It comes as a surprise that sales for Coca-Cola HBC in Greece, which is where the company started out in 1969, should have been mildly positive in the first half of this year, aided by some clever marketing including smaller packaging.
By contrast, Russia, impacted by falling disposable income, was as expected weak, even if the company outperformed the soft drinks market generally. CCHBC, which moved to a London quote in 2013, bottles and sells Coke in 28 countries.
In so many different territories, its performance is always going to be variable, but the halfway figures comfortably outpaced City expectations, sending the shares ahead by 97p to £14.20. They have been a dull market throughout the summer, mainly because of concerns over Greece, which accounts for about 6 per cent of revenues.
The main story was a 170 basis points improvement in margins to 7 per cent. Strictly comparable earnings were ahead by 31 per cent to €219 million.
There are a number of factors moving the figures around. The biggest is an unfavourable currency hit, which will mean a €155 million reduction in earnings for the current year.
There were four extra trading days, which had a disproportionate effect — volume growth of 3.8 per cent translates into 1.3 per cent if you strip this out. In more developed markets, the reported revenues suffered from the effects of deflation and the need to make one-off promotions, meaning temporary price cuts in some areas. In emerging markets, CCHBC is managing to put through some useful pricing increases.
The company is cutting costs by making its plants in Europe more efficient. It is forecasting €44 million of savings in the current year and €30 million a year thereafter. Finally, raw material costs are lower, mainly the cost of sugar in the EU and plastics generally because of the low oil price.
Take out currency movements, then, and the revenue per case was unchanged from last year. CCHBC hopes to increase volumes for the rest of the year in each of its reporting segments. The shares sell on 24 times earnings, though, which looks a bit rich to prompt an immediate purchase.
Revenue £3.15 bn, down 1 per cent
MY ADVICE Avoid for now
WHY The halfway figures comfortably beat expectations but the rise in the shares has left them on a very demanding multiple
I am thinking of requesting a new clause in my contract that says I do not have to write about the London property market. This is increasingly impossible to forecast on any rational basis. Derwent Londonis one of the purest plays, specialising in developing unusual buildings in high growth areas.
The most startling figure in the halfway figures is the £57.50 per sq ft it has gained from renting out a quarter of its White Collar Factory in red-hot Old Street a year ahead of completion. The company says that demand for such space continues apace from “grown-up” companies that can afford this sort of rent, which not that many years ago would only have been seen in prime West End or City locations.
Meanwhile, investor demand for such property is “voracious”, in the company’s words. It is shifting up this year’s forecast for rental growth by a couple of percentage points to 8 to 10 per cent — last year’s target was comfortably exceeded.
The question is whether further purchases of the right sort of properties can come through. Derwent has 1.1 million sq ft to be developed, at a cost of £480 million, which can easily be funded given the strong balance sheet. It has two other huge sites, in Baker Street and Tottenham Court Road, that are not included in this. Derwent has also paid £232 million for almost half a million sq ft in the EC1 Tech Belt.
Net asset value, up 11 per cent to £32.26, is not that far behind the shares, up 31p at £36.95. Buy, unless you think that the London market is really heading for that long-awaited collapse.
NAV/share £32.26
Dividend 12.6p
MY ADVICE Buy
WHY Proxy for London market that shows no signs of slowing
As a highly cyclical business, Michael Page International needs about £50 million of cash in the bank to tide it through hard times. This allows it to keep those highly paid professional headhunters it employs at their desks when they are less busy, rather than losing such skills and then having to hire again when the cycle turns.
Fortunately, Page ended the half-year with £100 million in the bank, and had already promised to consider a special dividend, the first in the company’s history, at this stage.
That extra £50 million will fund a 16p return, along with a halfway payment up by 5 per cent to 3.6p. The extra cash puts the shares, up 19½p to 546½p, on a 5 per cent yield, providing much needed support for a stock on a huge earnings multiple of 27.
The question is whether those extra payments can be afforded in following years. The answer depends entirely on the world economy, and to what extent the convulsions in China are followed by a slowdown elsewhere and an unwillingness again on the part of employers to hire. Unless you think this is in prospect, the shares are worth buying for the yield.
Revenue £530m
Dividend 3.6p
MY ADVICE Buy for income
WHY Further special payments in prospect
And finally . . .
All change at Grainger, the UK’s biggest quoted residential landlord. This is undergoing a management succession, with the new chief executive, Helen Gordon, set to join earlier than scheduled and the finance director, Mark Greenwood, announcing his retirement. The company has put its wholly owned assets in Germany, about 6 per cent of the portfolio, up for sale. It has reshuffled its debt. The first build-to-rent scheme, at Barking, east London, is now fully let, and at 10 per cent more than expected.
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