Restaurant Group (LSE: RTN) and G4S (LSE: GFS) are topping the losers board today after the two companies issued full-year results which missed expectations and issued downbeat outlooks for the year ahead.
Challenging conditions
At time of writing, shares in Restaurant Group are down 18% on the day. Although the company posted a 7.9% increase in revenue for 2015, it warned that 2016 had already got off to a bad start. Total sales rose 6% during the first ten weeks of 2016, but like-for -like sales fell 1.5%, as challenging trading conditions, which started at the end of last year, persist. Management expects this trend to continue throughout the rest of the year and believes that like-for-like sales growth will likely be “difficult to generate”.
Even after today’s declines Restaurant Group’s shares are trading at a forward P/E of 15. The shares support a dividend yield of 3.4%.
Crumbling profits
Meanwhile, G4S is on the back foot after reporting that pre-tax profit for 2015 fell to £78m, from £128m as reported for 2014. The drop in earnings was the result of a £66m goodwill charge it booked on businesses it has sold. The company also increased provisions against onerous loss-making legacy contracts it’s operating here in the UK. These provisions include of £31m loss it expects to make a contract with the UK government to house asylum seekers. And the company has warned it may be forced to book a further £57m provision if the Home Office decides to extend this contract.
Having said all of the above, on an underlying basis G4S’s underlying earnings rose by 14% during 2015. G4S’s shares currently trades at a forward P/E of 13.9 support a dividend yield of 4.3%.
Ashtead (LSE: AHT) and Lonmin (LSE: LMI) are also near the top of the losers’ board today although there is little in the way of news to explain the decline.
Reduced demand
It seems as if Ashtead’s declines can be traced to analysts at Berenberg’s downgrade of the company. Berenberg’s analysts have reduced their price target on Ashtead’s shares from 1,350p to 1,150p, following the company’s warning at the beginning of March that reduced demand from the oil and gas industry is starting to weigh on sales growth.
Nonetheless, the group’s pre-tax profits for three months to the end of December gained 17% year-on-year and for the first nine months, the financial year pre-tax profit was up 20%. Despite this high double-digit growth, Ashtead’s shares trade at a relatively undemanding forward P/E of 11.2 and support a dividend yield of 2%. City analysts believe the company’s earnings per share are set to grow 28% this year.
Profit taking
Lastly, Lonmin’s declines seem to be a result of profit-taking after the recent commodity rally. Platinum prices have gained around 25% after hitting a 13-year low at the beginning of the year. Lonmin’s shares have reaped the benefit of this commodity strength gaining 105% over the past month.
But during the past week platinum prices have given back some of their recent gains and Lonmin’s shares have suffered as a result. City analysts don’t expect Lonmin to report a profit for the next two years, so it’s hard to value the company’s shares at present.
