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29th September
…Last Week….
It was a week to miss. The FTSE 100 fell -2.74% to 6639, its worse performance since March. The FTSE 250 dropped -2.94%, with the AIM All Share at 749, was -1.64% lower. There was a continuous drip of cautious news; earnings, ECB, China, Ukraine, US Inflation etc., rather than a single event deluge. US GDP at 4.6% was strong enough to help a recovery on Friday, but the timing of the end of QE and an Interest raise still act as a psychological break to any ‘sloppy’ positive sentiment.
……..This Week………..
UK Economics will be viewed through the prism of political party politics. It is a busy economic week with plenty of detailed statistics. The highlights will be the reporting of faster growing GDP on Tuesday, with the classic ‘no change’, BOE Interest Rate decision on Thursday. There are PMIs on Construction and Manufacturing in-between. German Retail Sales are reported on Tuesday and are worth noting. In the US the early Unemployment figures index is reported on Thursday and this remains a sensitive indicator. For choice markets should improve.
Pause for Thought
VCTS, which invest in small companies raised £440m which was the largest inflow of funds for eight years.
Official Figures
REPORTS
NARS Acquisitions Driving Growth ?
JNY Food to fly
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Nationwide Accident Repair Services (LSE:NARS)
Bid/offer spread: 78.5p/80p MKT CAP: £34.6m
Next results: March 2015
Nationwide Accident Repair Services (LSE:NARS) reported a profit recovery in the first half of 2014. The underlying interim profit, excluding amortisation and restructuring costs, increased 86% to £2.5m on the back of a 14% improvement in revenues to £90m. Most of that improvement came from acquisitions, although the recent Gladwins acquisition was completed too late to make a contribution in the first half. The interim dividend was maintained at 1p a share. Net cash was £3.1m at the end of June 2014.
Insurers remain the main customers but fleet revenues are increasing. Claims frequency is stabilising and supply is coming into line with demand. Nationwide plans to continue to be involved in consolidation as well as widening the range of services it offers.
House broker Westhouse forecasts a full year profit of £4.87m and a total dividend of 2.9p a share. The benefits of the recent acquisitions should flow through next year and a £5.7m profit is forecast for 2015.
The shares are trading on less than ten times prospective 2014 earnings and the prospective yield is 3.6%. Quindell still owns more than 25% of Nationwide but it is uncertain whether it will eventually bid or sell the shares, acquired for Quindell shares, to raise cash for its own business. Whatever happens to the Quindell stake, Nationwide has a strong underlying business and it is a major player in the consolidation of the repairs sector.
Journey Group (LSE:JNY)
Bid/offer spread: 137p/140p MKT CAP: £m
Next results: March 2015
There was a negative reaction to the interim figures from airline caterer Journey Group (LSE:JNY) but the figures do not change the underlying potential to win new catering contracts. The weak dollar hit the interim figures of Journey because its catering business is all in the US. In the six months to June 2014, revenues would have grown by 5% on a constant currency basis but they slipped from £19.2m to £18.8m, while continuing profit slumped from £690,000 to £596,000. The interim dividend was increased by 10% to 1.375p a share. The balance sheet remains strong with net cash of £3.57m.
The US airline catering business increased revenues and profit in dollar terms and the strategy is still to grow by winning new contracts at additional airports. Journey has to wait until these contracts come up for renewal before it can bid for them so it is not in control of when it can win new business.
House broker N+1 Singer has shaved its 2014 profit forecast by around £130,000 to £1.95m, still an improvement on 2013, but the dividend forecast has been edged up to 3p a share. The 2015 forecast has also been trimmed but this figure could change if a new airline contract is won.
