SIF April review: Harvey Nash, Redrow and IAG are in the spotlight

Tuesday, May 01 2018 by
SIF April review Harvey Nash Redrow and IAG are in the spotlight

After last week’s round-up of a successful year for the SIF portfolio, this week it’s back to business as usual. As it’s the end of the month, I’m looking at stocks which could be up for eviction after at least nine months in the portfolio.

This month’s stocks

No stocks were added to the portfolio in July last year, so none are nine months old. But I do have three stocks which were bought previously and remained in the portfolio after the March review. I need to check if these firms still qualify for the SIF screen:

  • Recruitment group Harvey Nash. Last week’s results contained some hefty restructuring charges. How have these affected the small cap’s screening performance?

  • Housebuilder Redrow - the SIF portfolio’s oldest stock looks set to hang on for another month

  • British Airways owner International Consolidated Airlines Group - a disappointing performer so far, but things could be changing.

Here’s how these three stocks have performed during their time in the portfolio so far (excluding dividends):


Harvey Nash

Original coverage 21/06/2017

One reason why I now hold stocks in the portfolio for a minimum of nine months is to ensure that at least one set of accounts is released during the holding period. Doing this means that a fresh set of figures is pushed through my screen while the stock is in the portfolio. This usually also results in updated broker earnings forecasts.

I believe this is useful as it tends to highlight the direction of travel for the business, at least over the short term. Are margins improving? Is earnings momentum slowing. Are sales stagnating?

Harvey Nash’s results for the year ending 31 January were published last Friday, so are very recent. A 9.2% increase in constant currency revenue was marred by a fall in gross profit margins from 12.5% to 11.3% There were also some hefty non-recurring costs relating to the transformation programme and to acquisitions.

I’ve highlighted the relevant figures in the table below, which was taken from the results:


As Graham Neary pointed out in March, non-recurring items have been fairly small in recent years. So the company’s claim that last year’s costs are exceptional and should be disregarded carries some credibility.

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Harvey Nash Group plc is a United Kingdom-based recruitment business company. The principal activity of the Company is the provision of professional recruitment and offshore solutions. The Company's segments include United Kingdom & Ireland, Mainland Europe and Rest of World. Services provided by each segment are permanent recruitment, contracting and outsourcing. The Company provides executive search, interim management and leadership consulting services. Its leadership services include board evaluations, management development, audits, assessments and strategic human resource (HR) consulting. Its professional recruitment services include technology recruitment business and recruitment solution business. Its offshore services include projects and software services, which provides application development, third party software maintenance and outsourced software services to clients across the world, and managed services/business process outsourcing. more »

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International Consolidated Airlines Group, S.A. is an airline company that holds the interests in airline and ancillary operations. Its segments include British Airways, Iberia, Vueling, Aer Lingus and Other Group companies. It combines the airlines in the United Kingdom, Spain and Ireland. It has approximately 550 aircrafts to over 280 destinations. The Company operates various aircraft fleet services, including Airbus A318, Airbus A319, Airbus A340-600, Boeing 787-800, Embraer E190 and Boeing 777-200, among others. The Company, through its subsidiaries, is engaged in providing airline marketing, airline operations, insurance, aircraft maintenance, storage and custody services, air freight operations and cargo transport services. The Company offers its services in cities, including London, Madrid, Barcelona, Rome and Dublin. The Company's brands include British Airways, Iberia, Vueling, Aer Lingus, IAG Cargo and Avios. more »

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Redrow PLC is engaged in residential housing development. The Company is engaged in constructing homes throughout England and Wales. The Company's operations are focused on housebuilding. Its product range is focused on traditional family housing in its regional businesses and apartment schemes in Greater London. The Company's range of properties include Heritage Collection, Regent Collection, Abode Collection and Bespoke Collection. The Heritage Collection includes homes, which are designed for modern living. The Regent Collection includes homes, which are designed similar to the formal townhouse residences. The Abode Collection includes modern urban homes. The Bespoke Collection offers approximately 50 luxury apartments and penthouses. The Company has approximately 100 live developments throughout much of England and Wales. The Company's subsidiaries include Harrow Estates plc, Redrow Real Estate Limited, Redrow Regeneration plc and HB (HDG) Limited. more »

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  Is LON:HVN fundamentally strong or weak? Find out More »

5 Comments on this Article show/hide all

tony akram 1st May '18 1 of 5

Hi Roland

Thanks for your article , I too hold HVN (not with much conviction ) is it me but I find their accounts difficult to understand ? Also the last 3 years Operating margins and ROCE has been falling and debt increasing thinking of selling myself .

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covkid 1st May '18 2 of 5

Thanks Roland - very interesting as per usual.

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JohnEustace 1st May '18 3 of 5

Anyone tempted to hold IAG will need to share Willie Walsh's view that Brexit will not be an issue for them.

The EC has issued a reminder that all UK issued licenses will cease to be valid in the EU once the UK becomes a third country.
"Certificates issued before the withdrawal date by the competent authorities of the
United Kingdom on the basis of the provisions of the Basic Regulation and its
implementing rules will no longer be valid as of the withdrawal date in the EU. This
concerns in particular:
 Certificates of airworthiness, restricted certificates of airworthiness, permits to
fly, approvals of organisations responsible for the maintenance of products, parts
and appliances, approvals for organisations responsible for the manufacture of
products, parts and appliances, approvals for maintenance training organisations,
and certificates for personnel responsible for the release of a product, part or
appliance after maintenance, issued pursuant to Article 5 of the Basic
 Pilot licences, pilot medical certificates, certificates for pilot training
organisations, certificates for aero-medical centres, certificates for flight
simulation training devices, certificates for persons responsible for providing
flight training, flight simulation training or assessing pilots' skill, and certificates
for aero medical examiners, issued pursuant to Article 7 of the Basic Regulation; "
etc, etc.

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Graham Ford 1st May '18 4 of 5

In reply to post #359558

Yes, indeed. But is there any reason to suppose that the EU will think it is better to paralyse air travel between the UK and the rest of Europe thereby devastating the economies of areas that are highly popular with British tourists rather than accepting that British licences are equivalent? It would seem to be perverse to do so and highly unpopular with countries such as Spain, Portugal, Greece, Italy.

Furthermore, were British airlines able to fly to European destinations prior to the formation of the EU? Yes. Are other non-EU countries airlines able to establish their credentials to fly into the EU? Yes.

So, the possibility of a problem exists, but the probability of it occurring would seem to be quite low. So while Brexit may cause many difficulties which are hard to solve, I don’t think this particular one is a significant threat.

Not a pro or against Brexit point, just putting this single issue in perspective (as I see it).  No position in IAG

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ddinksdadd 6th May '18 5 of 5

International Consolidated Airlines SA (LON:IAG) was my best performer on Friday with some good numbers. It also seems to have broken up with a gap up. I think they have a way to go yet as International Consolidated Airlines SA (LON:IAG) seems to have become a consolidator in a famously fragmented and problematic industry. For sure £RYR and £EZY continue to forge on but there seems to be a place there for a company to swallow up all the rest who are not performing and I think IAG is that company. They seem to have deep pockets too!

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About Roland Head

Roland Head

I'm a private investor and writer on stock markets, with a particular fondness for free cash flow, dividends and value. I also have a lingering interest in commodity stocks. In earlier life, I worked as an engineer in telecoms and IT. The rules-based approach required for this kind of work undoubtedly influenced my investing style. I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a large and now defunct Canadian firm.  My investment focus is increasingly on developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. more »


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