It’s a day of judgment for these three companies delivering their latest reports this morning.
Passing the test
Global testing, inspection and certification services group Intertek (LSE: ITRK) has had a good year, with its share price up 50% in that time. However, today’s half-year report has left markets underwhelmed, with the share price dipping 1.5% at time of writing. That’s despite the company posting double-digit revenue and earnings growth, plus an interim dividend of 19.4p, up 14.1% from 17p last year, maintaining its progressive dividend policy.
Pre-tax profit rose 15% from £149.8m to to £172.5m, with revenues up 13.2% to £1.2bn. Management said Intertek is on track to hit full-year targets and Brexit was unlikely to hurt future growth opportunities. The company has grown strongly through acquisitions and perhaps the main reason for today’s market scepticism is that at 25.5 times earnings and yielding 1.46%, future success is priced-in.
Food for thought
Back in February, Real Good Food (LSE: RGD) had lost its flavour. It issued a profit warning after investing heavily in staff and product development, as it shifted focus to its “three pillar markets” of cake decoration, food ingredients and premium bakery. The £22m cap company claimed this was just a temporary setback and its net debts would be greatly reduced by the £44.4m proceeds from the sale of sugar business Napier Brown.
Today’s full-year profits evidently tasted bitter to investors, with its share price down almost 10% at time of writing. Real Good Food’s trading update on 26 April 2016 forecast profits before tax of £13.9m, but that number was cut to £12.9m today due to working capital adjustments, written-off acquisition costs and higher staff pension costs. Executive chairman Pieter Totté said recent trading was “satisfactory” but sounded downbeat with warnings of challenging times for the food industry with “increasing legislative burdens, the growth in the minimum wage and ever-demanding consumers”. Yet with net debt cut from £30.1m to £5.1m, investors may soon regain their appetite.
Publishing group Trinity Mirror (LSE: TNI) is the only one of these three stocks to enjoy a boost today, its share price up 6% after publishing its half-yearly report. The Daily Mirror publisher reported a 44.3% leap in adjusted operating profit, driven by the benefits of November’s acquisition of Local World and tight cost control. This offset its losses from the launch of daily newspaper New Day, which closed in May. Its digital audience and revenues grew strongly, the latter up 14.4% to £39.7m, although digital classified revenue fell.
Like every newspaper group, Trinity Mirror is hoping to manage the shift away from print by protecting revenues from this source while driving further digital growth. It’s a tricky balancing act, one the group says has been made harder by Brexit, with subsequent lower UK growth forecasts hitting revenues. The share is down 43.1% over the last year and trades at just 2.21 times earnings, yielding 6.48%, so despite today’s positive reaction it remains a risky stock to invest in.