The Motley Fool

Should You Buy Drax Group plc, Jardine Lloyd Thompson Group plc, Elementis plc And Segro plc After Today’s Earnings?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.


Shares in Drax (LSE: DRX) have risen more than 10% by morning trading, after the power producer reported an 18% rise in EBITDA to £120 million for the first half of 2015. This exceeded analysts’ expectations, as its share of biomass generation rose from 23% last year, to currently 37%. The increase use of biomass has reduced its UK carbon tax liability; and with the increase in carbon prices, the benefit to its bottom line is much more pronounced.

Its electricity supply business, Haven Energy, is also doing well, with revenues having increased 23% to £629 million in the first half. Drax also announced an increase in the interim dividend to 5.1 pence, from 4.7 pence last year.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

The value of Drax shares are still 21% lower than a month earlier, following the removal of the Climate Change Levy exemption on renewable energy in this month’s budget. The move had been unexpected, and the investment justification of many renewable projects now look doubtful.

Without a U-turn in government policy, the investment case for buying Drax shares is unappealing. As biomass generation will no longer be exempt from the Climate Change Levy, EBITDA is still expected to fall by £30 million this year and £60 million in the following year.

Jardine Lloyd Thomson

Jardine Lloyd Thompson (LSE: JLT), Europe’s largest insurance broker, reported underlying EPS fell 10% to 30.2 pence in the first half of 2015. Revenue, which only grew 6% to £592 million, failed to offset the increase in operating costs attributed to the expansion of its US specialty business and the shift away from commissions-based employee benefits in the UK.

Because of one-off factors and growth investments, the drop in profitability in this year’s first half should only be temporary. Chief executive Dominic Burke remains confident that organic revenue growth will be in line with last year’s. “As we look forward, the business is well-positioned to deliver sustainable earnings growth”, he said.

Shares in Jardine Lloyd Thompson fell 1.7% to 998 pence.


Elementis (LSE: ELM) reported a 9% decline in pre-tax profits, following the decline in sales to the oil and gas industry. Sales to the oil and gas sector fell 30% from a year ago, as drilling activity was considerably lower with lower oil prices. The specialty chemicals company is trying to diversify by increasing sales to paint and personal care manufacturers, but this will do little to slow the decline in earnings in the medium term.

Shares in Elementis have an attractive prospective dividend yield of 3.9%, but declining earnings and a pricey earnings multiple makes its shares unappealing. Analysts expect underlying EPS will fall 12% to 14.2 pence this year, which gives its shares a forward P/E of 17.9.


Industrial REIT SEGRO (LSE: SGRO) reported an 8.3% rise in net asset value (NAV) to 416 pence, in the first half of 2015. The limited supply in high quality industrial and logistic space in its European markets has helped to boost its property valuations. But, even with higher property prices, rental yields for industrial units are typically much higher than those for commercial and residential properties. Its portfolio of completed properties have an average yield of 6.3%.

The REIT should stand to benefit from its large speculative development pipeline, because development projects typically offer much higher rental yields. Although there is a risk of higher vacancy rates, the average projected rental yield on development costs for its development properties is 8.8%. 

SEGRO is currently trading at a 6% NAV premium, but the combination of high yielding developments and further potential for substantial valuation gains means its premium is well deserved.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Elementis. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.