Saga
Revenue £478m Dividend 2.2p
It is encouraging that of Saga’s 200,000 retail investors, the majority customers of its insurance or travel businesses, few have chosen to sell out since the award of the one-for-20 bonus share in May. It would make little sense to have done so with the shares trailing their 185p flotation price and the company limbering up to provide a decent dividend income.
As they consider their next move, they should be aware that Saga is doing pretty much what it said it would at the time of the float in May last year. It is extending the brand into other areas, such as financial services, upgrading its travel operation and bearing down on debt.
Halfway figures to July 31 suggest that Saga is getting a following wind for its motor insurance side, still a heavily competitive market. The number of insurance policies rose by almost 10 per cent, helped by the purchase of Bennetts, the motorcycle specialist. The company is expanding its market share by using a panel of underwriters, who are therefore prepared to write more policies than its in-house partner.
Meanwhile, rises in premiums in the market are starting to stick, while its demographic of older, mainly retired and more cautious drivers is not producing the rise in claims frequency and personal injuries seen elsewhere in the insurance market.
New ventures include the financial services operation in joint venture with Tilney Bestinvest. This is still under wraps, so it is not as yet clear why, other than out of blind loyalty to the brand, its customers should use this rather than other financial services providers. Call it an unknown quantity, then.
Over the next half-decade, Saga will upgrade at least one of its two cruise ships with new, more efficient craft. Trading profit for the half-year came in not much changed at £117.5 million, a number that disregards the effects of the flotation.
The halfway dividend, the first payment, obviously, is set at 2.2p, with a promise that this will represent a third of the year’s total. Assume a bit of generosity, and the shares, up 4½p at 205½p, yield a bit more than 3.3 per cent.
Existing investors should certainly hold on. I suggested buying for the long term at 193p in May; I would repeat the advice today.
My advice Buy long term
Why Company is progressing with the strategy laid out at the float, expanding its travel and financial services side, and paying down debt
Harvey Nash
Revenue £337m Dividend 1.49p
It is boom time for those who let themselves out for short-term IT contracts in the UK and the United States, and a good time, too, for specialist recruitment companies, such as Harvey Nash, that find and place them.
The company is keen to expand its American business — less than 10 per cent of the total — to take advantage of those hirings on the West Coast and outplacements being carried out by Microsoft.
This comes with the odd disadvantage. Because of how such placings are paid for, Nash and other recruiters see a strong outward cashflow as the business picks up, and this was a feature of some otherwise strong halfway numbers that puzzled some analysts.
In fact, that cash outflow is a measure of the strength of the business, even if it does leave the company with debt of £16 million. Nash is also having much success placing staff in the UK financial services sector, to cope with the switch to contactless and mobile payments, for example.
Gross profit was up by 6 per cent to £46.3 million in the six months to July 31. The shares added 3¼p to 98p. They sell on 11 times earnings, which looks like good value long term.
My advice Buy long term
Why Company is gaining from booming market in IT staff
Darty
Value of Fnac approach £535m
There is no particular reason, since it sold the doomed Comet chain in 2011, why Darty should have a stock market quote in London. It is one of the very few quoted companies here, outside the natural resources sector, that has all its assets overseas, the 186 stores in France and a few in the Low Countries. An all-share bid from Groupe Fnac, a fellow French retailer, would remove that anomaly by shifting all shareholders on to the Paris market.
There are significant barriers to such a deal, though, not least competition and overlapping stores in Paris. Fnac apparently believes that these can be overcome. I would suggest, without being overcynical, that when two well-connected French companies want something to happen, it generally happens.
Of more significance are what Darty refers to in its statement reporting the Fnac approach as “deal execution risks”. A little more than half its shareholder base of UK institutions would have difficulty taking shares in the combined company in Paris.
This is not unresolvable. The price on offer, 101p in Fnac shares, or £535 million, suggests a multiple of about 16 times earnings. The potential bidder has contacted Darty before but, at this level, it is clear why the latter felt the need to inform its shareholders of the approach. Their views will now be sought out.
The price is below the 130p plus at which Darty was trading early last year but looks like a good one. The uncertainties mean the price rose 15½p to 96½p. I would be inclined to take this in the market.
My adviceTake profits
Why No guarantee that offer will eventually be struck
And finally . . .
HarbourVest Global Private Equity this month gained a full listing on the London stock exchange, which should make the shares easier for retail investors to buy through the usual wealth managers. This is one of those vehicles that allows you, ideally, to share in the gains of private equity investors, with stakes in a range of more than 700 funds. The shares are trading on the usual sector discount to net assets; the latest halfway figures show another good increase in these — 6 per cent since the end of January.
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