Monday 29 September 2014

Key announcements 15-26 September



During the period I was away there were a few announcements for shares that I hold:

Greggs the Bakers
 
Greggs issued a very positive IMS on 15 September stating that like-for-like sales grew by 5.4% in the 11 week period to 13 September 2014, compared to a 1% decline in the equivalent period in 2013; this continued the strong performance reported at the time of their interim results announcement but also reflects the benefit of the weaker comparative period last year. 
 
In the year to date LFL sales have increased by 3.9% and total sales grew by 4.0% year-on-year in the 11 weeks, including the impact of their accelerated closure programme for poor performing shops.
 
In the year to date they have completed 153 shop refits and expect to complete around 200 refits in the year as a whole.  New shop openings were 32 year to date and they closed 43 poor performing units.  As at 13 September 2014 Greggs had a total of 1660 shops, including 42 franchised operations.
 
There are some strong comparatives for the final quarter, but with a combination of strong sales performance, lower costs and their outlook for the remainder of the year, means that management anticipate full year profits to be materially ahead of its previous expectation.  This lifted the SP up by 12% on the day to 602p, some analysts have pushed up EPS for this year to 40p, so the shares on the current price (594p) are on a P/E of 14.9 and prospective 3.3% yield.
 
 


Pan African Resources announced their preliminary results on 16 September with gold (97% of sales)sold increasing by 44.2% to 188,179oz, although sales grew only 15.7% to £154.2m, due to the 16% lower gold price received of $1,303 per oz for the year and the average strength of sterling in the period.
 
The cost of gold production increased from 52.3% to 68.6%, mainly due to Evander’s (their 2012 acquisition) low grade mining cycle a factor that will continue until early 2015. Consequently earnings were down 37% to £26.8m, with EPS further affected by a 13% increase in the average number of shares down 55.7% at 1.46p.  A 1.3% reduced dividend in sterling (a 7.3% increase in ZAR) was proposed of 0.7898p. Free cash flow due to the increased operational costs was well down at £0.7m compared to £20.7m last year.  A difficult year, but earnings growth is expected to return next year and on a prospective P/E of 7.3 and current yield of 6.3%, PAF looks to be a low risk investment for a portfolio exposure requirement to gold. 




If ever there is a reason to invest in large corporates with good credit ratings this is it.  On 16 September Diageo that returns an average of 10% of free cash flow on its average capital employed, launched a €0.5bn fixed rate Euro denominated bonds due in September 2024 with a coupon of 1.750%.  In addition to the new issuance, there was also a €0.5bn reopening of the 1.125% bonds due in May 2019 with a coupon of 1.125%.
 
Pennant
 
 
 
Pennant issued two announcements on the 17th and 22nd September.  The first announcement related to a services consulting contract award from Public Works and Government Services Canada.  The contract allows for services to be called upon an "as and when required basis" for an initial two year term through to the 14th of September 2016 and has a maximum value of $CA 7.9m. In addition, there are three additional one year extension options in the contract, which if exercised will extend the period of the contract through to the 14th of September 2019 and raise the maximum value of the contract to $CA 19.7m.
 
 
The second announcement was the appointment of Philip Walker as a director and CFO.  This follows the announcement in March that the existing incumbent John Waller is retiring on 31 December 2014.  Walker starts on 3 November 2014, so a reasonable handover period.
 
 
 
 
Glaxo announced on 19 September the imposition of a £297m fine by The Changsha Intermediate People's Court in Hunan Province, China, due to being found guilty of offering money or property to non-government personnel in order to obtain improper commercial gains.  The verdict follows investigations initiated by China's Ministry of Public Security in June 2013.  Although this closure in China is welcome news, this will not be the end of the affair for Glaxo, as European and US officials will be investigating the company's conduct in this matter and may hit the business with further fines.  This though should enable Glaxo to get back on track in developing its business in China - on an ethical footing this time. 
 
 
 API Logo
 
 
 
With a profits warning on 3 September due to the Foils Americas business unit continuing to underperform, I thought it would not be too long before the activist shareholders (see here) wanted to see some change.  The company announced on 18 September Richard Wright, Non-executive Chairman, is stepping down in quick order from the Board with effect from 31 October 2014 and Andrew Turner, Group Chief Executive, has agreed to act as Chairman on an interim basis until a permanent appointment is made.  This "...to facilitate the overhaul of the Board..."
 
 
BHP Billiton
Since the divestment announcement on 19 August (see here), management have engaged extensively with investors and other stakeholders. As a result of this they are now assessing a potential Standard listing in London for the new company in addition to the previously announced listings in Australia and South Africa.  Quite clearly BLT's management received some poor advice from their advisors on how to proceed with this divestment, pointless I guess to hope that this might be reflected in their fees.  Welcome news though.
 
 

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