continue to generate strong cash flow and they finished the year with a net cash balance of £24.6m, this compares to £12m at the interim stage and £19.4m at this time last year.  It will be good to see the detail when they announce the full results on 26 February and also the decision on dividends; I would think that a continuation of their 28 year record of dividend increases is a strong possibility. 


Management anticipate that full year results will be in line with their previous expectations.


For 2014 they have stated that due to the structural changes they are making, about 300 people may leave the business and that these changes would result in one-off redundancy costs and asset impairment charges amounting to £9.0m, of which £8.0m would be a cash cost.  Management anticipate that the ongoing benefit of the cost reduction would be £6.0m per year from mid-2015 and that, excluding the one-off costs, there would be a benefit in 2014 of £2.0m.


As previously indicated by management the costs of these structural changes are likely to constrain profit growth over the next two years; however they are confident that they are building a platform for sustainable long-term profitable growth.  See my previous post here for a full analysis.


Greggs is a highly cash generative business with a good dividend paying record, that will remain in my income portfolio.

Idox finals

The Company is engaged in the development and supply of software solutions and services to the United Kingdom public sector and asset intensive industries worldwide. It operates in four segments: Public Sector Software, which delivers software service solutions to mainly local government customers across a broad range of departments; Engineering Information Management, which delivers engineering document management and control solutions to asset intensive industry sectors; Information Solutions, which delivers both an information service and consultancy services to a diverse range of customers across both private and public sectors and Recruitment, engaged in providing personnel with information, knowledge, records and content management to a diverse range of customers. It also provides information management, Web development, online publishing and training services. I have a holding in my growth portfolio (epic code: IDOX)

Yesterday Idox released their final results, with no further trading surprises.  Group revenues from continuing operations grew by 3% to £57m, due to organic growth in the PSS division and the impact of the three acquisitions made during last year. 


The geographical split of its revenue was similar to the prior year with 33% generated outside of the UK. 


Gross profit earned was 4% higher at £52m and Idox saw an increase in gross margin from 90% to 91% as a result of an increased mix of higher margin software business. 


As guided by a previous trading update see here EBITDA decreased by 9% to £15.0m (marginally better than expected) with EBITDA margins of 26% compared to 30% last year.


Despite the problems, Idox still generates reasonable amounts of free cash flow, £6.6m compared to £7.4m last year.  


Diluted adjusted EPS fell 7% to 3.38p and statutory diluted EPS increased by 13% to 2.07p.


Management sated that "...The Group starts the new financial year in an improved position in terms of capability, reliability and revenue visibility going forward..."


So is the worst behind us and can we expect good improvement from here?  It is difficult to tell, the following statement from the Chairman would imply some further overhead increases: 


"...Idox has had a long tradition of running a very lean business in terms of costs and people and we now recognise that we need more depth and capability across the Group to manage our newer activities around the world and provide more cover and support when needed in critical management positions. In addition, the complexities of the sales process for both software and services in large global organisations means we need to be more competitive in terms of management skills..."


There was also no detailed mention of the progress in recruiting a CFO (other than it is likely to be the last recruitment in the process of strengthening their management team) since the last one left rather swiftly in October and they had expected to have one in place by December.


They usually hold their AGM in late February and issue a trading statement at the same time, so I will wait to then before taking any action.