This latest fall means the stock has lost more than 40% of its value over the last year. Today, I want to ask whether Ted Baker is in trouble, or if smart long-term investors should be buying at current prices.

One-off problems?

In a statement on Wednesday, the lifestyle retailer said that adjusted pre-tax profit is expected to be about £63m this year. That’s a fall of 14% from last year’s figure of £73.5m. Analysts’ had previously expected Ted’s profits to be broadly unchanged this year.

The company noted that volatile exchange rates have resulted in a £2.5m loss from currency translation. A further £7.5m of charges have been identified relating to stock write-downs and additional product costs this year.

Management also said all of these items are “non-cash”, which means they shouldn’t affect the company’s cash flow or debt levels. As a result, I don’t expect any change to the firm’s dividend policy.

However, the company’s financial year ended on 26 January, so this profit warning has come quite late, in my view. I’d have thought some of these factors should have been known about sooner than this.

Buy, sell or hold?

Ted Baker shareholders are also still waiting for clarification about the future of the group’s founder and chief executive Ray Kelvin.

He’s currently on leave of absence while the firm investigates allegations of misconduct made against him. Although my view is that the Ted Baker brand is probably big enough to survive any fallout from these allegations, this situation still carries some risk.

Historically, this business has been very profitable. Strong cash generation has supported years of continuous growth with only modest amounts of debt. However, today’s profit warning suggests to me the group’s profitability may have weakened over the last year.

After today’s fall, I estimate the shares are trading on roughly 15 times forecast earnings, with a 3.6% dividend yield. I’m going to reserve judgement until the firm publishes its full results in March. For now, I’d hold.

An overlooked gem?

Daily Mail-owner Daily Mail and General Trust (LSE: DMGT) is an unusual business that’s a little hard to understand. I’ve been guilty of overlooking this firm in the past, but recent news suggests to me it might be worth a closer look.

Last year saw the group receive a £642m cash windfall from the sale of its stake in Zoopla-owner ZPG. This left DMGT with a £255m net cash balance and a number of other profitable operations.

Although it’s best known for the Daily Mail, the company also owns stakes in a number of business-to-business information services and runs trade events. These include a 49% stake in Euromoney Institutional Investor, which is a FTSE 250 company in its own right.

Recent press reports have suggested that DMGT might sell its stake in Euromoney, which could be worth about £700m. In the meantime, the group recently reported a 2% rise in first-quarter revenue and confirmed is previous guidance for the full year.

City forecasts put the stock on a 2019 price/earnings ratio of 17, with a 3.8% dividend yield. I feel the shares could offer decent value at this level.

The post This is what I’d do about the Ted Baker share price right now 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 has recommended Ted Baker. 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.

It said conditions remain “challenging” for some businesses in the group but advised: “The outlook for the Group as a whole is in line with market expectations, with adjusted earnings per share towards the higher end of the range and adjusted profit before tax towards the lower end of the range.”

Major changes

DMGT has recently undergone management changes with a new chief executive and finance director. One of the first major things the company did under the new CEO was reduce its 67% stake in fellow mid-cap listed media group Euromoney Institutional Investor (LSE: ERM) to 49%.

Euromoney will cease to be a subsidiary and will be accounted for as an associate. However, the change is more than a paper exercise and the tangible benefits of it for both companies are part of the reason I reckon they could be brilliant turnaround stocks from the levels they’re currently trading at.

De-ratings

Before coming to their turnaround prospects, the tables below show where the two companies are at today, compared with their last share-price highs of February 2014.

As you can see, the market has de-rated both companies. DMGT’s earnings per share (EPS) has declined 7% but its share price has dropped a massive 41%. As a result, the multiple of 19.3 times earnings investors were paying back in 2014 has dropped to just 12.2 times for investors buying today. Meanwhile, the combination of the falling share price and the increasing dividend (still well covered by earnings) means the yield has risen from 1.9% to 3.6%. It’s a similar story, only less pronounced, for Euromoney.

Turnaround prospects

I believe both companies have prospects of delivering good earnings growth in the coming years. If so, share price rises will almost certainly be given an extra boost by the market affording the companies higher earnings multiples. Even if the multiples don’t reach the previous 19-odd levels, a re-rating could still add significantly to the gains.

The reduction of DMGT’s stake in Euromoney means the latter’s balance sheet is now independent of DMGT’s. This has increased Euromoney’s financial flexibility to be acquisitive and add to its already well-respected brands and high-quality stream of recurring subscription revenues.

At the same time, DMGT has been able to reduce net debt from the proceeds of the share sale, likewise increasing its financial flexibility. This will help it pursue its strategy of allocating capital investment in market-leading positions, both organically and through acquisitions.

Both companies have good management in my view and look well capable of executing on what also appear to me to be sound strategies. On the basis of reinvigorated earnings growth and rising earnings multiples if this plays out, I rate both stocks as very buyable.

The post 2 brilliant turnaround stocks that could make you rich appeared first on The Twelfth Magpie.

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G A Chester 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.

Profit held up better than revenues, falling 12% to £47.3m. Digital revenue grew 5.9% to £41.4m, but that increase is nowhere near enough to cover falling distribution and advertising revenues elsewhere.

The company exceeded its cost savings target, cutting £15m costs out of the business when the original target was only £10m. Net debt reduced to a tiny £22.4m, while the pension deficit fell by £59.2m to £406.8m, likely thanks to an increase in interest rates.

A combination of solid cash flow and balance sheet strengthening meant the company increased its interim dividend payments by 7.1% to 2.25p per share. If the final dividend is increased by the same amount, the shares offer a prospective 5.5% yield.

Uncertain Future

The company also bought back £4.6m worth of shares over the period. I find returning so much capital to shareholders a little odd when the existing business model is under strain.

I see no point in buying a structurally declining business only to have management hand a portion of your capital back to you. In my opinion, I’d prefer to see money directed towards the best opportunities for new revenue streams. 

To be fair to Trinity, there is a strategy to find new sources of income and the company has had successes. Take the successful launch of ‘Live’ branded sites. These are digital one-stop shops for all things relating to a city, like breaking news, local sport, entertainment, events, local interest, traffic and travel, plus what’s on, and they’ve attracted a lot of page views.

Reinvestment Opportunities

Value investors may find their interest piqued by the company, which now trades on a PE of around five, well below market averages. Of course, this ratio is largely useless when valuing businesses with structurally declining revenues and earnings. If earnings halve, the PE becomes 10, for example. As a long-term investor, I’m not sure that Trinity has found the remedy for its sector-caused ailment, so I will be avoiding the shares.

If I had to invest in a print journalism business, I’d probably choose Daily Mail & General Trust (LSE: DMGT). The company has managed to increase revenue by 7% in Q3 this year. This is thanks to the diversified nature of the business and the prestige of the company’s media assets. 

Last year, the firm generated 53% of revenues from B2B services, largely through providing high-value data to the insurance, property, energy, education and finance sectors. The company also operates a number of events that in total generate half a million visitors per year and over 13,000 exhibitors. I’m a fan of trade shows because of the attractive industry dynamics. 

In the age of video conferencing, events have held up surprisingly well. As professionals continue to rely on the business they do at trade shows and conferences, the most successful events can expect repeat custom from every essential name in the industry. 

The shares change hands on a PE of 11 and yield 3.5%, which seems a fair price considering MailOnline.com is one of the most visited English language websites in the world.

The post Despite a P/E of 5, this stock is no bargain appeared first on The Twelfth Magpie.

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Zach Coffell 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.

Looking ahead, Hostelworld is forecast to increase its bottom line by 10% next year and with its shares trading on a price-to-earnings (P/E) ratio of around 10, it seems to offer good value for money. While average booking value has been lower in the current year versus the prior year, Hostelworld has a new marketing campaign and is focused on optimising its cost base. As such, for investors who can live with an above-average degree of volatility, Hostelworld could prove to be a strong long-term buy.

Advertising woes

Also falling today are shares in Daily Mail and General Trust (LSE: DMGT), with the publishing company recording a fall of 9% in its valuation. That’s largely because of a drop in the company’s revenue and profitability, which is reported in today’s half-year results. Sales for the six month period fell by 1%, while underlying operating profit declined by 12% as advertising revenues were lower than in the same period of the previous year.

Looking ahead, Daily Mail and General Trust now expects its dmg media segment to deliver an operating margin of around 10% for the full-year due to the particularly weak print advertising market. And with the company’s bottom line already forecast to fall by 6% prior to today’s release, investor sentiment in the stock could weaken in the coming months. Certainly, Daily Mail and General Trust may have a bright long-term future, but with its shares trading on a P/E ratio of 12.1 there seem to be better options available elsewhere.

Slow start

Meanwhile, shares in brick manufacturer Ibstock (LSE: IBST) have fallen by around 10% today after it released a rather mixed AGM trading update. While it’s on track to meet expectations for the full year, Ibstock noted that the UK clay business made a slower start to the year than expected. This was due to destocking in the builders merchant supply chain. However, monthly comparatives have steadily improved and have now moved positive. And with trading conditions in the US and UK being upbeat, Ibstock remains positive about its long -term potential.

With Ibstock forecast to grow its bottom line by 15% in the current year and by a further 13% next year, investor sentiment could quickly reverse in the coming months following today’s share price fall. And with it trading on a price-to-earnings growth (PEG) ratio of just 0.8, now could be a good time for long-term investors to buy a slice of the business.

The post Why are Ibstock plc, Daily Mail and General Trust plc and Hostelworld Group plc among today’s biggest movers? appeared first on The Twelfth Magpie.

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Peter Stephens 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.

However, Daily Mail and General Trust (LSE: DMGT) is considering throwing its hat in the ring to bid for Yahoo! (NASDAQ: YHOO.US) the internet giant.

Against the ropes

Such a deal is only possible because Yahoo is struggling to hold its own in the shadow of its lofty American peers such as Facebook and Google. The name Yahoo may be familiar to many but poor business economics have plagued the firm for years as successive turnaround plans have failed to revitalise operations.

Yahoo’s sales fell by 50% over the last 10 years and earlier in the year the company announced plans to axe 15% of its workforce. With the shares down around 30% since the end of 2014, Yahoo is under pressure from activist shareholders to turn itself around and some have even demanded replacement of the entire board of directors.

With the firm against the ropes, there’s no wonder that it has decided to put itself out of its own misery by going to the market. Yahoo has set a deadline of 18 April for interested parties to submit their offers.

David and Goliath

Is there any value left in the Yahoo brand now? Daily Mail And General Trust must think so. A spokesman for the firm said the owner of the Daily Mail newspaper is in early stage talks with private equity firms and potential bidders about an offer for the troubled internet company.

There’s no certainty that a deal will proceed and Daily Mail can’t do it on its own — the firm’s pockets aren’t deep enough. At today’s share price of 698p, Daily Mail’s market capitalisation is £2.34bn. That compares to Yahoo with its $36 share price and a market capitalisation of $34bn (£24bn) — something of a David and Goliath situation that suggests Daily Mail’s ownership of Yahoo will be fractional if a deal goes through.

However, Daily Mail has weight to bring to the table. The firm cites the success of DailyMail.com and Elite Daily as justification for its place in any bidding team that may be assembled.

Extracting value from a deal

The Wall Street Journal, citing people familiar with the matter, speculates that the potential bid could be organised such that a private-equity partner acquires Yahoo’s core web business with the Daily Mail taking over news and media properties or merging them with its existing Mail online operations.

Yahoo’s media assets include Yahoo News, Yahoo Finance, Yahoo Sports and  several digital magazines, which look like an attractive prize. However, Daily Mail won’t hold all the power at the negotiating table as Time Inc is also reported to be mulling a bid with another private equity firm. Perhaps there’s decent value left in the Yahoo brand after all. We can only speculate what that might do for Daily Mail’s fortunes if a deal goes through.

The post Daily Mail And General Trust plc Eyeing Yahoo! Inc Bid appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

Daily Mail and General Trust

Shares in Daily Mail owner the Daily Mail and General Trust fell by 6% this morning after the group reported a sharp fall in profit and a continuing decline in its newspaper business.

Adjusted pre-tax profit was down by 4% to £281m, while revenue fell by 1% to £1,845m. The fall in profit would have been greater but for a heavy focus on cost-cutting at the Daily Mail, where print circulation and advertising revenues continue to fall.

There was a small dividend increase, from 20.4p to 21.4p, but the stock’s 3.2% yield isn’t outstanding.

The group also cautioned on an uncertain outlook for its financial publishing business, Euromoney, and said that the continued decline in print advertising would be likely to weigh on 2016 results.

It all adds up to an uncertain picture, in my view. Although the shares aren’t massively expensive on a forecast P/E of 12, debt levels are rising and I believe there are better buys elsewhere.

Chemring

After shocking investors with a profit warning on 27 October, Chemring shares have bounced back strongly and are now up by 40% from their opening low of 136p on that day. Although the shares remain down by 14% on their pre-warning level, Chemring is likely to benefit from any rise in defence spending over the next few years.

Today’s post-close update was enough to push the shares up by another 5%, to 193p. Chemring flagged up a big increase in its order book, which rose by 17% to £570m last year.

The group said that the delayed 40mm ammunition contract which helped trigger October’s profit warning had now received export approvals. Payments should follow.

My concern is that Chemring’s finances are not robust enough to cope with such occasional delays, which are inevitable. The firm admitted today that it is still discussing the effect on its debt covenants of the events in October. The firm’s balance sheet should be strengthened by Chemring’s planned £90m rights issue early in 2016, but I think there are better buys elsewhere.

HSS Hire Group

Investors who took part in the IPO of equipment hire firm HSS earlier this year are probably regretting it. Since March, the group has issued two profit warnings. The firm’s shares have fallen by 77%.

Today’s trading update confirms that performance is in-line with full-year expectations. Revenues for the first nine months of the year rose by 10.7% to £230m.

However, the outlook for profit was less encouraging. Adjusted earnings before interest, tax and amortisation — a similar but less conservative measure than adjusted operating profit — fell to £13.8m, down from £23.8m for the same period last year.

The big problem is that HSS has far too much debt. Interest costs are high and the group’s net debt of £210m is greater than the value of its fixed assets, which was £175m at the half-year mark.

For me, HSS is a non-starter. Even if there isn’t another profit warning, the risk of debt-related problems is too high, in my view.

The post Why I’d Steer Clear of Daily Mail and General Trust plc, Chemring plc & HSS Hire Group PLC Today appeared first on The Twelfth Magpie.

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Roland Head 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.

These businesses often have much stronger balance sheets than the average company, and are conservatively stewarded for subsequent generations. Long-term business performance and shareholder returns suggest that pitching in your lot with these families can be highly profitable.

There was mixed news today from three such firms: Daily Mail & General Trust (LSE: DMGT), Fuller, Smith & Turner (LSE: FSTA) and Nichols (LSE: NICL). Could now be a good time to buy a slice of these businesses?

Daily Mail

Daily Mail & General Trust (DMGT) evolved from the eponymous newspaper, launched in 1896. DMGT’s strategy is to grow its business-to-business assets, and offset the slow structural decline of print news circulation with digital advertising revenue from its fast-growing MailOnline website, and other online assets, including Wowcher and Elite Daily.

DMGT has been managing this successfully, but news in today’s Q3 trading update came as something of a shock. Underlying revenue across the group’s media businesses declined by 5% in the quarter; notably MailOnline‘s £1m (8%) growth lagged well behind a £7m (15%) decline in print advertising for the Daily Mail and Mail On Sunday.

DMGT’s explanation of a general “marked deterioration in the UK print advertising market in the quarter” is credible, because local newspaper group Johnston Press said the same thing last week, noting in particular that advertisers chose to reduce or delay their spend around the time of the General Election.

So, the quarter looks to be something of an anomaly, albeit of sufficient impact for DMGT to warn that “the outlook for the Group’s Full Year results is now towards the lower end of market expectations” — and for the shares to fall over 10% in early trading. On the assumption that Q3 was something in the nature of a blip, DMGT looks reasonable value on a forward price-to-earnings (P/E) ratio of 15.5 based on earnings at the lower end of previous market expectations.

Fullers

Brewer and pubs group Fuller, Smith & Turner — founded in 1845 and famous for its London Pride ale — issued a trading update ahead of its AGM today, saying that “the business has made a strong start to the new financial year”.

The update was short and selective on numbers, but those it gave put some flesh on the “strong start”: like-for-like sales in managed pubs and hotels were up 5.7%, like-for-like profits in the tenanted division grew 4% and brewery volumes were level.

The shares are up 3%, as I’m writing. And, after a strong performance since the start of the year (+24%), Fullers trades on an elevated P/E of 22. I would be looking for a bit of a pull-back in the shares, although the P/E is always on the high side. That’s the price you pay for a premium business, with strong freehold property backing and a remarkable record of having increased its dividend every year without fail since 1974.

Nichols

Nichols was established on the back of soft drink Vimto, created in 1908 and now sold in more than 65 countries. The company’s brand portfolio also includes Levi Roots, Sunkist and Panda which are sold in the UK. In today’s half-year results, Nichols also announced the acquisition of premium juice drinks brand Feel Good.

The results showed sales at the same level as last year. However pre-tax profit was up 9% and earnings per share up 11%, as the company’s current value-over-volume strategy lifted the operating profit margin from 18% to 20%.

Nichols’ shares are up 2%, as I’m writing, and up 44% since the start of the year. If the half-year earnings growth carries through to the full year — the company said today that it is “well positioned to continue its growth trend” — we’d be looking at the same premium P/E of 22 as for Fullers. Again, I’d be hoping for a dip in Nichols’ shares, but again they still wouldn’t be “cheap”, partly because the company has a tremendously strong balance sheet, which includes £32m of cash and no debt.

The post Is There Value In Family Firms Daily Mail and General Trust plc, Fuller, Smith & Turner plc And Nichols plc After Today’s Mixed News? appeared first on The Twelfth Magpie.

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• 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?

G A Chester 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.

Television and social media are clearly part of our culture, so it might make sense to invest in the firms that most often gain our eyeballs and media spend — companies such as ITV (LSE: ITV), SKY (LSE: SKY) and MailOnline owner Daily Mail and General Trust (LSE: DMGT).

All three firms have outperformed the FTSE 100 so far this year — but are they still attractive buys?

1. Valuation

ITV’s share price has risen by a staggering 331% over the last five years, while shares in Sky and DMGT have gained around 70% each.

However, all three stocks still look quite reasonably valued, as these figures show:

At today’s valuations, it’s certainly possible to envisage further gains.

2. Growth outlook

Sky’s decision to spend £4.9bn on Sky Italia and Sky Deutschland, plus £1.4bn on Premier League football rights last year, pushed the firm’s net debt up from £1.3bn to £6.5bn. Earnings growth from its European operations should help justify the spend, but Sky now has a lot to prove, in my view.

ITV’s approach to acquisitions has been different: the firm has remained largely debt free, and has focused on buying content producers to help reduce its dependency on advertising revenues.

So far, this strategy seems to be working: ITV’s earnings per share rose by 33% in 2014, and are expected to increase by 25% this year and by 9% in 2016.

Daily Mail and General Trust reported a 12% increase in earnings per share last year from its portfolio of consumer and business-to-business operations. Earnings per share are expected to be fairly flat this year, but growth is expected to pick up in 2016, when analysts expect profits to rise by around 15%.

3. What about dividends?

How do ITV, Sky and DMGT compare in terms of income?

Sky offers the highest yield at the moment, but dividend growth is only expected to be 1.5% this year, probably as a result of last year’s spending binge.

In contrast, ITV’s ordinary yield is lower, but shareholders received an additional special dividend last year, and there’s potential for this to happen again this year.

Today’s best buy?

In today’s market, my choice as a buy would probably be ITV, as I’m impressed by its combination of prudent financial management and strong profit growth.

The post 3-Point Checklist: Should You Buy ITV plc, SKY PLC Or Daily Mail and General Trust plc? appeared first on The Twelfth Magpie.

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

Here are three companies operating in very different spaces, which are all successfully exploiting the revolution in media markets.

Shares up 25% in a year

WPP (LSE: WPP) (NASDAQ: WPPGY.US) is the world’s largest advertising group, acting as a holding company for marketing, PR and advertising agencies including JWT, Grey and Ogilvy & Mather. Digital is transforming advertising. Online media is taking over from print and traditional broadcast, facilitating the gathering of vast quantities of marketing information and, increasingly, automatic placing of adverts.

WPP has moved aggressively into this field. Last year, 36% of total revenues derived from ‘direct, digital and interactive’ business, whilst the Data Investment Management segment alone contributed a fifth of revenues. WPP’s strategy is to target fast-growing geographic and functional markets: sales are split equally three ways between North America, Europe and emerging markets.

In 2014, WPP achieved a 23% increase in profit before tax, measured on a constant currency basis. Three factors have driven its shares up by 25% over the past year and 140% over the past five. Advertising spend is highly correlated with general economic activity. By acquiring and consolidating specialist agencies, WPP has been able to push up sales and margins. And a failed merger between its number two and three global competitors allowed it to poach disgruntled customers.

16 years of dividend increases

Daily Mail (LSE: DMGT) has completely transformed itself from its print newspaper heritage. Though still best known for its daily paper and website (the world’s most visited online newspaper), that business makes just a quarter of operating profits. Three quarters of profits derive from business-to-business sales, with provision of information and analytics and organising conferences amongst the mix.

DMGT is a paradigm of long-term family management — ordinary punters get non-voting shares. Floated in 1932, the company has paid increasing dividends for at least the last 16 years.

Sky‘s (LSE: SKY) origins were in analogue satellite broadcasting, but digital is now its bread-and-butter. The group has been swift to adopt new technologies to extend its pay-TV business, marrying customer appeal with digital delivery. So Sky Go customers, for example, can watch the same content on multiple mobile devices. Having pushed triple-play pay-TV, broadband and landline services, the company is set to move into mobile telephony, whilst acquisitions of Sky Italia and Sky Deutschland gives it a pan-European platform. But the cost of defending its premium football rights highlights the pre-eminence of content in this business segment.

The post 3 Digital Media Winners: WPP PLC ORD 10P, Daily Mail and General Trust plc & SKY PLC appeared first on The Twelfth Magpie.

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Tony Reading owns shares in WPP and Daily Mail and General Trust. The Motley Fool UK has recommended Sky. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.