Why did the LDG share price originally crash? Is the recent growth a sign of a turnaround? And should I be adding the business to my portfolio?

Falling share price

Over the years, Logistics Development had signed various news contracts with companies like Homebase and Britvic and made several key acquisitions to expand its portfolio of service offerings. But despite this, the firm struggled to generate profits and racked up a lot of debt in the process.

Naturally, a continuous stream of disappointing results led to a steadily falling share price. And by mid-2019, it had lost around half its value in two years. But this decline quickly accelerated. In the following August, CEO Alex Laffey stepped down with immediate effect. Why? Because an internal accounting review revealed that operating profits were “significantly lower than anticipated”. This led to the delayed publication of its half-year results and consequently caused the shares to be suspended from trading.

By the time trading was reinstated in November 2019, the LDG share price had been slashed again from 64p to 5.4p. But just as the company looked like it was going insolvent, it received a £55m rescue package from private equity group, DBAY Advisors.

Time for a comeback?

With new cash injected into the business, Eddie Stobart began restructuring itself into an investment company and renamed itself Logistics Development. Using its industry knowledge, combined with investing expertise provided by DBAY Advisors, the company’s new business model is to seek out investment opportunities within the logistics, transport, warehousing, and e-fulfilment sectors.

This new strategy was approved by shareholders in December 2020. And so its effects were not captured in the most recent published results. But the preliminary report did show a good base from which to start.

The net debt of the company has been cut by £77.2m to £144.5m. By comparison, based on the current LDG share price, the firm’s market capitalisation stands at around £90m. So the business is still highly leveraged. But it’s a significant improvement compared to the year before. Meanwhile, underlying profits increased from £4.2m to £47.8m. Impairments ultimately resulted in an overall loss for the year. But as these are one-time expenses, I give it the benefit of the doubt.

The bottom line

Overall, I think the new strategy sounds like it has potential, especially since the rising popularity of ecommerce has led to a considerable boost in demand for the sectors in which Logistics Developments intends to invest. And if successful, then I believe the LDG share price can make an exciting comeback over the long term.

However, at this stage, there are simply too many unknowns. For now, I’m keeping this stock on my watch list until I see how effective the new strategy actually is.

The post Can the Logistics Development (LDG) share price make a comeback? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in Logistics Development. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In a shock announcement at the end of August, the company said it was suspending its shares following a review of the accounts. Management believes this ongoing review will lead to a substantial readjustment in reported earnings before interest and tax, according to the company’s press release on the matter.

As a result, management also warned it will be reviewing Eddie Stobart’s dividend policy. Immediately following the announcement, the shares were suspended from trading, and have remained so.

However, today, the story took another turn. Responding to media speculation over the weekend, the company announced it had received a “preliminary expression of interest” from the private equity group DBAY Advisors Limited regarding a possible issue for the business. As of yet, there’s no certainty an offer will be made, but DBAY now has until 5pm on 7 October to make a final decision.

If it does decide to acquire Eddie Stobart, this could be a boon for shareholders. This time last year, shares in the logistics business were changing hands around 123p, 76% above current levels. I think it’s highly likely an offer, if it does emerge, will be substantially above the current share price.

An FTSE 100 dividend champion

If Eddie Stobart is taken off the market, an excellent replacement in your is portfolio could be Johnson Matthey (LSE: JMAT). I think this is one of the best in the FTSE 100 for a couple of reasons.

First of all, the business is a leader in the speciality chemicals business. This is a highly regulated and niche company, where reputation counts for everything. Johnson has been in business since 1891, giving it a substantial competitive advantage over smaller, younger competitors.

Secondly, management has been pursuing a conservative dividend policy. For example, the company’s current dividend per share (89p) is covered 2.7 times by earnings per share, and it’s been that way for roughly the past 10 years. The dividend has grown at a compound annual rate of around 5.5% over this time, roughly in line with earnings growth. Net gearing — a gauge of balance sheet strength — was just 33% at the end of its fiscal 2019. So it appears the firm has a moderate level of borrowing and a strong balance sheet.

These numbers tell me that while Johnson Matthey’s current dividend yield of 2.9% might not be the highest around, it’s exceptionally safe. Earnings would have to fall by more than 50% for the dividend to come under pressure. Considering its reputation and competitive advantage, I think that’s unlikely.

Still, even if it earnings do fall 50%, Johnson Matthey has plenty of financial headroom on its balance sheet to borrow money and make up for any short term cash shortfalls. That’s why I think this could be one of the best dividend stocks in the FTSE 100.

The post Is this the best dividend stock in the FTSE 100? appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, so far, the share price has been sinking and the current 98p or so leaves it almost 40% down from where it started when first listed. The valuation looks tempting with the forward-looking price-to-earnings rating for the trading year to November 2019 just above seven and the anticipated dividend yield a little over seven too. But that’s not the whole story.

Strong growth

Such a bargain rating suggests lacklustre business performance but there’s no sign of that. City analysts following the firm predict that earnings will grow around 17% in the current trading year and by 11% in the year to November 2020. Not only does Eddie Stobart have apparent value, it also appears to enjoy decent growth prospects.

I find today’s full-year report to be encouraging. It revealed that revenue grew a little over 35% compared to the previous year and adjusted earnings per share moved a little more than 16% higher. However, the figure for net debt moved almost 46% higher to almost £160m, which I’m not so keen on. But the directors expressed their confidence in the outlook by slapping almost 9% on the total dividend for the year.

The growth in revenue in the period came from a mix of organic advances, new contract wins and contributions from the firm’s prior acquisitions of iForce Group, The Pallet Network Group, The Logistic People and Speedy Freight. The directors explained in the report that the net debt figure rose because of the acquisition of The Pallet Network Group and due to “working capital investment,” which is “expected to normalise in 2019.”

Reasons to be cautious

I think the debt situation is the one thing that takes the shine off the low valuation and exciting-looking growth prospects. Adjust for the debt, and the valuation doesn’t look as attractive any more. The current figure for net borrowings runs at more than five times the year’s operating profit. I’d want the company to make serious inroads into getting the debt burden down going forward.

Chief Executive Alex Laffey said in the report the company made “significant progress” during the year in delivering its strategy to become “a full-service logistics and supply chain organisation.”

I reckon there’s bound to be a big element of cyclicality in the company’s operations and Laffey said the directors are “mindful of the current political and economic uncertainty,” but he is “confident” the firm’s “unique” operating model will deliver the “flexibility to respond rapidly to changing market conditions.” 

Eddie Stobart is cheap, the dividend yield is high, and the immediate growth prospects look good. But I think that risks can be found in the way high debts combine with the cyclical operations. I see the stock as tempting, but I’d approach with caution and watch any investment closely.

The post This 7% dividend and growth stock looks tempting to me appeared first on The Motley Fool UK.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These companies are both major players in essential sectors. Unlike some sexy tech stocks, I’m pretty certain that the services provided by these companies will still be needed in 10 or 20 years’ time.

Keep it rolling

When Edward Stobart took over the running of the Eddie Stobart haulage business from his father in the 1970s, he realised that customers would pay more if he could combine transport and warehousing services. This insight helped him to build the group into one of the UK’s largest logistics operators.

After several changes of ownership, Eddie Stobart Logistics (LSE: ESL) floated on London’s AIM market last year. Share price performance has been disappointing so far and the stock is down about 17% since its flotation.

However, today’s half-year results suggest to me that the firm’s share price could soon find some support. Revenue rose by 25% to £359m during the first half, thanks to a mix of acquisitions and major contract wins. Underlying operating profit rose by 7% to £18m, cutting the group’s underlying operating margin from 5.9% to 5%.

The company says that profit growth lagged behind sales growth due to the costs involved in setting up several major new contracts. That’s understandable, given that these new contracts are expected to deliver annual revenue of £158m, or around 20% of forecast sales for this year.

My view

Chief executive Alex Laffey expects the investments made in the first half of the year to support strong profits growth during the second half. That sounds reasonable to me.

However, the group’s net debt has now risen to two times EBITDA (earnings before interest, tax, depreciation and amortisation). That’s at the upper end of what I’m comfortable with for a low-margin business of this kind.

When Stobart’s full-year results are published in 2019, I’ll be looking for evidence that cash flow and margins have reversed recent declines. I’d also like to see a reduction in borrowing levels.

Despite these concerns, I believe this could be an attractive long-term income pick. Trading on less than 12 times forecast earnings and with a 4.9% yield, Eddie Stobart’s valuation seems reasonable to me.

Making money from muck

Collecting and managing waste is an essential function in any modern society. I don’t see that changing in my lifetime.

With this in mind, I think that waste management firm Biffa (LSE: BIFF) could be an interesting investment. 

Biffa’s revenue rose by 8.8% to £977.7m last year. This increase was split evenly between acquisitions and organic growth. The group’s profit margins were maintained, lifting underlying operating profit by 10% to £81.2m.

Cash generation was also encouraging, with underlying free cash flow improving from £28.8m to £44.4m.

Growth opportunities

As one of the largest firms in this sector operating in the UK, Biffa enjoys economies of scale not available to smaller firms. I feel that this should allow management to expand profitably in areas such as energy from waste and recycling.

Overall, the stock looks quite good value to me, on 12.8 times forecast earnings with a well-covered yield of 2.8%. In my view, Biffa could be a good long-term buy for UK investors.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The company reported that for the 13 weeks to the beginning of April, total group sales increased 10.4% on an organic basis, excluding the impact of acquisitions or disposals. Including the effects of these portfolio changes, total sales grew by 18.3% year-on-year, a significant jump helped mainly by a rise in international sales from £4.5m for the period last year, to £25.6m this year. 

Total sales in the UK and Republic of Ireland increased 10.4% on a reported basis and 7% on a like-for-like basis in the UK alone.

Pizza rush 

These figures show that despite concerns about saturation in the fast food market across the UK, customers are still flocking to Domino’s offering. 

CEO David Wild believes that customers are attracted to be group’s “clearer value proposition,” a conclusion based on customers’ “strong scores for value for money and overall satisfaction.” As long as Domino’s can maintain this reputation, the company’s growth is unlikely to slow any time soon, especially in the international market. Here the enterprise is still fairly underrepresented in the markets where it has exposure. In fact, only around 150 of the firm’s 1,203 outlets are overseas.

City analysts are currently forecasting earnings per share growth for 2018 of 25%, followed by growth of 11% next year. Based on these earnings targets, shares in the company are trading at a forward P/E of 21 falling to 19 by 2019. This might look expensive at first glance, but shares in Domino’s have always commanded a high valuation. The firm’s double-digit earnings growth rate, coupled with its franchise business model (and the high-profit margins that come with the franchise model) are certainly worth paying a premium for in my view. That’s why I would buy and hold the stock for the next two decades.

Growing industry 

Another potential long-term investment I like is Eddie Stobart Logistics (LSE: ESL).

Logistics is a low-margin, tedious business, but it is also an essential one and demand for logistics services is only going to grow as the world’s population expands and consumers do more shopping online and less in stores. 

Among other businesses, Eddie Stobart, which has one of the most recognisable names in the industry, provides e-commerce fulfilment and logistics services to a range of retailers.

However, this business has only been independent for around a year, and it is still, in my opinion, finding its feet. Over the next few years, as management leverages the group’s reputation for building its independent offering, I believe the shares could be set for a substantial re-rating. 

City analysts seem to agree with earnings per share growth of 116% pencilled in for 2018, the group’s first full year as an independent company. For 2019, earnings per share are expected to grow by a more sedate 11% as the firm settles into a more sustainable growth trend. 

It seems as if the market is overlooking this as, at the time of writing, the shares are trading a forward P/E of only 12.1, and are projected to yield 4.5% for 2018. With this being the case, I believe now is the perfect time to make the most of the opportunity.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Domino's Pizza. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The BCA share price has fallen by 20% over the last six months, as investors fretted that a slower UK market and rising debt levels could limit the group’s profitability. So today’s news should mean that shareholders such as fund manager Neil Woodford can breathe easy, for a while.

I’d like more detail

BCA provided very little detail in today’s trading update. Strong trading seems to have been driven by “a number” of new remarketing contracts plus “continuing renewals”. Remarketing is the group’s main auction business and accounted for around three quarters of operating profit during the first half of the year.

The company didn’t provide any indication of how far profits had risen ahead of forecasts. And while net debt is now expected to be “lower than market forecasts”, there was no indication of what this might mean.

I’m not convinced

I’ve been cautious about BCA in the past, due to what I see as a weak balance sheet. The group’s half-year accounts showed total liabilities of £1,026m versus tangible assets of just £637.1m. This left the group with a negative net tangible asset value, a situation I prefer to avoid.

My view is that recent years’ profits have been boosted by rising volumes of nearly-new cars and add-on services such as “Partner Finance”, which provides credit for customers. With new car sales now falling, maintaining this rate of growth could soon become difficult.

I may be overcautious, but I’m not sure that this is a good time to invest in this business. I’ll be staying away, for now.

Trucking ahead

Another relatively new arrival on the stock market is Eddie Stobart Logistics (LSE: ESL). The trucking and logistics group has a strong brand and works with a wide range of blue chip customers.

Former parent company Stobart Group spun out this business into its own stock market listing back in April last year. Since then, the group’s operational performance has been good, but the shares have flopped. Is this a buying opportunity?

So far, so good

This week’s full-year results contained a fairly large number of adjustments. But if we accept the group’s picture of underlying performance, last year was quite good. Revenue rose by 13.6% to £623.9m, while adjusted pre-tax profit climbed 57.5% to £37.8m.

Thanks to IPO proceeds totalling £118m, Eddie Stobart was able to reduce net debt from £165.5m to £109.5m in 2017 and spend £43.2m on acquisitions. Alongside this, the group paid a maiden dividend of 5.8p per share, giving the stock a trailing yield of 4.6%.

The right time to buy?

My concern is that the business went through a number of changes last year. Seeing through these isn’t that easy, so I’d like to see a ‘clean’ set of accounts before investing.

Despite this, the picture looks reasonably positive to me. Broker forecasts suggest that earnings should climb 22% to 12p per share this year, putting the stock on a forecast P/E of 10.5, with a prospective yield of 5.1%.

I think there’s a good chance that this week’s results will mark the low point for Eddie Stobart’s share price. I’m going to keep this one on my watch list.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bad call

Telecoms giant BT Group (LSE: BT-A) currently pays an astonishing 6.47% income with cover of 1.8, but as so often is the case, the sky-high yield flags up underlying problems. The group’s share price peaked at 500p in December 2015 but trades at just 237p today.

The rot started with irregularities at its Italian business and only worsened when the scandal turned out to be worse than originally thought (don’t they always?). As my Foolish colleague Kevin Godbold points out here, BT continues to struggle with a £9bn debt mountain, stiff industry competition, and the need to constantly restructure to drive down costs and comply with regulator Ofcom’s demands.

February’s figures showed a 3% drop in revenues and adjusted earnings across the three months to 31 December amid weaker trading in its Global Services division, and falling monthly revenues from mobile users. 

Italian job

This leaves the group trading at a forecast valuation of just 8.5 times earnings, deep into bargain territory. Investors should not bank on a spectacular comeback as earnings per share (EPS) are forecast to grow just 3% in the year to 31 March 2019, and 1% the year after. Competition is likely to intensify, rather than weaken. By then, the yield is forecast to hit 6.9%, provided it is sustainable.

Union approval to close its final salary scheme should offer some relief and unlike its telecoms rivals, BT should benefit from higher interest rates, which will shrink its £9bn pension deficit. A fix for its Italian problems and EE synergies could also boost growth. All of this may take time, but while you wait, there is that dividend.

Steady Eddie

Here’s a much smaller stock that is also trading at a bargain valuation, and with a juicy dividend to match. Eddie Stobart Logistics (LSE: ESL) has just announced full-year results for the 12 months to 30 November 2017, with a headline 9.4% increase in group revenues to £623.9m, and underlying EBIT up 17.4% to £48.5m, although operating profit fell by 1% to £26.6m.

The £450m logistics group has had a bumpy ride lately, its share price falling 20% in the last three months, with only the slightest of recoveries on today’s announcement. Yet chief executive Alex Laffey hailed “significant progress” in its first year as an AIM-listed stock, with strong underlying revenue growth, £41m of existing contracts renewed and £89m of new volume. It also completed acquisitions of iForce, Speedy Freight and Logistic People.

Rolling, rolling

The board proposed a final dividend of 4.4p, making a total of 5.8p for the full year, in line with its progressive dividend policy. 

The stock currently offers a generous forecast yield of 5.3%, with cover of 1.8. Fellow Fool Jack Tang has previously highlighted its low valuation and attractive yield. Its EPS are forecast to rise an impressive 20% over the year to 30 November 2018, then another 13% the year after that, when the dividend will hit 5.9%. Eddie Stobart looks set to carry on trucking.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Synergies

Progress with the integration of the two bookmakers is going better than many analysts had expected, with the merged group on course to generate £150m in annual synergies by 2019, more than double the group’s original estimate. And on the back of these upbeat expectations, the group doubled its interim dividend from 1p per share, to 2p per share.

As I write, Ladbrokes Coral shares are trading at about 117p, which puts the stock on a 2017 forward P/E of 9.8, and gives it a prospective dividend yield of 3.9%. This indicates that it offers very good value for money, with the average UK-listed company trading at 14.1 times forward earnings and expected to yield just 2.8%.

Retail decline

However, looking ahead, the declining profitability of its shop estate could be a cause for concern. In the past six months, revenues from the group’s UK retail operations fell by 6% with a 7% decline in comparable over-the-counter wagering. Retail gaming revenues seem to be on a long-term structural decline, and still account for roughly two-thirds of the group’s revenues. There is also regulatory uncertainty ahead, with the proposed reduction in the maximum stake on fixed-odds betting terminals being the biggest worry.

Nevertheless, in my view, the market has already priced-in most of these risks. Instead, I believe investors are not fully appreciating the size and scale advantages of the merged group. As such, with modest near-term earnings growth and a re-rating of the stock, I reckon Ladbrokes Coral could offer significant total returns to its shareholders.

Double-digit growth

Also reporting its first-half results on Thursday was logistics and supply chain solutions company Eddie Stobart (LSE: ESL). The firm, which was spun-off from Stobart Group in 2014, reported double-digit growth in revenues and operating profits during the first half of the year.

The company’s underlying revenues increased by 13% to £286.8m from £253.6m in the same period last year. Meanwhile, underlying earnings before interest and tax rose 14% to £16.9m, on the back of margin improvement and new business growth.

Going forward, management expects full-year results to be in line with market expectations, following an encouraging start to the second half. The group is on the lookout for new acquisitions to drive continued earnings growth, and is keen to use its acquisition-led strategy to leverage cross-selling opportunities, implement synergies and strengthen its service offering.

The company’s low valuation and attractive yield make the stock seem to me like a tempting buy. Eddie Stobart trades at just 14.6 times expected earnings in 2017 and has a prospective dividend yield of 3.5%.

The post 2 income-and-growth stocks for shrewd investors appeared first on The Motley Fool UK.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Revenue and earnings have expanded rapidly over the past three years, and investors have been well rewarded for this growth with shares in the group gaining 243%, excluding dividends, since listing.

And there could be further gains ahead. Today the company released its final figures for the fiscal year ended 30 April, which show growth across the board. Group revenue for the period increased by 17.2% from £290m to £340m and earnings before interest and tax increased 21.8%. Profit before tax surged 20.6%, and earnings per share increased drastically by 20.5% from 10.3p for fiscal 2016 to 12.5p. Cash generated from operations rose 25.2% to £25.7m and on the back of this impressive growth in cash flow, management declared a 20% increase in the company’s dividend per share to 7.2p.

You might not have heard of Clipper, but you’ve almost certainly used the company’s services at some point. It provides essential logistics services to the UK retail sector. Customers include ASOS, Morrisons, Halfords, John Lewis and other high street retailers as well as parcel delivery services. As the UK’s consumers increasingly move away from the high street, Clipper is well placed to capitalise on this shift. The company operates click and collect services as well as returns services for a number of retailers. According to today’s update, it has a “strong pipeline of new business opportunities” with both existing and new businesses.

Bright growth outlook

City analysts are highly excited about the group’s growth potential predicting a 29% increase in earnings per share for fiscal 2018, followed by growth of 25% for fiscal 2019. If the company hits these lofty growth targets, it will have doubled earnings per share in four years. Pre-tax profit will have grown fivefold since 2014. 

Unfortunately, this kind of growth does not come cheap. Shares in Clipper are currently trading at a forward P/E of 26.9 based on fiscal 2018 estimates. However, compared to projected earnings growth of 29%, this valuation does not seem overly demanding. There is also the potential for accelerated growth through acquisitions.

So, as a long-term buy, to capitalise on the consumer shift away from the high street, Clipper might be a great investment.

Undervalued spinoff

Another fast-growing logistics play is Eddie Stobart Logistics (LSE: ESL). Spun off from its parent company last year, City analysts expect the transport group to report earnings per share of 10.9p for the year ending 30 November 2017. For the following fiscal year, analysts have pencilled in earnings per share growth of 14% to 12.4p, giving a 2018 P/E ratio 13. 

Once again, compared to the earnings growth rate this multiple seems to undervalue the business. As revenues grow, analysts also believe management will initiate a dividend payout of 5.6p per share for 2017 and 6.4p per share for 2018, giving a current dividend yield of 3.9% for 2018 at current prices.

Whereas Clipper is a more specialist retail logistics provider, Eddie Stobart provides a broader range of transportation services for clients and therefore, the company might be a better buy if Brexit uncertainty hits the UK consumer. Stobart won’t escape unscathed from such a downturn, but the company’s diversification across the rail, warehousing and trucking industries helps mitigate consumer exposure.

The post Clipper Logistics plc is a high-growth mid-cap I’d retire on appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.