The week's results: HWDN, TLPR, TNI

Saturday, Nov 10 2012 by
4

3 sets of figures out this week for companies in the portfolio - Howden Joinery, Tullett Prebon and Trinity Mirror. My most recent discussions of the three companies can be found at the following links:

Howden Joinery

Howden Joinery (LON:HWDN) have appreciated further versus a pretty flat market since my last post, having added about 10%. They dropped about 6 of those percentage points since the results, which came on Thursday morning, though in reality it's just a blip in what has been a rather smooth upward trajectory since the start of the year.  Given the evident quality of the business, though this is very easy to say in hindsight, I think this was certainly one of my safer shares.

The results were wholly uninteresting, though seem to indicate some slowing momentum - revenue is up 4.3% for the year so far, though only 2.2% in the second half. The remaining two 4-week periods account for about 10% of their remaining revenues, and so we can fairly easily see how that figure for the year will pan out, but a slowdown in growth makes another unexciting year likely. Not that any fireworks were particularly expected. On the physical growth front, the company reckons it'll finish the year with 20 more depots than it started with - 4% more - which is a positive given the minimal up front cost (they lease the depots and estimate the fit-out cost at £170,000 - seems extremely cheap to me!) and good returns on capital. The company says they break even at, usually, about 2-3 years, though maturation is much longer given the lack of advertising and the organic way they grow. There's plenty of scope for continuing locational growth - they think room for about 150-200 more - and there's a good deal of free growth built in to the way these depots do take time to mature.

Revenue per depot peaked at about £2.2m in 2007, and now sits at about £1.7m; even though openings has slowed, meaning a maturer profile of stores.

Depot growth, locational growth, unit growth, cohesive business model. A slowdown for this IMS doesn't really concern me - times aren't fantastic. They're not expensive against the profit of not-fantastic-times, though, and so I think downside is limited and upside is large.

Trinity Mirror

Trinity Mirror (LON:TNI) , since the post I've linked above, have also been rather exciting. First a 30% dip on the hacking news, and then more or less back up due to a combination of better sentiment and the figures they released. They, basically, were business as usual. Revenue is falling, as expected, but they put the full year operating profit for the business at £104.5m. Capex is slightly down, and net debt has fallen more than expected. It is, basically, the same story as ever, just with every passing day they manage to keep churning out cash paying down that debt and thereby making the equity more valuable.

The pension deficit came in substantially worse,  but that's volatile anyway. The trading statement hasn't really changed much - I suspect that will just be a matter of time. If they keep performing, there will be a point, suddenly, whereby it becomes clear they are going to have cashflows far exceeding their myriad potential liabilities, and equity will rerate. Business as usual just takes us closer to that point.

Tullett Prebon

If those two were boring, Tullett Prebon's statement was less so. The shares are down 9% on the results, which put revenues down 12% YoY for four months in question. Like-for-like revenue was down 15%. It is perhaps not as bad as it sounds, given Tullett's variable cost base and their good margins, but I expect the revenue figure is considerably worse than expected.

 Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »

My main problem, really, is the same as in the post I linked - indeed, today makes me feel this even more so:

Normally, I try to understand the business, understand the figures and invest after I know what I'm getting in to. In short, I look for no obvious roadblocks on the horizon, and instead try to invest in companies which I think are unfairly penalised. Tullett Prebon clearly does not fall into this category. While I understand what they do, sort of, the regulatory questions about the role of intermediaries in the financial system means their fate is probably tied up in questions which fly far above my head.

If you'd asked me yesterday where revenues would be, I wouldn't have had a clue. I suspect that sounds ridiculous to anyone who knows the business and the financial markets; given the issues they explained, it should have been obvious revenues would fall. The statement simply serves to hammer home how little I understand of the fundamental drivers of their business at a core level. Superficially, as I say, what they do is easy to explain. They're a broker;  they match people, facilitate trade, take a commission. They do all sorts of interesting financial products as well as some rather more boring ones.

Could I give an opinion on the regulatory reform that's coming, or tell you which direction it seems to be headed? Hardly; and those questions are intrinsic to the value of the business.

At the same time, I tell myself;

"the market overstates change. Change is always slower than anticipated. Market leaders always wrangle to remain market leaders, just in a new and different market."

I find that rather persuasive, too. To warp the words of a rather splendid Greek - the only thing of which I'm certain here is how little I know!


About the Author's Blog

ExpectingValue Profile Image Promotional
expectingvalue.com

Expecting Value is a value investing blog which publishes regularly on different topics. Generally, the coverage will focus on specific shares and feature a discussion and analysis of its potential, but also includes some 'bigger picture' concepts. ...read more or visit website »


Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


Do you like this Post?
Yes
No
4 thumbs up
0 thumbs down
Share this post with friends



Howden Joinery Group Plc, along with its subsidiaries, is engaged in the sale of kitchens and joinery products, along with the associated procurement, manufacture and distribution of these products. The Company’s operations are located in the United Kingdom and France. It has depots located in both the United Kingdom and France. It operates approximately 529 depots across the United Kingdom. It operates two manufacturing facilities in the United Kingdom, one at Runcorn in Cheshire and one at Howden in Yorkshire. The Company's United Kingdom-based manufacturing facilities produced 3.5 million kitchen cabinets; 800,000 kitchen worktops and breakfast bars, and 2 million kitchen frontals. The Company offers over 40 kitchens, a range of doors, appliances and worktops, and two basic cabinets. more »

Share Price (Full)
389.3p
Change
3.9  1.0%
P/E (fwd)
16.8
Yield (fwd)
2.4
Mkt Cap (£m)
2,491

Tullett Prebon plc (Tullett) is an inter-dealer brokers, and acts as an intermediary in the wholesale financial markets, facilitating the trading activities of its clients, in particular commercial and investment banks. The business covers the product groups, including fixed income securities and their derivatives, interest rate derivatives, treasury products, equities and energy. Tullett Prebon’s business is conducted through voice broking, where brokers, supported by screens displaying historical data, analytics and real-time prices, discover price and liquidity for their clients, and through hybrid electronic platforms, which cover asset classes that include United States, European, Australian and Scandi Repo, United States Fixed Income, global FX Options, Cash Credit and CDS, and the United States and European Energy markets. more »

Share Price (Full)
250.8p
Change
-2.7  -1.1%
P/E (fwd)
8.0
Yield (fwd)
6.7
Mkt Cap (£m)
552

Trinity Mirror plc is a United Kingdom-based publisher with a portfolio of media brands providing news, entertainment, information and services to consumers and connecting advertisers with national, regional and local audiences. The Company is engaged in the publishing of newspapers both in print and digital formats, the provision of printing services to third parties and specialist businesses in digital classified and digital marketing services. The Company’s segments include publishing, printing and specialist digital. Publishing segment includes all of its newspapers and associated digital publishing. Printing segment provides printing services to the publishing segment and to third parties. In September 2013, Trinity Mirror PLC sold Trinity Mirror Digital Property Limited, the owner of SmartNewHomes.co.uk, Email4Property.co.uk, HomesOverseas.co.uk and Zoomf.com to Zoopla Property Group Limited. more »

Share Price (Full)
143.75p
Change
1.8  1.2%
P/E (fwd)
4.5
Yield (fwd)
3.4
Mkt Cap (£m)
365.9



  Is Howden Joinery fundamentally strong or weak? Find out More »


What's your view on this article? to Comment Now

 
 
You are feeling neutral

Use the £ sign in front of a ticker to turn £VOD into Vodafone PLC

You can track all @StockoChat comments via Twitter


About ExpectingValue

ExpectingValue

Follow

Private investor turned hedge fund analyst, looking predominantly at global small caps. Sector agnostic.



Stock Picking Tutorial Centre



Stock Picking Simplified

Stockopedia takes your stock picking to the next level with cutting edge Stock Reports & Screening tools.


Get started
or Take a Tour to find out more.