Snail Mail

The fall continues a steady slide for the group, whose share price topped 1,000p just under five years ago, but trades at 614p at time of writing. These are tough times for media companies generally, and this one is no exception, despite owning a diversified portfolio of global media companies and the best read English language newspaper site in the world, MailOnline, whose digital advertising revenues now exceeds the Daily Mail’s print ad revenues.

The group has a stronger financial position with net cash of £233m, against net debt of £464m at the start of the year, after realising £642m from disposing of its stake in ZPG plc. The drop in adjusted profits, and a 23% decline in adjusted earnings per share to 42.2p, reflects its reduced portfolio of businesses. The group reported stable underlying revenue and said performance was in line with expectations, so it wasn’t all bad.

B2B or not 2B

It’s business-to-business (B2B) division even posted a 3% rise in underlying revenues, with margin improvement. But its consumer media operation has challenges, with underlying revenues falling by 4%, while margins thinned from 11% to 10%. At least the full-year dividend rose 3% to 23.3p, which leaves Daily Mail General & Trust yielding 3.4%, with cover of 1.7.

Worryingly, analysts are forecasting an 8% drop in earnings next year. With the stock trading at 17.6 times earnings I’m not tempted to buy, despite CEO Paul Zwillenberg’s claim that its strategy should deliver consistent earnings growth and sustainable annual real dividend growth. It was a falling knife a year ago, and it still is.

On repeat

I wouldn’t describe ITV (LSE: ITV) as a falling knife, but it isn’t far off. Its stock is down 43% over three years, and has fallen 7% in the past three months. A disappointing trading statement in November didn’t help.

2018 wasn’t looking too bad, with total advertising up 2%, external revenues up 6%, ITV Studios revenues up 10%, and online revenues up 43%. Management also boasted of a “strong balance sheet and healthy liquidity.” But the results were overshadowed by warnings of a fourth-quarter slowdown as Brexit uncertainty grew, with revenues likely to fall 3%. December will definitely not be magic with a 6-8% drop, which means total advertising is expected to be broadly flat over the full year.

At least its cheap

Looking forward, City analysts reckon ITV is staring at a 6% drop in earnings per share growth in 2018, then another 4% in 2019. That worries me, but it doesn’t worry Kevin Godbold, who reckons its shares are worth exploring while they are out of favour.

I also like buying good companies after a bad run, and ITV is certainly more tempting than Daily Mail General & Trust as it’s available at a discounted price of just 10 times forecast earnings. The yield is also higher at 5.3%, with cover of 1.9. ITV may also enjoy a Brexit bounce, if we get one.

The post Would the ITV share price and this dividend stock fit nicely inside your stocks and shares ISA? appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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 my view, this is one of a relatively small number of firms whose core assets and brands are too large and valuable to ignore. I believe that any hidden value in Glaxo’s portfolio will eventually be realised, even if this takes a little time.

One problem is the group’s controversial conglomerate structure, which includes consumer healthcare products, vaccines, and a wider pharmaceutical segment.

Supporters of this structure say that this diversity helps to smooth out earnings growth. Investors who believe the group should be split up say that this diversity may hide inefficiency and result in a lack of management focus.

A return to growth?

I’m starting to accept the arguments in favour of a breakup. Glaxo’s pre-tax profit fell from £6.6bn to £1.9bn between 2012 and 2016. Even if we use management’s favoured ‘core’ underlying measure, pre-tax profit fell from £7.3bn to £7.1bn over this five-year period.

This year looks like another flat one. Brokers’ consensus forecasts currently suggest that underlying earnings will fall by 3% to 107p per share in 2018.

However, the group’s cash generation — a historic strength — did start to recover last year, boosting support for the dividend.

On balance, I think the bad news is now in the price, which represents an attractive P/E of 12 and gives a prospective dividend yield of 5.9%. At this level, I believe Glaxo could be a good stock to buy and tuck away.

A surprise income choice

Shares of Daily Mail and MailOnline owner Daily Mail and General Trust (LSE: DMGT) gained around 5% this morning, after the group confirmed its previous guidance for the year ahead.

This stable outlook was something of a relief for investors. The company’s last update — in November — contained a downbeat outlook for 2018 which caused the shares to crash 25% in one day.

When considering recent trading, it’s important to remember that this isn’t just a newspaper business. It also operates a range of specialist business-to-business information services in sectors such as insurance, and runs specialist events. These activities now provide around two-thirds of profits.

If we accept DMGT’s underlying figures, which have been adjusted for acquisitions, disposals and exchange rates, then trading was fairly positive during the first quarter. Group revenue rose by 2% with gains in all divisions except the newspaper business, where sales fell by 4%, outweighing underlying advertising growth of 2%.

What does the future hold?

Will anyone still be buying printed newspapers in 20 years? Perhaps not. But I’m fairly sure that a profitable model for online news will eventually emerge.

In the meantime, DMGT’s B2B information businesses generate the majority of the group’s profits and appear to be well positioned for the future.

The stock currently trades on 14 times forecast earnings, with a prospective yield of 3.8%. The group’s financial situation seems stable and cash generation remained strong last year. I believe this could be a good long-term dividend buy.

The post GlaxoSmithKline plc isn’t the only unloved dividend stock I’d buy and hold forever appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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 resulting sell-off pushed the shares down as low as 500p for a 28% dip, though they came back a little to 545p — still a 22% drop.

Are things really as bad as that sounds, give that the company headlined Thursday’s results announcement by claiming a “resilient underlying performance“?

An adjusted pre-tax profit of £226m looks a lot better, though it still represents a 13% deterioration over 2016 as adjusted revenue also fell by 13%. And at the bottom line, adjusted earnings per share slipped by just 1% to 55.6p.

The company also produced 2016 pro-forma adjusted results aimed at a like-for-like comparison based on its varied ownership of Euromoney Institutional Investor during the year after reducing its stake from 67% to 49%, and that resulted in a 4% rise in pre-tax profit. Who said company accounts were complicated?

Debt down

There’s some good news in DMGT’s net debt, which was reduced during the year by £214m to £464m. That might still sound a lot, but it seems modest for a company bringing in £1.66bn in revenue, and the resulting net debt-to-EBITDA ratio of 1.4 is “comfortably within preferred range.”

Chief executive Paul Zwillenberg reckons “the new strategy and strong balance sheet will, over the medium term, generate consistent earnings growth that will underpin DMGT’s long-standing commitment to deliver sustainable annual real dividend growth.” And on that front, the dividend was lifted by 3% to 22.7p per share (from 22p last year).

That’s in line with inflation, but it’s less than the 23p forecast by the City’s analysts, and on Wednesday’s closing share price it would have represented a yield of 3.2% — but the share price fall has boosted that 4.2%, so those buying today will do a bit better out of it.

Can it deliver?

The question now is whether DMGT can turn a new strategy under the guidance of its new chief executive and new finance director into sustainable long-term growth. It is in the declining newspaper business, but also operates a number of other multinational companies, and with MailOnline.com a big overseas success. 

The strategy is based on three main priorities: improving operational execution, increasing portfolio focus and enhancing financial flexibility.

According to Mr Zwillenberg, pruning the management structure and reducing overheads is helping with the first, and the sell-off of part of Euromoney plus other restructuring addresses the second point. Together, that does seem to be helping on the financial flexibility front, with that net-debt-to EBITDA of 1.4 times apparently the lowest it’s been in more than 20 years.

Underlying valuation

Prior to the price crunch, we were looking at a P/E multiple of 12.5 based on adjusted results, and with the shares pummelled that’s now dropped to 9.8, again on adjusted results.

Do I think that represents a good price to buy-in at? With the changes in the company over the past year as it settles its new direction, and with a number of one-offs clouding DMGT’s statutory results this year, a year-on-year comparison is indeed tricky.

But I think the market has overreacted to the top-line statutory figures and the reaction is overdone. And yes, I see a buying opportunity here, with solid long-term potential.

The post Is Daily Mail and General Trust plc a falling knife to catch after sinking 25% today? appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft 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.

Today’s results show that the group’s revenue rose by 4% to £1,917m last year, while adjusted pre-tax profit fell by 7% to £260m. The dividend has been increased by 2.8% to 22p per share, giving a yield of about 2.7%.

DMGT describes today’s results as “a resilient performance in challenging markets.” Investors seem impressed, or perhaps relieved. The shares rose by about 7% in the opening hour of trading, making DMGT one of today’s top risers.

Lots of businesses, but one risk?

DMGT’s business doesn’t just revolve around the Daily Mail newspaper. Around two-thirds of profits come from the B2B division, which includes events management, data services for commercial customers, and trade publishing. DMGT also owns a 31% stake in online operator Zoopla Property Group.

It’s a complex business for investors to understand. However, one common thread that runs through many of DMGT’s businesses is that they depend on marketing and advertising expenditure by clients.

The most obvious example of this is the Mail newspaper business, where print advertising revenues fell by 12% last year. But this was probably a result of the gradual decline of printed newspapers, rather than the condition of the UK economy.

DMGT operates in a number of other countries, but I don’t see any reason why Brexit in itself should cause problems. What could be a problem though is if Brexit triggers a UK recession. This could hit property-related profits and push businesses to cut spending in areas such as advertising, marketing and training.

Is DMGT a buy?

In September, DMGT announced plans for a strategic review of all its businesses. Further disposals look likely as the group continues to optimise its portfolio.

The outlook for the group seems uncertain to me. Its complex mix of businesses makes it hard to pinpoint the biggest risks and opportunities. With DMGT now trading on about 15 times forecast earnings, I’d rate the stock as a hold.

I’m more bullish about this stock

Hardly a week goes by without global advertising and marketing group WPP (LSE: WPP) making an acquisition. But these are usually small deals, which are integrated into WPP’s global network of companies. It sounds complex — and it is — but I believe WPP’s size and geographic diversity mean that as investors, it’s safe for us to view the group as an integrated unit.

WPP’s earnings per share have doubled since 2010, and are expected to keep rising. Earnings forecasts for the current year are 10% higher than they were 12 months ago, thanks to strong trading during the first three quarters.

Although WPP would be hit by a major UK or European recession, I think its scale and international presence should help to reduce the likely impact of Brexit.

WPP stock isn’t obviously cheap, on a forecast P/E of 15. However, earnings are expected to rise by 13% next year, giving WPP a more modest 2017 forecast P/E of 13.5. In my view, the shares are quite reasonably priced.

The post Would a Brexit slowdown threaten Daily Mail and General Trust plc? appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head owns shares of WPP. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Business information

Shares in Euromoney Institutional Investor (LSE: ERM) fell a couple of percent this morning, 1,028p, on the release of preliminary full-year results, although they actually looked quite reasonable and were pretty much in line with expectations.

Adjusted pre-tax profit fell by a modest 5%, to £102.5m with adjusted EPS down a similar proportion to 66.5p, and the firm maintained its full-year dividend at the expected 23.4p per share to yield 2.3% on the current share price.

The business and financial publisher and event organizer has suffered along with the rest of the print media business, as the idea of sending out information written on dead trees is really becoming old hat these days.

But according to chief executive Andrew Rashbass, the company’s recovery strategy, instigated in March is working, and he pointed to “the acceleration in subscription growth, which constituted a record 58% of our business in 2016, and in the flow of successful product launches” as examples of its success.

The firm is also changing direction through acquisition, having snapped up metals news and prices platform FastMarkets during the year, and Reinsurance Security, which rates reinsurance companies.

Euromoney shares are on a forward P/E, based on next year’s forecasts, of around 16 now, which is a bit above the FTSE average, and its dividend looks set to yield a below-average 2.3%. That, coupled with the decline of the print publishing business, might make the shares seem like a poor investment.

But it looks to me as if Euromoney is managing the shift to digital publishing and information provision competently, and the firm could well be at the bottom of a relatively modest downturn cycle with EPS growth on the cards again for 2017.

If that’s the case, we could be looking at a decent long-term investment here.

Traditional publishing

Turning to a more traditional publisher, shares in Daily Mail and General Trust (LSE: DMGT) have been under pressure since early 2014, but they’ve been staging a bit of a rally in the latter half of this year. The price took a dip immediately after the Brexit vote, but since a low on 6 July we’ve seen a 37% rise to today’s 790p.

A pre-close update in September helped, confirming that the group’s outlook remained in line with market expectations with underlying revenue growth of 4%.

The group continues to own 70% of Euromoney Institutional Investor, so the fortunes of the two companies are closely tied, with Euromoney’s revenues effectively contributing around 15% to Daily Mail’s returns on a revenue basis.

Full-year results should be with us on 1 December, and analysts are expecting them to show a fall in EPS of around 10%. But that would put the shares on a perfectly respectable P/E of 15 which would drop to under 14 if the predicted return to earnings growth for 2017 comes good.

Dividend yields are looking pretty average at around 3%, but the cash handout is growing and it should be more than twice covered by earnings.

It’s a sector not without risk, that’s for sure, but I see the recent share price recovery as being backed by sustainable earnings, and this is a share worth a closer look.

The post Is Euromoney Institutional Investor plc a good investment in these troubled times? appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

At first glance, it looks as if Countrywide is a company in turmoil. Three of the company’s top executives walked out this month, the latest in a long line of departures as a result of the dramatic reshaping of the group under chief executive Alison Platt. All three senior management figures walked out to pursue “other opportunities”, which was the same excuse given earlier in the year when the managing director of estate agency group, Bob Scarff, and the group commercial director, Nick Dunning, both stepped aside at short notice. It looks as if these departures are part of the group’s drastic restructuring. However, while management is busy reorganising the business, Countrywide’s profits are falling. Earlier this month Countrywide revealed operating profits for the first nine months of the year were down 11% year-on-year.  City analysts expect full-year earnings per share to fall 13% year-on-year so for the time being it might be wise to avoid the company. 

Thomas Cook fell to a 52-week low on concerns that geopolitics would weigh on the company’s earnings for the next few years. But the company dispelled these concerns this week by reporting full-year results that beat expectations. Net profit nearly doubled in the year to the end of September and based on these figures the company currently trades at a P/E of 9.1. After an impressive 2015, Thomas Cook could have more in the tank for 2016. 

Stagnant sales and concerning levels of management compensation have weighed on Vislink’s share price this year. Vislink’s shares are down by nearly 50% from their June peak and they now trade at a forward P/E of 7.5. City analysts expect the company to report earnings growth of 18% for 2015, implying that the group is trading at a 2016 P/E of 6.9. As With such a low valuation, Vislink’s shares could be worth a bet. 

Daily Mail and General Trust has been hurt by lower-than-expected visitor numbers to the company’s MailOnline newspaper. Group pre-tax profit fell 4%for the year ended 30 September 2015, but City analysts expect the company to return to growth next year. Earnings per share growth of 4% in pencilled in for next year. Daily Mail and General trades at a forward P/E of 11.8, which isn’t overly expensive and the shares support a yield of 3.2%. Still, if the company disappoints again, the shares could print a new 52-week low. 

City analysts expect UK Mail’s earnings per share to slump 50% to 15p for the year ending 31/03/2016 and based on this forecast the company is trading at a forward P/E of 21.6, a premium growth multiple the company doesn’t deserve. What’s more, UK Mail’s shares may support a dividend yield of 7.2% by the payout isn’t covered by earnings per share. Overall, UK Mail might be one company to avoid.

The post Should You Buy These Stocks Near 52-Week Lows? Countrywide PLC, Thomas Cook Group plc, Vislink plc, Daily Mail and General Trust plc & UK Mail Group PLC appeared first on The Twelfth Magpie.

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• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.