Derek Pain: Looking good for portfolio as updates flow in
No Pain, No Gain
Friday 01 February 2013
The rush of new-year trading updates continues to enliven the stock market — and the No Pain, No Gain portfolio. Another four constituents have produced bulletins. All are in positive territory but some are not quite as bullish as earlier contributors.
The ritual of letting shareholders – and other interested parties – know just how a business is performing between statutory announcements has developed rapidly. In my younger days, such communications were almost non-existent. I am not decrying the update experience – any move to add to shareholder knowledge should be applauded.
At the time of writing, nine of the 14 portfolio members have produced January trading statements, including my two most recent recruits. Both are recovery plays, and both seem to be making headway. Nick Basing, chief executive of Essenden, the tenpin-bowling group, says: "Having turned things round from a probable derailment, the company is back on track." Roger Siddle, his counterpart at Findel, comments that the home shopping group "remains on the path to recovery".
Essenden pushed up sales by 1.4 per cent in the five-week festive period, but over the year the advance was a somewhat less flattering 0.7 per cent. Earnings before interest, tax, depreciation and amortisation as well as cash generation continue to improve. At the halfway mark, the group announced pre-tax profits of £780,000.
Findel reported sales up 8.9 per cent so far in its current year. With the exception of the doorstep selling business, Kleeneze, the group is doing well, with its Express Gifts operation enjoying its best Christmas for five years. The education and health businesses also progressed but trading "remains challenging" at Kleeneze. Half-year loss was £10.5m.
Essenden shares are about 30p against the 24p paid by the portfolio. Findel, probably reflecting some disappointment that its rumoured sale has still to be clinched, is 7.65p against 7.1p.
Marston's, the pub-owning brewery, was also positive, with chief executive Ralph Findlay saying "good progress" continues. In a 16-week period, managed pub sales were up 1.2 per cent. Profits from the tenanted and franchised pub side were 2 per cent higher.
Shares of the group, which has 2,150 pubs, have been lively in recent months after a long, rather lacklustre display. The portfolio paid 95p nearly four years ago. The price is now about 133p.
Brightside, the insurance broking and financial group, is a constituent with an upbeat message. It talks about "significant growth" in turnover and profits, and declares it should meet stock-market profit estimates of about £18.6m against £15.5m last time. Stockbroker Cenkos Securities believes the year's dividend will be 0.4p. The shares arrived at 18.5p last year; they are now 22.25p.
The group is seeking shareholder approval to buy in up to 10 per cent of its shares. It believes picking up its own stock will improve stock-market liquidity as "relatively insignificant" sales have had a disproportionate impact on the share price. I am not enthralled by buy-ins; I much prefer higher dividend payments.
Finally, Avation, the aircraft leasing group, has increased its fleet to 19. Chairman Jeff Chatfield says that should help ensure revenue continues "to move in a positive direction". Avation has close links with Skywest, an Australian airline planning a merger with another Down Under aircraft group, Virgin Australia.
Skywest already has trading ties with Virgin. Once the merger, goes through, I would not be surprised if Virgin displayed predatory ambitions towards Avation, a business spun out of Skywest. Avation's results are due next month.
Of course, many companies besides Avation do not take part in the January deluge of updates – financial periods may be unsuited to such exercises. Another example is constituent Whitbread. With an early-March year end, it often produces a trading statement in February.
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