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Alan Green discusses Marks & Spencer #MKS, Severn Trent #SVT, Avacta #AVCT & CVS Group #CVSG on the UK Investor Magazine podcast
Alan Green discusses Marks & Spencer #MKS, Severn Trent #SVT, Avacta #AVCT & CVS Group #CVSG with Jonathan Roy on the UK Investor Magazine podcast
Ian Pollard – M&S #MKS Admits Defeat
Marks & Spencer M&S Bad news for Waitrose, as the the bonds between the two behemoths grow ever closer. with M&S and Ocado announcing a new 50/50 joint venture which is intended to transform online grocery shopping for UK consumers.Significantly the new venture will trade as Ocado.com which must be a clear indication as to who will be holding the reins, although lip service is paid to the M&S brand and its leading food quality and innovation.Of course a major announcement like this can not come without the necessary jargon and the unintended admission. Thus the joint venture is seen as a strategically compelling route to unlock growth for M&S Food – an admission that growth in M&S Food has become blocked with the implication that it has lost its way as any Saturday afternoon shopper can tell. Steve Rowe and Ocado see it as combining the magic of two iconic and much-loved retail brands. We shall see
Taylor Wimpey TW claims 2018 as another strong year which produced record revenues, a very strong start to 2019 and continued strong demand for Wimpey homes. Profit before tax for the year to 31st December rose by 18.9% and basic earnings per share by 18.2%. A total dividend of c.£600 million will be paid in 2019, subject to shareholder approval and confirm the intention to make further material cash returns in 2020 and beyond.
Ted Baker plc TED updates that pre-tax profit for the Year to 26th January has been adversely affected by three non-cash impacts: Foreign exchange movements in the final week of the financial year, is the first. Systems upgrades have allowed the identification of additional costs which arose during the second half but will now provide robust controls to prevent a recurrence; Thirdly a more prudent view has been taken on aged stock, resulting in an unanticipated write-down in value of approximately £5m. Profit before tax is now expected to be in the region of £63m.
Avingtrans AVG Revenue from continuing operations increased from £26.9m. to £47.7m in the half year to the 30th November, whilst adjusted EBITDA from continuing operations more than tripled to £3.6m from £1.1m. Adjusted Profit Before Tax shot up to £1.6m following 2018’s half years loss of £0.1m and the interim dividend is increased by 7.7% to 1.4p per share.
Redde plc REDD Another set of good results showing further growth in earnings for the half year to the 31st December, claims the CEO, as earnings rise by 14.9% and profit before tax by 7.6%. It is anticipated that the second half will be a tougher comparison against the benefits which last years extreme weather, kindly generated for the company. The interim dividend is maintained at 5.5p per share
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Ian Pollard – Can Marks #MKS remain independent?
Marks & Spencer MKS looks like it has definately claimed top position as 2018’s big time Christmas loser. In the 13 weeks to the 29th December International sales collapsed by a frightening 15% which is not surprising when you look firstly at the poor service offered by some of its overseas stores and more importantly the fact that it started a major sales effort weeks before the advent of Christmas, having been forced into an offer of 20% off everything you see. Overall, group sales were down by what must have been a very disappointing 3.9%. Steve Rowe blames well publicised market conditions and then a full menu of management failures plus the combination of reducing consumer confidence, mild weather, Black Friday, and widespread discounting by competitors, all of which he claims made November a very challenging trading period. A list of major failures like that makes Marks future as an independent company, look decidedly dodgy.
Tesco TSCO Enjoyed a strong Xmas in the UK & and Republic of Ireland with Christmas like for like sales sales up by 2.6% and outperforming the UK market in both volume and value terms. This applied in all key categories: food, clothing and general merchandise. In the third quarter the rise was 1.9%. Booker was particularly strong with third quarter sales rising by 11% and Christmas up by 6.7%. In Central Europe claims that the quality of the business is continuing to improve are hardly born out by by the figures which show increasing falls in each quarter as the year progressed. The first quarter showed a fall of 1%, the second 2% and the third 3%.
Asia looked a bit like a disaster area with third quarter sales down by 8% nearly equalling the first quarters 9% but Christmas fighting back strongly with a a decline of only 2.8%. Strangely enough, online like-for-like sales did not enjoy the surge in sales of some of its competitors, with the increase over the Christmas period being a comparatively modest 2.6% over the Christmas period. It looks like Tesco still still knows how to get its shoppers out of their armchairs and into its stores.
Halfords Group HFD The 14-week period to 4 January 2019 was one of overall decline. Every part of the business saw sales fall on a like for like basis except for Autocentres and Travel Solutions. Car maintenance led the way with a drop of 4.6%. Again management sees no fault in itself and drags out the usual suspects, as being responsible for the disappointing performance – mild weather and weak consumer confidence. In fact these two factors have become so important as face savers for Halfords management that the Chief Executive, thinks one mention is not enough and it is worth bringing them in for a second just in case the board and the shareholders did not get the message the first time round.
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Ian Pollard – Vodafone Reaps The Rewards
Vodafone Group plc VOD has in its third quarter to the 31st December, reaped the rewards for having become what appears to be a sclerotic company whose management has had to seek refuge in jargon and obscurantism, always a sign of problems. India. for example has declined by 32.1% because it could not beat the competition. Later on one learns that Vodafone India merged with Idea Cellular and Vodafones revenue is now excluded from the results. Mud has a clearer consistency, there is a “more for more ” proposition and scale is being gained in “fixed”.
In what appears a desperate attempt to avoid being tied down it has even created a new geographical area which nobody has ever heard of before. No it is not Fantasy land but “other Europe”. Where is that one may ask. My first thought was that it must be the UK after Brexit but it isn’t. Anyway, wherever it is it fell by 24% which perhaps explains why they want to keep its location a secret. The “real” Europe fell by 2.8% , despite rises in the UK of 5.8% and 2.9% in Germany.
Group revenue fell by 3.6% overall, the decline being led by the “growth” regions of Africa Middle East and Asia Pacific. This is described somewhat optimistically as good commercial momentum.
Marks & Spencer plc MKS yesterday announced the closing of up to fourteen stores accompanied by the loss of hundreds of jobs, mostly in the impoverished parts of the country i.e the north.”we have to ensure we have the right offer in the right locations” trumpets the director of retail operations. The only solution which this blinkered executive can come up with is store closures, reduce the locations. Not a word about getting the offer right. Did it never enter her head that there may be nothing wrong with the locations for most of which she will not have any personal responsibility. The real problem could be and probably is with the offer for which she has direct and personal responsibility. Anyway blame the location, at least that way your job will not be in any danger, just those of the unfortunates at the bottom of the pile who will be being made redundant. As long as you keep making and trying to sell highly priced clothing for the middle aged and the elderly, more closures are bound to happen. Only when the name of Marks strikes fear once more in the boardroom of Primark et al will the closures stop. Your successor may come up with the idea of opening some new stores instead of just accepting the steady decline of what was once Britains leading retailer. But to do that, the offer will have to be right.
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M&S – Decline In All Sectors Produces Rise of 2%
Marks & Spencer MKS CEO Steve Rowe comes out of his corner fighting with claims that in the half year to the end of September, good progress has been made on the immediate burning issues which he faced a year ago, and that Marks is now a robust and profitable business. Only in Food are there still problems which he will be addressing later in the year. The company, he crows, is ready to accelerate the transformations which have taken place and he produces figures which he appears to hope, will lead people to believe him. International profits have trebled to £60.3m., full price Clothing & Home sales have risen by 5.3% and food revenue is up by 4.4% but all of that rise he admits is due to the opening of new space.
Now it would perhaps be unfair to say that is a load of porkies but the figures which really matter in the view of many, like for like revenue on a constant currency basis, show a somewhat different story which hardly yet justify that fighting stance. The truth is that on a like for like, constant currency basis, decline still prevails and does so in all sectors. Food is down 0.1%, Clothing and Home is down 0.7%, total UK revenue is down by 0.3% and even the much vaunted International business turns out to have declined by 3.1%. To add insult to injury the same table of statistics is used to show that all these falls add up to a rise of 2% in total group revenue. This mathematical sleight of hand is made possible by failing to specify whether that total revenue figure is like for like revenue, on a constant currency basis or what.
Persimmon PSN has enjoyed strong customer activity in the quarter to the 7th November and has now fully sold up for the current year, whilst forward sales reserved beyond 2017 now amount to nearly £1 bn. Not surprisingly in these circumstances pricing has also remained strong.
JD Wetherspoon JDW updates that the new financial year has started positively with sales at a slightly higher level than anticipated. Costs however have been significantly higher than expected. Chairman, Tim Martin, saves most of his update to lambast the media, senior company directors et all for providing completely false information about Brexit and the devastating effect it will have on companies and on the British economy, as a whole. He refers to quotes and articles by Sainsbury and Whitbreads and exposes their arguments as being deliberately misleading and makes the point that they and other majors, already have plans in place in readiness for brexit, deal or no deal and many of them are positively looking for ward to it.
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Marks Surrenders to Sainsbury
Marks & Spencer MKS is giving little away in its first quarter results for the 13 weeks to the 1st July. The subdued tone certainly seems to indicate a surrender to Sainsbury at least for the time being. The quarter did at least see an end to discounting in Clothing & Home, whilst Simply Food openings produced strong growth and food revenue rose by 4.5%. Like for like UK sales however were miserable with Clothing & Home down 1.2% and food down 0.5%, In constant currency terms international revenue for the quarter fell by 4% whilst group revenue rose by 2.7%.
Galliford Try GFRD updates that the year to the end of June has been one of excellent progress and robust market conditions. Underlying results are expected to be strong and the final dividend is expected to be in line with previous guidance.
Page Group PAGE In constant currency terms gross profit for the first half grew by 7.7% to record levels. The UK was bottom of the pile with a fall of 4.5% compared to the Americas which showed a rise of 13.8%. The weakness of sterling was a major factor benefitting the group and adding £28m to gross profits for the half year. In the second quarter growth in France rose to 23% but even this was dwarfed by SE Asia with a rise of 35%
Grafton Group GFTU performed strongly and better than the company expected in the 6 months to the 30th June. Group revenue rose by 9% or 5.7% on a like for like basis and 6.2% on a constant currency basis. However, it is important to note that the company remains cautious in the short term because of uncertainties in the economy and fears that spending on housing may decline because of pressure on real incomes. Housebuilders beware !
Ilika IKA continued development of its new batteries during the year to the 30th April but revenue remained small despite nearly doubling to £1.1m. Losses remained level at £3.5m.
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Marks & Spencer – Awaiting Sir Archie
Marks & Spencer M&S must be desperately awaiting the arrival of Archie Norman in the hope that he can achieve the turn round which has so far eluded the company. Todays results paint a sorry picture for a company which was once the leading presence on the UK high street.Profit before tax for the year to 1st April fell by 63.5%, basic earnings per share by 70.7% and profit after tax by 71.1%. Revenue growth of 4.2% in food sales came from new stores.On a constant currency basis like for like sales in home and clothing fell by 3.4% but home and clothing was a main item in current plans for recovery and growth. Despite this management is to reduce space for home and clothing by between 1 and 2% Overall like for like group sales for the year fell by 1.1%.
Babcock International BAB continued its enviable record of strong growth in the year to the end of March. The full year dividend is to be increased by 9.1% after a revenue increase of 7.1% and rises of 7.6% in profit before tax and 8% in basic earnings per share.. The year saw significant breakthroughs with receipt of the first ever orders from the French Ministry of Defence and becoming the first non US company to win business for a critical US nuclear submarine programme. The order book remains robust.
Mediclinic international MDC is to pay a final dividend of 4.7% making a total for the year to the end of March of 7.9%, in line with its dividend policy. revenue for the year rose by 30%, earnings per share by 5% and earnings by 29%. The company benefited from the weakness of sterling. South Africa’s performance was particulary strong but the Middle east was very and did not come up to expectations.
Dixons Carphone plc DC. claims another good year with a 4% rise in like for like revenue, although in the final quarter to the 29th april, this fell to 2%, due mainly to a late Easter and the delayed arrival of the Samsung S8. Southern Europe has had a very good year with like for like revenues up by 6% and Greece being a particularly strong performer.
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Archie Norman Will Need More Than Singles Nights To Save Marks
Archie Norman made his name, not as the boss of ASDA but as the man who saved ASDA, and he was brilliant enough to do so virtually overnight. ASDA had taken the established supermarkets by storm and given them hard lessons in retailing. Then, all of a sudden for no apparent reason, shoppers were deserting it in droves and things got so bad that it had empty shelves as suppliers cut off supplies, fearing that it was going bankrupt, which left to its own devices, it probably would have.
Within 3 months of Archie Norman taking over, ASDA was unrecognisable – fully stocked, “colleagues” whose only wish was to serve, and unheard of in those far off days of the early nineties, a golden rule, that if more than two people were at a checkout, then more check outs had to be opened immediately. Customers loved it, a supermarket which was actually putting them first, with new initiatives galore. Even a singles night for the lonely shopper. Thursday night at ASDA could be quite an experience, as eyes met across the frozen peas and trolleys “accidentally” bumped into each other, ever so gently and with profuse apologies from the blushing owners.
Friday’s sudden, surprise announcement that Archie Norman had agreed to take over as Chairman of M&S, raised more than an eyebrow, it sent the share price roaring ahead by some 5%. Indeed there is more than a slight similarity between the old ASDA and the sorry state which Marks now finds itself in. It is only six weeks ago that it was forced to announce that it was pulling out of mainland China,completely – closing down for good in what is now the worlds largest retail market. This followed on the heels of November’s announcement that it was pulling out of a number of major European countries and closing its flagship store in Paris.
Will Mr. Norman be able to repeat his success at ASDA. If anybody can save Marks, he can but it is now a different ball game entirely. It is not a just a major retailer which is at risk, it is the concept of high street shopping itself which is under threat, as online shopping takes over from that tiresome Saturday afternoon drag round the shopping malls. Will he be able to change the way Marks thinks just as he did with ASDA.
Very often it is the periphery of a large organisation which gives the game away and shows how deeply the rot has set in. One can not be more at the periphery of M&S than Greece and what a disgrace their operation is here. Management seems to be non existent. The late Lord Marks used to be proud of the fact that he could visit any of their UK stores and be instantly recognised by store managers. Store managers in Greece appear to be ashamed at even the thought of being seen on their own shop floor.
My last two visit to an M&S food store in Athens resulted in me leaving my purchases at the check out because there was nobody there to serve me. One assistant was making a special coffee for two customers at the coffee bar and the rest of the staff were tidying the shelves and completely and deliberately ignoring customers. Both check outs were unmanned.
On a previous occasion all the shop floor staff were being spoken to by a lady apparantly from head office, perched precariously on her very high heels and so, so important, that she was only allowed to carry a single sheet of paper in her hand. Again the check outs were unmanned. I asked her if they were closed when she asked me, as I wason my way out, if she could help. I suggested that she could perhaps take herself to a check out and start serving customers. That did not go down at all well but it is even worse in the clothing department.
As a sign of how management has thrown in the towel, one M&S store is across the road from a Lidl, which like all supermarkets in Greece, opens at 8a.m., except for Marks, which steadfastly refuses to open its doors until 9a.m. by which time Lidl will have taken tens of thousands of Euros and Marks will not have taken one. Customers have been seen knocking on the doors and windows of Marks trying to get in but the staff just point at their wrists and indicate they must wait for 9a.m..
Archie Norman is going to have his hands full.
The High Street – Still Alive And Kicking But Online Threat Grows
Marks & Spencer MKS gives a very brief summary of its trading for the 13 weeks to the 31st December. Group sales rose by 5.9% on a reported basis. Food did well with a rise of 5.6% or 0.6% on a like for like basis and continuing to increase its market share. Sales in clothing and home did even better on a like for like basis with a rise of 2.3%. Total like for like sales were up by 1.3%. The high street may still be a battleground but at least Marks emerged unscathed from the most important trading period of the year.
Tesco TSCO claims its first increase in market share since 2011 following strong and sustained progress in its 3rd quarter, covering the 13 weeks to the 26th November, which also produced the 8th consecutive quarter of volume growth. Over the 6 weeks to the 7th January the rise in like for like sales continued with growth of 0.3%, the UK being particularly strong with a rise of 0.7%. Clothes and toys produced over all sales rises of 4.3% and 8.5% respectively. The one weak point was International which produced like for like falls in both the 3rd quarter and over the 6 week Xmas period.
Mothercare MTC showed a return to growth in the UK for the 13 weeks to 7th January with a 1% rise in like for like sales but International sales still has problems with a total fall of 6% in constant currency terms, the day being saved by currency fluctuations which turned that into a rise of 13% in real terms. Online growth was particularly strong with a rise of 5.5% taking online’s percentage of total sales up to some 40% of total sales. Perhaps this is an indication of the future of retailing.
Debenhams DEB Is pleased with what it claims to be a resilient performance, with like for like sales over the 18 weeks to 7th January up by 3.5% or 0.5% on a constant currency basis. Online sales were strong with a rise of 13,9% taking online’s growth over 2 years to more than 25%. The 7 week Xmas period to 7th January produced like for like growth of 5% or 1.7% on a constant currency basis.
ASOS ASC provides more evidence of the growing power of online retailing with growth which dwarfs that of the high street retailers. Total group revenue rose by 30% on a constant currency basis for the 4 months to the end of December. The UK looked positively pedestrian against this with a rise of only 18%, which ASOS nonetheless claims is a strong performance in a more promotional market.
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CEO admits Marks Business Is Unsustainable
Marks & Spencer MKS CEO Steve Rowe openly admits in todays strategic update that Marks business is not sustainable and needs to be built into one that is and one which will also delight its customers. If its stores in Greece are anything to go by he is dead right and it is going to take a lot of work to make them anything like sustainable and pleasing.
How can you make a profit if you can not bother to open up until 9am. when you are within 100 m. of a Lidl which opens and has queues from 8a.m. and 50 m from one of Greeces largest supermarkets which like most shops also opens at 8a.m. The M&S staff in the clothing store are so unsupervised that they go and sit on the steps outside and smoke whilst customers queue because of unattended check outs and are told if they want to be served quicker they must go upstairs. it is in the backwoods of a business that management weaknesses are exposed not in stores within a stones throw of head office.
Food sales for the half year to 1st October did rise by 4% and made good progress but like for like sales still fell by 0.9% despite outperforming the market. Clothing and Home fell by 5.3% or 5.9% on a like for like basis. In the UK like for like sales fell by 3.0%. Basic earnings per share for the half year slumped by 90.5%, statutory profit before tax by 88%. and on an underlying basis profit before tax was down by over 18%
Punch Taverns PUB Average profit per pub rose by 4% during the year to 20th August as strategic disposals came to an end. The year produced a strong set of results but nowhere near strong enough to reinstate a final dividend. Underlying profit before tax was down from £60m to £53m. but last years loss of £105m was transformed into an actual profit before tax of £60m.
GETECH GTC Profit before tax fell by nearly two thirds during the year to 31st July and earnings per share were down from 5.77p to 3.25p. However steps taken in the first half strengthened considerably the performance in the second half. The backdrop to the company’s performance remained challenging as oil prices remained low and volatile.
Aviva AV. is raising its interim dividend for the half year to the 30th September by 117% to 13p but it is only doing this so that full year dividends are re weighted towards the interim dividend. I winder how the final dividend will be re weighted. The full year outlook is in line.
Telit Communications TCM expects to finish the current year strongly, with double digit growth anticipated in EBITDA and earnings per share.
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