With share prices heading all over the place since the EU referendum, what’s the best way of getting a handle on what’s really happening? Going through the swathe of company reports released today is a good start, so here are three worth looking at.
Pizza perfection?
Shares in Domino’s Pizza (LSE: DOM) dipped immediately after the result of the Brexit vote, but they quickly recovered the loss and even moved into positive territory. Including a 2% rise today as a result of the firm’s first-half report, the shares are up 24% over the past 12 months, to 391p, and up 128% over five years.
For the six months to June, sales were up 17% to £494.5m, with pre-tax profit up 17.7% to £33m, and earnings per share up 22.8% to 19.9p. The interim dividend was raised by 16.7% to 10.5p per share. The only slight downer in the headlines was a shift from net cash of £19.2m a year previously to net debt of £10.9m, but that’s no real problem.
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In the UK, Domino’s has recorded 11 successive quarters of double-digit like-for-like sales growth, and chief executive David Wild spoke of very strong cash conversion while predicting “another good performance right across the group” for the full year. The company will need to keep that growth going well if it’s to justify a P/E multiple of 30.
More food profits
A third-quarter update from Compass Group (LSE: CPG) revealed organic revenue growth of 5.6% for the nine months to 30 June, with the company saying its “focus on growth is driving strong levels of new business wins and retention remains good across all regions.“
Business in North America appears the strongest, with organic revenue growth of 8.3% over the nine months, compared to 3.7% in Europe and 0.2% from the rest of the world. The company kept its expectations for the full year unchanged, telling us that its future pipeline is strong.
Despite the upbeat news, Compass shares fell 2% to 1,432p. But there has been a strong Brexit surge to take the price up 35% over 12 months and to a P/E ratio of 24, so I suspect we’re just looking at a minor correction — and at a company with definite growth possibilities over the next few years.
Motoring weakness
Car seller Inchcape (LSE: INCH) reported an 11.2% rise in revenue to £3.8bn for the half year to June, with like-for-like revenue on a constant currency basis up 9.1%. With pre-tax profit up 7.8% to £165m and adjusted earnings per share up 8.7% to 27.6p, the company elected to increase its interim dividend by a modest 2.9% to 7p per share.
On top of a forecast full-year dividend yielding 3.4%, Inchcape also announced a new £100m share buyback thanks to its healthy cash generation and strong balance sheet, so it seems to be doing a pretty good job of returning cash to shareholders. Despite this positive performance, the share price dropped 5% on the day to 684p, so what’s wrong?
It’s that nasty old Brexit thing again, as the firm said its “second quarter new vehicle market growth rate moderated to 1.0% from 5.1% in the first quarter.” It also told us it expects the slowdown to persist into the second quarter. With a likely forward P/E of around 13, I think I’m seeing a reasonable long-term investment here.
