The sizes of the discounts to their latest published net asset value at which some of the big property companies are trading are truly startling. British Land’s shares are about two thirds of the last figure; Land Securities are at 70 per cent.
By contrast, Segro is trading at a slight premium, the shares up 14½p to 519½p after the publication of half-way figures that contained a NAV figure up 5.4 per cent to 504p and a 4.9 per cent rise in the value of its portfolio to £7.3 billion. This is because the others are exposed, to whatever extent, to a London property market that some fear is vulnerable to a post-Brexit downturn.
Segro has located itself in recent years in exactly that part of the property market that is growing, providing logistics for internet shopping. This week’s news that Tesco is aiming for same-day delivery plays to Segro’s strengths because it covers both “big box” large sorting centres and the crucial local hubs that provide the “last mile” delivery. As an indication of the value of such assets, Blackstone last month announced the sale of its own pan-European logistics network to China Investment Corporation for €12.25 billion.
Not only will internet shopping be increasingly more competitive, the third of Segro’s portfolio on mainland Europe can only benefit from the recovery in the various economies there. In March the company raised £557 million in a rights issue to buy out the half of the portfolio it does not already own in a joint venture that owns property around airports in the southeast.
There was some criticism of the rights issue being opportunistic, because it was more than twice the cash Segro had to lay out for the deal. Investors who put up 345p for the shares will not be complaining, while this provides funding through to the end of last year.
This will involve the building of greenfield sites rather than buying existing assets, which are a bit pricey today, and there are increasing opportunities to co-operate with land-hungry housebuilders in the southeast.
Segro presents investors with a dilemma, because the rise in the price offers the opportunity to take significant profits. The shares should have further to run, though.
MY ADVICE Buy
WHY The share price has come on a long way and outstripped peers, but Segro is well positioned in one of the few growth areas in property
PZ Cussons
Perish the thought that PZ Cussons raised its dividend by 2 per cent in the latest financial year, despite a corresponding fall in earnings per share, because it did not want to spoil a 43-year progression of higher payments — or that it reflected the presence of a family holding of 53 per cent on the share register.
The company, owner of the Imperial Leather soap brand, can at least say that the year to the end of May should mark the low point in its fortunes and that it has coped with the main area of weakness, a 50 per cent devaluation in the value of the naira, the Nigerian currency, rather well.
Nigeria accounted for a bit more than a quarter of profits, but higher prices and cleverer packaging managed to keep the fall in profits from Africa to only 7 per cent, and at constant currency rates they were up by 16 per cent. Across the group pre-tax profits after exceptionals rose by 5 per cent to £88 million, helped by a good rise in Asia, despite the effects of a retail price war in Australia.
The shares, down ½p at 361½p, sell on 20 times earnings. The naira looks a bit more settled, but it must remain a concern.
MY ADVICE Avoid
WHY Uncertainties over Nigeria must persist
Spectris
A fall in the Spectris share price of 195p to £24.39 probably reflects the market’s earlier bafflement at the raft of one-off charges announced rather than any reflection of first-half performance, which showed a return to underlying growth for the first time in several years.
Spectris, which still has a market capitalisation of about £3 billion, makes sophisticated controls and instrumentation and has suffered from the weakness in the oil and gas and mining sectors. It has embarked on Project Uplift, an attempt to find annual savings of £35 million by 2019 at a total cost of £45 million. The programme is running on track, with £6 million to be saved in 2017.
This did mean a one-off hit of £8.8 million at the halfway stage, along with restructuring costs of £6.3 million. These probably were not in all full-year forecasts, while analysts may have taken too rosy a view of second-half prospects, which will start to lap some improvement seen in the latter months of 2016.
Add in those Uplift costs and adjusted pre-tax profits actually fell by 4 per cent to £63.8 million. The first half, though, delivered a 5 per cent rise in underlying growth and the same from earlier acquisitions.
Spectris is talking about seeking another round of efficiencies, but there are no details yet. The United States is recovering while Asia and Europe are strongly ahead, helped by Japan, China and good growth in Germany. Spectris shares have come up from about £19 a year ago. Not cheap on 19 times’ earnings, but worth taking a long-term view.
MY ADVICE Buy
WHY Shares not cheap, but recovery is well under way
And finally . . .
Extraordinary fact of the day: after a 10 per cent rise in the shares yesterday after a favourable set of annual figures, the market capitalisation of Games Workshop, which makes and retails plastic fantasy figurines, is now about £470 million, or about £40 million behind that of a somewhat better known high street chain, Debenhams. GW is not much followed in the City, though the analysts who do have to get their heads around the launch of Warhammer 40k: Dark Imperium, whatever that may be.
