All three companies released results this morning, plus news of some other significant developments. Here’s what you need to know about each one.
Full-year revenue at financial trading group IG rose by 8% to £400.2m last year, but reported pre-tax profit was down 13% at £169.5m. The dividend has been left unchanged at 28.15p per share, giving a yield of about 3.7%.
Long-serving chief executive Tim Howkins has decided to leave IG in the wake of the Swiss franc “event” in January, which resulted in IG recording an exceptional loss of £27m.
IG shares have fallen by around 6% so far today, but in my view this could be a buying opportunity. The Swiss franc losses are likely to be a genuinely exceptional event and shouldn’t detract from IG’s core attractions — an operating profit of 43% and strong cash generation.
In the year just ended, 95% of IG’s operating profit was converted to free cash flow. That’s outstanding and is good for shareholders, as most of this is paid out as dividends.
In my view, IG remains a quality buy.
FTSE 250-listed chemical firm Croda specialises in producing specialty ingredients for use in cosmetics and the like.
It’s a high margin business in which Croda has a significant presence. This morning, the firm said that sales had risen by 5.2% to £564.6m during the first half of the year, while adjusted earnings per share had risen by 11.1% to 71.8p.
This puts Croda shares on a trailing P/E of 21.9, which does seem a little pricey at first sight. However, Croda’s adjusted operating margin of 25% suggests that the firm may deserve a premium rating. Since 2009, Croda’s operating margin has averaged around 23.1%, while the firm’s dividend has risen by almost 90% over the same period.
In my view Croda shares remain fairly valued and are a strong hold at today’s price.
Small cap Amino makes set-top boxes for internet television. In recent years, it has offered a high dividend yield, but has looked a little like a firm that’s run out of ideas.
That all changed today. In two announcements this morning, Amino reported a 56% rise in first-half adjusted operating profit and revealed plans to acquire US firm Entone, Inc. for £46.7m.
According to Amino, Entone is a market leader in the US IPTV (internet TV) market and a direct competitor, so the deal looks logical. It’s not cheap, though. Amino is paying around eleven times earnings before interest, tax, depreciation and amortisation (EBITDA) for Entone, excluding Entone’s net cash.
The acquisition will be funded with a £21m placing of new shares, plus Amino’s cash balance of £17.3m and £5.1m of debt. Shareholders fearing a dividend cut can be reassured: Amino has committed to maintain its 10% dividend growth policy until at least the end of the 2016 financial year.
The market seems to like the deal, and Amino shares are up by 6.5% as I write. I’d wait for a pull-back before buying any more, but continue to see Amino as an attractive stock.