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Ian Pollard – Royal Mail #RMG Executives Struck Dumb
Royal Mail plc RMG finds plenty to highlight in its interim results for the half year to the 23rd September. A rise of 1% in revenue is one of the best. Apart from that, underlying adjusted profit before tax was down 27 per cent and· adjusted basic earnings per share fell by about a third from 20.1% to 13.6 pence. As if that was not bad enough the reasons for this dismal performance, were even worse. Poor productivity performance, lower cost avoidance in the UK and higher than expected cost pressures in GLS, where admittedly there was a ray of sunshine with a 9% rise in revenue. The most amazing thing about this report apart from the surpising rise of 4% in the interim dividend, is that not a single member of senior management or the board had the courage to come out and make a single comment about the results. From the CEO to the Chairman and all the other senior executives, they all appear to have been simultaneously struck dumb.
Bovis Homes Group BVS on the other hand displays no such reticence as the CEO proclaims that the transformation of its customer service and build quality has resulted in a significant improvement in its financial performance since the 1st July. Bovis is fully sold for this year and expects full year profits will be at record levels. As with all housebuilders it has to make obeyance to the government for its generosity to the industry in agreeing to extend its completely unjustifiable Help to Buy Scheme for yet another two years until March 2023.
Young & Cos Brewery YNGA produced another strong performance for the half year to the 1st October, with profit before tax up by 19.5% and basic earnings by share by 19.4%. The interim dividend is to be increased by 6% making it the 22nd consecutive year-on-year interim dividend increase. Summer results were exceptional – average like-for-like sales growth of 5.6% over the past seven years, with this half year producing a revenue rise of 8.8%, helped by the hottest summer on record. Drink sales enjoyed a particularly strong summer with double digit growth of just over 7.4% on a like-for-like basis. Accommodation sales rose by over 18% and EBITDA by 4.7% to record levels. The strong trading has continued in the first six weeks of the second half.
Dart Group DTG Group operating profit for the half year to the 30th September surged by 68% after a 36% revenue rise. Basic earnings per share rose by 56% and the interim dividend is to be increased by 87%. Bouyant demand led to a particularly strong season for the Leisure Travel business although increased losses are to be expected in the second half of the year as further investment is made in additional aircraft and marketing.
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Ian Pollard – Housebuilders In Cloud Cuckoo Land
Bovis Homes BVG delivered a total of 1,580 completions in the half year to the 3oth June, slightly ahead of expectations and an increase of 4% on the previous year. Average selling prices for private houses only managed by a whisker to avoid falling into negative territory at £335,000 compared to last years £334,700. The total average selling price represented nothing less than a disaster, collapsing from £277,400 last year to this years £261,000 Bovis claim that the fundamentals of the housing market remain robust. Rumors that their latest new site will be in cloud cuckoo land are not to be believed.
Persimmon PSN It is not all that long ago when a set of results like these from one of the country’s major house builders would have been regarded as a national disaster. Gone, however, are the days of double digit increases in this that and the other and Persimmon regards itself as being in a robust position merely because it has managed to scrape into positive territory. It provides an update that in the six months to the 30th June revenue increased by 5% and completions of new houses, rose by 3.6%. Most telling of all however is the fact that Persimmon was only able to increase its the average selling price by a mere 1.2%. In other words new house price inflation is virtually dead, despite the fact that consumer confidence is resilient and business is claimed to be robust.
Associated British Foods ABF updates that the revenue momentum of the first half continued into the second half with like for like group revenue in the forty weeks to the 23rd June being 3% ahead of last year at constant currency rates and 2% ahead at actual exchange rates. Lower EU sugar prices impacted the performance of the Sugar division without which the increases become even more respectable at 6% and 5% respectively. Good profit growth for the full year is expected from Grocery and Agriculture. The continuing decline in wold sugar prices means that sales and profit at AB Sugar, both for this financial year and the next will be lower than previously expected.
Primark is benefiting from higher margins and sales in the year to date were 6% ahead of last year at constant currency rates and 7% ahead at actual exchange rates. This was mainly due to an increase in selling space but like-for-like sales improved on those for the first half of the year. Margins in the second half are expected to be well ahead of the first half.
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Ian Pollard – WPP #WPP, not a pretty year
WPP plc WPP “Not a pretty year” says Sir Martin Sorrell about his companies performance in 2017.Top line growth was flat and operating margins and profits were either flat or only marginally up. To add to the gloom, 2018 has had a slow start which managed to be above budget but in January like for like revenue was flat.On a like for like basis 2017 billings were down by 5.4% or 3.9% at constant exchange rates, although revenue at constant exchange rates did show a rise of 1.6% but on a like for like basis it fell by 0.3% On a happier note profit before tax rose by 11.6% (7.7% constant currency) and the dividend is to be increased by 6%.
Rentokil RTO had a good year in 2017 and its strong performance exceeded its medium term financial targets. After a rise of 13.8% in adjusted profit before tax the final dividend is to be increased by 15.1% to 2.74p per share.On a constant exchange rate basis adjusted profit before tax rose by 6.2% and adjusted earnings per share by 5.2%. Pest control performed particularly well and the company was very active in the mergers and acquisitions field, where it acquired 33 pest control companies. The policy of expansion by acquisition is to continue.
National Express NEX delivered strong performances both internationally and in the UK during the year to the 31st December with significant increases inr evenue, profit and cash. This is recognised in the final dividend which is to be increased by 10%. Like for like profit before tax at constant exchange rates grew by 11.7% and group revenue by 6.1%. The UK bus and coach businesses delivered a strong second half after the declines experienced during the first half of the year. A good start has been made to 2018 with profit and revenue both showing rises in January.
Bovis Homes BVS is pleased with what it describes as its operational progress in 2017. This progress saw profit before tax fall by 26% and earnings per share by 25%. and there are not many companies which dare call that, progress. The ordinary dividend is to be increased by 6% after strong increases in the average selling price, up by 7% during the year. The company also expresses itself as being excited by the future which is not surprising if it can get away with price rises like that.
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Bovis Profits And Completions Tumble
Bovis Group BVS It is years since a major house builder produced such an appalling set of results. To do so at a time when the industry is in a long term boom illustrates the depth and severity of the problems which Bovis created for itself and to which management was too inept to find solutions. At least it now has a new CEO who has been in post since April and can hopefully start to get a grip on things.
Completions in the six months to the 30th June fell by 6% which is no surprise because at the same time the average selling price of a Bovis home rose by 9%, which the company appears to be trying to claim was not really a price increase as such but due to a change in mix. The result is that half year profit before tax fell by 31% and earnings per share by30%, whilst net debt more than quadrupled to over £32m. The company claims that the disaster is down to operational issues which can be fixed. The interim dividend remains unchanged but as a sweetener to shareholders they are promised that the full year dividend for 2017 will be increased by 5% and that for 2018 it they will get a further 20% increase. In addition, over the three years to 2020, special dividends equal to 134p per share will also be paid.
Since February customer rating levels are said to have improved significantly but they are still down at 74% which means that a quarter of Bovis customers are dissatisfied. One answer the company proposes is to focus on affordable housing and the second is to increase the number of houses built to 4,000 a year. In the current half year it completed 1,512.
Empyrean Energy EME is excited about the prospects for offshore China Block 29/11 and confirms that, based on its internal preliminary analysis, the Block contains prospects of truly significant scale and size. The three priority targets have the potential to contain 591m barrels of oil.
Molins MLN moved back into profit for the half year to the 30th June with last years half time loss of £0.3m being replaced by a statutory profit of £0.9m. Basic earnings per share of 4.3p similarly replaced a loss of 1.5p per share. The company claims that it is now positioning itself for sustained long term growth.
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Is Primark Ex Growth ?
The problem for ABF is that the growth in average retail selling space at Primark was also 13%, exactly the same as revenue growth without any exchange rate benefits – – so where, one may ask, is the like for like revenue growth. The only growth at Primark on these figures came from currency benefits which lifted revenue growth up to 21% and from increased selling space.
Without any greater detail, the figures appear to assert that Primark did not enjoy any like for like growth and went ex growth during those 40 week,. despite the claim that it has increased its market share. The only saving grace is that there was a spurt during the last 16 weeks when sales rose by 15% at constant currency rates and 21% at actual rates. Third quarter trading prior to Easter was particularly strong.
easyJet EZJ June passenger statistics showed year on year growth of 11.3% and load factor rose again to 94.1%. Checking on some fares,appears to indicate that all pretence of being a budget airline appears to have been abandoned. Despite that the load factor indicates that it must still have something going for it. Perhaps it is the punctuality.
Bovis Homes BVS Trading for the 6 months to the 30th June has been in line with expectations but the group C.E.O. is confident a successful turn round can be delivered. He has visited all regions and 85 sites as part of the process but completions for the full year are still expected to be 10-15% down on 2016.
Churchill China CHH has enjoyed strong growth in its export markets for the half year to 30th June as it continued to benefit from the weakness of sterling.
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Bashful Bovis Rejects Bids
Bovis Homes BVH is in demand by predators if not by investors, with bids over the weekend being announced from Redrow RDW and Galliford Try GFRD, neither of whom knew that the other was interested. Bovis, no doubt delighted that it has found an escape route from its management problems, decided that the bride price was too low and both offers were rejected. Redrow was informed that that its proposal did not merit further consideration.
Any housebuilder which has managed to do badly during the current boom conditions is not really fit for purpose and Bovis should be delighted that it is suddenly in such demand. Housebuilders are so flush with cash that they do not know what to do with it and presumably this is an alternative to keep giving it back to the shareholders. Obviously neither bidder felt that it should be reducing, rather than increasing its exposure to the collapsing central London market but that is house builders for you. Discussions with Galliford Try are continuing and Redrow believes that Bovis is a compelling opportunity. Let battle begin.
Computacenter CCC admits that results for 2016 were mixed which is a bit of an understatement with statutory profit before tax falling by 31.3% and diluted earnings per share by 36.3%. The only thing that was mixed appears to be that the UK part of the business did badly with a material decline in profitablity, after a 1.1% revenue decline, despite a strong second half, whilst Germany leapt ahead with a 15.4% rise in profitability and France edged upwards with a rise of 4.5%. The dividend is to be increased by 3.7%.
Clarkson CKN produced a strong 2016 performance despite challenging markets and the final dividend is to be increased by 5%. Underlying profit before tax and earnings per share both fell for t he year to the end of December but reported profit before tax rose by some 50% from £31.8m to £47.3m. The company also sees the beginnings of what it calls “recalibration” in the shipping and offshore markets and is looking forward to the opportunities which it sees in 2017
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Bovis Comes Clean At Last Over Poor Build Quality
Bovis Homes Group BVS is being forced into taking a one off £7m hit because of claims arising from its poor build quality and it is brazen faced enough not to issue an apology either to the shareholders or even more importantly, to its customers. In fact in 2016 it imposed a rise of 10% in its average selling price for those who were unfortunate to buy one of its shoddily built houses but it does make a promise to those who buy one of its homes in 2017 – it will put prices up even higher.
For the year to the 31st December revenue rose by 11% but profit before tax was by 3% and basic earnings per share by 5%. As ever where management does not want the shareholders to get angry and seek revenge, it is hiking the dividend by 11% as the best means of self protection and promises that this years dividend will not be cut. It is also changing its priorities and customers are going to be put first which makes the mind boggle as to where they came in the pecking order, last year. It is also going to build fewer houses and sell off some of its land.
What makes it even worse is that Bovis lied in a trading update which it issued on the 28th December, only 3 days before its year end. It lied in postitive manner by claiming that its problem was that in December build production had been lower than expected. It deceived by omission, in failing to even hint at serious customer care and quality issues which it then must have known were going to cost it millions. Rarely has a major UK company gone to such lengths to hide its true state of affairs from shareholders and potential investors. Only a few days later when the CEO of some 8 years standing suddenly announced his departure with immediate effect, did it become apparent that the company was in serious trouble.
The resignation was notified purely as a Change in Directorate, with thanks given to the outgoing CEO for his years of service. Again Bovis kept its problems under wraps. The company behaved as if it was hoping it could get away with a cover up. Should the stock market not have been notified that the Board was keeping secret material facts of which it knew and which were bound to affecting the share price of the company ? Are those who were in the know and responsible for deceit, fit to be Directors of a public company.watch Live by Night movie now
So far this morning the share price, which had been attempting something of a rally recently, fell by just short of 10%.
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Bovis – Signs of Trouble Ahead for Housebuilders
The blizzards now raging on the Athenian coast will no doubt keep the weather pundits busy for a day or so and the most popular explanation from the chattering clashes is likely to be that global warming is responsible, which leads us on to the warning signs of storms ahead for the UK’s house builders.
Bovis Homes is the latest to set alarm bells ringing with a trading update for the year to the end of December which when compared to previous updates in the summer and autumn, clearly illustrates the beginnings of a serious decline in the house builders fortunes. Indeed when one looks back only six months, it is obvious that management was oblivious to what was happening in its marketplace.
Firstly Bovis has had to admit the unthinkable, namely that the delivery of new homes for the current year will be lower than previously anticipated, one of the major factors in this being delays in build production in December. What ?, do I hear you gasp, Bovis management is in such a mess that its years delivery statistics may be knocked sideways by delays in just the last month of that year.
Never mind says Bovis, we are protected against this by the price increases we have imposed on buyers during the year and which, with only 3 days to go, have averaged 10%. Very good that until you look at the figures produced at the time of the interim results at the end of June and then at later dates. Price increases in those heady days then averaged 15% i.e. 50% less than they have turned out to be at the end of the year. It does not required a degree in statistics to realise that the second half’s price increases must have fallen steeply to bring the years average down to 10%.
Closer inspection reveals other gems which indicate a continuous, worsening situation. Operating profit margins for the full year are expected to fall. Site closures for the year now exceed new site openings – which will help to make the company more profitable and which in turn raises the question as to why these sites were bought in the first place. Obviously it was because management mistakenly believed they could develop them profitably.
As recently as 10th November Bovis was announcing that volume growth was still expected for the full year, which does not compare well with its position in December that the full year would produce a fall in volume growth. Were there no signs of that six weeks ago. Have things deteriorated so badly in such a short time.
Bovis is not alone. Share price falls in the UK housebuilders over the last months indicated that the market had already cottoned onto the truth. It is a pity that directors and management remained blind to the problems. All they needed to do was to speak to the big estate agents but no doubt that would have been beneath their dignity.
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Bovis Milks the Boom With 14% Price Rises
Bovis Homes BVS delivered a record number of homes in the 6 months to the end of June, allowing revenue to grow by 18%, profit before tax by 15% and earnings per share by 14%. Shareholders are rewarded with a 9% rise in the interim dividend to 15p per share and net debt has been slashed from £59m. to £8m.
That all looks very good but it appears to have been achieved mainly by imposing swingeing price rises averaging 14%, to take the average new home price to £254,000. Legal completions during the 6 months rose by only 5%. Take those two figures together and it puts the rise in profits into perspective, whilst at the same time illustrating the boom in the new housing market showed no sign of abating prior to June, save that the weekly private sales rate per site fell from 0.61 to 0.59. Since June however the decline has continued with a fall to 0.5 from 0.58 a year ago. Despite that, as at the 12th August Bovis had achieved over 90% of its planned sales for 2016 and it regards the decline in average sales rates as being seasonal.
Clarkson plc CKN has more than weathered the storm which continues to batter the shipping industry and it rightly claims that its performance for the half year to 30th June was robust. Profit before tax rose by some 70% from £10.8m to £17.5m whilst earnings per share nearly tripled from 15p to 41.7p. All this was achieved in the face of the most challenging rate environment which the industry has seen for many years and no improvement is yet in sight, at least in the short term. The interim dividend is maintained at 22p.
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Bumpy Landing For Easyjet
Easyjet EZJ The chickens have at last come home to roost and Sir Stelios has been proved right. Number crunchers can not run a successful airline and that is why Ryanair and Intercontinental thingummiejigs are two of todays most successful airlines.
Easyjet has quietly tried to distance itself from its origins as a budget airline. Some fares now equal or even exceed those of the “proper” airlines but it can not get away from the fact that it still operates with the attitude of a budget airline and still tries to pretend it is a budget airline. The result is that it is caught between a rock and a hard place. The flying public is not as stupid as Easyjet thinks and has delivered it a strong warning. The results for the half year to to 31st March do not make pleasant reading.
Firstly it has clearly gone ex growth. The load factor is static and revenue has risen by by a tiny 0.3%. Revenue per seat has fallen by 4.2% but costs per seat have risen by 4.3% despite the collapse in the price of fuel, a double whammy if ever there was one.Worst of all it has managed to turn last years half time profit of £7m. into a loss of £24m and earnings per share of 1.3p have become a loss per share of 5.1p
Easyjet calls this a robust performance, more like a bumpy landing
Few managements are capable of taking on board lessons from results like these. There is only one person capable of giving those lessons. At least Sir Stelios will be able to speak with added authority when he gives his next words of warning and advice. For once perhaps, they should listen to him.
Bovis Homes BVS has seen the house building boom continue unabated during the first four months of the year. Freely available mortgage finance has fuelled strong demand. Weekly sales rates have improved and sites have been selling out earlier than expected.
Cello CLL has had a good start to the year. Except in one division, it has a robust income pipelines and is continuing to work towards the resolution of its VAT dispute with HMRC.
Gear4music G4M has had a record year for its first as a listed company, with strong UK growth and excellent progress in Europe. Adjusted operating profit for the year to 29th February grew by 138%, adjusted EBITDA by 100% and revenue by 46%. Last years loss of £797,000 was turned into a tiny profit of £6,000. Year end cash has grown from just under £1million to £3.5m
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