I switch on my computer to check full-year results from Staffline Group (LSE: STAF), and what do I see?A 23% share price fall in morning trading!
That surprise came after the recruitment specialist annouced “publication of the results for the year ended 31 December 2018 has been delayed.” Analyst and investor presentations scheduled for Wednesday and Thursday, respectively, have been postponed too.
There’s been no reason given, and no new date for the expected figures. But the market bears are clearly fearing there are bad tidings afoot and have gone for a quick sell-off. Is that fair?
Big debt
Staffline had been expecting a rise in revenue of around 18% for the year to approximately £1.13bn. And net debt has jumped massively to around £63m at 31 December, as a result of acquisitions on top of some one-off restructuring costs. That announcement led to a sell-off earlier in January, and any material degradation in the year-end figures could trigger a further run on the shares.
Those shares have now fallen by nearly 30% over the past 12 months, and are now on a P/E of only eight, with the expected dividend yield up to 3%.
Fears
The biggest fear must be that some irregularities have come up, and it must surely have been something last-minute to prevent the company from announcing a delay earlier. But why no explanation of the cause?
That’s really no great puzzle, as any announcement of the reason would need to go through market compliance procedures and would take a little time. But I’d certainly be thinking of selling, if I had any.
Progressive
One thing you can say about Staffline is that its dividends have been strongly progressive, and I see a similar record from PZ Cussons (LSE: PZC).
The cleaning and toiletries specialist has been through a tough time of late, recording earnings falls for three years in a row — EPS has declined from 17.94p in 2015 to just 13.39p in 2018, a drop of 25%.
But during that time, the company was able to maintain its dividend thanks to strong cover by earnings — and that’s why I look for strong cover as a safety margin for troubled times. The annual payment was pegged last year and is expected to remain the same this year, but analysts have it resuming its above-inflation rises again from 2020.
First-half wobble
A fall in expected pre-tax profit, from £80m to £70m, knocked another 10% off the share price on Tuesday, taking it down 44% over the past 12 months.
But it only seems to be the firm’s African operations having problems, and the company as a whole looks like it’s well into a solid turnaround to me. In my view, through being significantly family-owned, Cussons has more of a long-term focus than many. And I see it as managed with scant regard for the City’s obsession with the next quarter’s results — which is good.
Income stream
I see that reflected in the firm’s dividend policy too. While it could easily have handed over bigger dividends in the past and made short-term friends, its more conservative approach has enabled the provision of steady annual income for shareholders even when business has been volatile.
With dividend yields set to exceed 4%, I rate PZ Cussons as a good pension investment.
