St.Ives: 26/11/13; Trading statement; Outlook encouraging! Still looks good value?
ST Ives (LON:SIV) (FTSE Small Cap Index) I have bought a holding in publishing and marketing company, St Ives. The company had a pretty torrid time during the 2000's with the shares falling from a peak of 650p in December 1999 to as low as 46p during 2009. Over the last 18 months or so the share price has staged a recovery as the momentum in the business has changed. The Company has to some extent re-positioned itself away from commoditised bulk printing to more value added services through the addition of marketing services. It now works with its clients on marketing strategy and providing them with the tools to execute it. During the last couple of years it has made some acquisitions in this area; Tactical Solutions, a leading field marketing company, Response One, who provide integrated marketing solutions , Pragma, a leading consultancy specialising in retail and consumer markets and Incite Marketing Planning Limited, an industry leading market research and insights consultancy. The Company also made an investment in Sponge Limited, a leading provider of mobile marketing solutions.
Recent results have started to show the fruits of these investments. The latest trading statement from the company issued on the 27th November was fairly upbeat with management talking about higher margins being achieved and improved operating profits as the balance of the business shifted towards the higher value added marketing operations.
This brings me to valuation where on consensus forecasts the Company is valued at only 7.3x earnings for the year to July 2013 falling to 6.8x July 2014. Enterprise Value (net debt + market capitalisation) is less than half turnover. A more than 2x covered dividend of 6.3p is forecast for the current year giving a prospective yield at 120p of 5.3%.
Although the shares have performed well over the last six months or so my view is that they could have a lot further to go. I have bought a 3.5% holding in the JIC portfolio with the proceeds of yesterday's sale of Halfords. (see transaction history)
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Media Corporation plc (Media) is an Internet gaming, advertising and media company. It is focused on Website publishing and online advertising. The Company has two principal divisions: Online Gaming and Advertising Network. Media owns Purple Lounge, www.purplelounge.com, which is an online poker casino operator. The Company’s Advertising Network division operates through Eyeconomy Limited (Eyeconomy). Eyeconomy is an Internet advertising network and solutions provider. Eyeconomy specializes in mass reach campaigns to up to 50 Million unique consumers per month via its own proprietary ad-serving and tracking technology for clients, including AOL, Dell and American Express, www.eyeconomy.co.uk. Its subsidiaries include Xworks Limited, Search Focus Limited, Result Online Limited, Flight Comparison Limited, Purple Lounge Limited and Purple Lounge (Malta ) Limited. In May 2012, the Company acquired Intabet Limited. more »
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St Ives plc is a United Kingdom-based international marketing services company. The Company operates through three segments: Strategic Marketing, Marketing Activation and Books. The Company's Strategic Marketing segment consists of Data, Digital and Insight businesses. The Company's Marketing Activation segment includes Marketing Print businesses and Field Marketing Business, which deliver marketing communications through a combination of print and in-store marketing services. The Company's Books segment consists of Clays, a book printer that offers a range of products, such as design, manufacturing, fulfilment, distribution and delivery. Its Data business consists of Occam and Response One. Its Insight business consists of Pragma, FSP Retail, Incite and Hive. Its Digital business consists of Amaze, Realise, Branded3, Solstice Mobile and The App Business. It operates approximately 16 marketing and print services businesses. more »
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St. Ives (130.5p and 4.9% of JIC portfolio) has issued its results for the 6 months ended 31st January 2013 in which it showed progress in its shift from a commodity print business to a added value marketing services group. Group revenue was down slightly at £161.7m v £166.4m in the prior year. However, removing the effect of acquisitions and the commodity print markets which it has exited, Group revenue increased by 2.9%. The marketing services segment saw revenue increase by 36% to £31.1m, pre-tax profits were up 10.1% to £12.2m and earnings per share up 8.8% to 7.67p. The interim dividend has been increased by 14.3% to 2.0p per share.
Conclusion: The Group seems to be making good progress in its strategy of re-positioning the Group towards higher margin businesses and indeed yesterday's announcement of the proposed acquisition of Amaze plc further helps this process. It jumped 7.2% yesterday so it is difficult to predict what it might do today, however my view is that the Group still looks good value on 7.9x consensus earnings forecasts to July 2013 falling to 7.5x to July 2014 and with a healthy dividend yield of 4.8% on the forecast dividend for the current year of 6.3p. 4th largest holding in the JIC portfolio; Happy Holder!
St.Ives (165p and 4.3% of JIC Portfolio) the company has issued an “in-line” trading statement for its financial year ending 2nd August. It says positive things about marketing services with the integration of Amaze and Branded3 progressing well. It also says it is pleased with the overall performance of the print business in the face of difficult trading conditions.
Conclusion: a pithy trading statement which is unlikely to have much effect on the share price either way. The shares are valued at 9.6x consensus forecasts for the year ending 31st July 2014 for 8% growth and 8.8x July 2015 for 10% growth. That feels on the cheap side to me, especially as I would expect St.Ives to benefit from the current recovery in the UK economy, in turn leading to upgrades to earnings forecasts. Happy Holder!
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St.Ives (173.25p and 4.3% of JIC) Results for the year ending July 2013 have come in slightly ahead of expectations. Turnover is pretty much in line at £317m but underlying pre-tax profits at 26.8m, up 10.7 % on last year compare to forecasts of £26m and earnings per share at 16.9p compare to forecast of 16.0p and are up 8.5% on last year’s 15.6p. The dividend has been increased by 13.0% to 6.5p compared to consensus forecasts of 6.3p. Cash flow was good with net debt rising to £15.2 m from £13.4m but after £22.3m had been spent on acquisitions.
For the last three years the company has been undergoing a transition away from its traditional commodity low margin printing business to higher margin marketing services. Marketing services now accounts for 35% of operating profits on an annualised basis and is the focus of future growth, both organically and through further “supplementary” acquisitions. Its experience so far has been encouraging with the acquisitions of Amaze and Branded3, during the last year, integrating well and indeed working on joint pitches. St.Ives sold St.Ives direct, Bradford yesterday marking “effectively completing its exit from non-core printing activities “.
Conclusion; These results look like a vindication of the last three year’s strategy. Management have transformed the company against a difficult economic back drop. This should just be the beginning though as growth accelerates in marketing services, supplemented by further acquisitions and helped by an improving UK economy. On current forecasts the shares are valued at 10x July 2014 falling to 9.2x July 2015 for 9% growth but I suspect these figures are too low following today’s results and upgrades are on the way. It yields 3.8% on the dividend just declared. Very Happy Holder!
I too am a very happy holder! Bought at under 80p prior to last years results, they have delivered and I reckon there's more to come. Had a recent tip in the IC so I think there will be a few watching, waiting for a good entry point.
Possibly cross 200 before year end...we'll see.
Best,
Sully.
26th November 2013
St.Ives (181p and 4.3% of JIC) has issued a trading statement covering the period from 3rd August to today. It is more of the same really. Revenue is flat due to the change in mix of the business but margins have improved. “Organic and acquisition growth within marketing services has largely offset the decline in print revenues resulting from our decision to exit commoditised print markets.”
In the outlook statement it says the new financial year has started well and now that the restructuring of its legacy print businesses is complete it will focus on converting the growth opportunities in its marketing services segment.
Conclusion; not much to get your teeth into with this statement but overall it reads encouragingly. One would expect St.Ives to be a direct beneficiary from the improvement in the UK economy and on 10.2x consensus earnings forecasts for the current year ending August 2014 for 24% growth, along with a 3.9% prospective dividend yield, the shares continue to look attractive to me. Happy Holder!