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| Tide turns against the euro
** FTSE Fledgling is made up of UK companies listed on the main market that are too small to be included in the FTSE All share index |
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Anyone for pizza
Expanding under the sun Back in the black
Another slice of pizza Attracts more interest HSBC renews contract Hampered by lack of finance In's and Out's from the Bridge Hall CFD Desk Featured stocksDominos Pizza UK & Irl (DOM)
Directors dealingsDirectors dealings can provide a useful insight The above list of transactions represents a selection of the directors' buys and sells reported last week |
There is no doubt that Dominos Pizza UK & Irl has been one of the winners in the UK recession. The business model has proved to be highly robust under such conditions and in the past eight months the share price has risen from 200p to over 330p. Final results revealed that system sales climbed 16% to £406.9m and pre-tax profits were 28% higher at £29.9m. The 501 mature stores reported a like-for-like sales growth of 8.4% and the fully diluted earnings per share rose 26% to 13.49p, which allowed the board to increase the total dividend for the year by 31% to 7.75p. Online sales now account for close on 20% of system sales, as orders on the web grew by 40% to £78.5m. There seems to be a good demand for franchises, not only from the Group’s existing franchisees that are wishing to expand but also from new franchisees. Dominos has enjoyed recent success in smaller locations and that, coupled with the opportunity to get good properties at attractive rents, will allow the new store opening programme to shift up a gear. By the end of 2009, Dominos had 608 stores and this year the board is seeking to step up new store opening plans from 50 to 55. The current year has started well as Chris Moore, CEO, was able to comment that “We had an exceptional start to 2010, with like-for-like sales for the first six weeks up 11.0%, despite the snow in the early part of the year being a mixed blessing. While encouraging people to stay at home, which was good for our business, the extent and severity of the conditions caused a large number of stores to cease deliveries to protect driver safety. While we are delighted with early performance, we face some very tough conditions particularly in the second half, and an unpredictable economic environment. Despite this, we are confident that we are well-positioned for another year of strong growth.”
The European holiday homes abroad market has been hit hard by the economic downturn but leisure resort developer Minoan Group is moving into the solar energy generation business at the same time as progressing its Cavo Sidero development in North Eastern Crete. The Cavo Sidero development is planned to consist of five low density centres with a mix of luxury hotels, villas, townhouses and apartments. The project covers an area of 26km² with a build density will be just 1%. Cavo Sidero is well-located lying just 30 minutes drive from the Sitia international airport which itself is a three and a half hour flight from the UK. Progress here has been on ice for a while, as an appeal has been lodged against the Greek Government's approval of the Company's Environmental Impact Assessment for the Cavo Sidero Development, which is working its way through the highest administrative court in that land. In June 2009, the Special Land Plan for Tourism and Sustainable Development was passed into law which gives clear guidelines as to the nature of tourism that can be developed in different areas of Greece including North Eastern Crete. In November 2009, the directors announced the move into becoming a solar electricity generator in Greece, largely for cash flow. The first deal was for a total of 200KW of power but Minoan has moved quickly to something rather larger, as the board has announced an agreement to acquire solar energy licences with a total output of 2.1MW. The plan is that once in full production the cash flow generated will cover most of the cost of Minoan's monthly burn rate. In the past the board has commented that “..we believe that the combination of Cavo Sidero and renewable energy represents compelling business and environmental logic as we continue to prepare for the development of the Site.”
There have been concerns that branded suppliers might be forced to lower prices to fight off the white-label competitors, but Premier Foods, as the UK largest supplier of ambient grocery goods, uses its scale for competitive advantage. Premier Foods manufactures a number of iconic brands including: Hovis, Mr Kiplings, Batchelor's, Quorn, Bisto, Ambrosia, Sharwood's, Branston, Oxo and Hartley's in an impressive portfolio of leading brands that has stemmed from heavy investment. In addition to these top brand names, the Group manufactures many lines for the catering industry and also supplies own-branded products to the UK's leading supermarket chains. Final results showed that branded sales were 6.5% higher at £1,678m with market share growing across all the Group’s markets. Total sales increased by 2.2% to 2,661m, trading profits were 4.5% better at £323m and pre-tax profit came out at £47m, compared to a loss of £405m in 2008. Recently the Group seems to have smartened itself up a bit, there have been changes in the boardroom where a new FD will soon to be joined by a new Chairman and a new three-year strategy has been unveiled. At the time the finals were announced Robert Schofield, CEO, said: “Today we’re outlining our plans and ambition for the next chapter in the successful growth of the business. We are laying outs a series of key targets and performance indicators for the next three years and providing an even greater degree of transparency as befits a business of our scale. We are confident that our business model is capable of continuing to capture share in our key market segments and delivering sustained earnings growth and cash generation over the medium term. ..”
Global Brands SA is the Domino's Pizza master franchise holder for Switzerland, Luxembourg and Liechtenstein. There should be good money to be made in owning the master franchise licence for Switzerland but so far this has eluded the Company. Above we highlighted what AIM-quoted Dominos UK and Ireland has achieved with such a licence even in a downturn. Global Brand has eleven corporate stores in Switzerland and the board see 2010 as their growth year. Certainly, 2009 was a year of change, as following a boardroom shake up the operational management seems to have been vastly improved. The new team has launched a number of key initiatives including: lowering prices to fight off competition, rationalising delivery areas, outsourcing food and logistics as well as launching a re-developed e-commerce website. Growth this year will come from Global's plans open five new corporate stores and sub-franchise two more stores; whilst offering more choice with a larger menu and increasing the marketing spend. The board has just raised CHF504,000 (£300,000), which together with the sale of the freehold of a poor performing store and asset financing should be sufficient to fund this strategic plan for the year. There have some early gains from the changes as in January, despite heavy snowfalls, the number of orders was 6.2% higher and total sales improved by 2.7%. The real star is the Eastern region (German speaking), which seems to be pioneering lower menu prices and was rewarded with order count up 26% and sales 18% higher. The five year plan is for Global Brands to grow to fifty Domino's Pizza stores with twenty Company-owned stores and thirty sub-franchisees.
Junior biotech Henderson Morley is in the throes of turning itself into a vaccine business. The Company has developed Ionic Contra Viral Technology (ICVT), which is a clinical stage anti-viral platform which has been shown to be non-toxic and effective against a number of DNA viruses. The board is in the process of selling-off some of its ICVT Human application portfolio to fund the focus on vaccines. There is interest in this technology, as the Company announced the receipt of a Letter of Intent (LOI) from an unnamed non-EU specialist pharmaceutical company, back in October 2009. Well last week, investors learnt that a specialist therapeutic drug development company has also showed its hand, as Henderson Morley received a LOI concerning the intellectual property rights of its ICVT portfolio in respect of the Recurrent Respiratory Papilloma (RRP) indication. RRP is a rare disease, characterised by the growth of tumours in the respiratory tract, caused by the human papilloma virus. This specialist therapeutic drug development company was set up by a number of senior executives from Merck Generics and its business model is to take high potential drugs right through clinical trials and regulatory hurdles to market. What might have attracted this drug developer's attention is that Henderson Morley in November, submitted an orphan designation application to the regulatory authorities (FDA and EMEA), for the RRP application of ICVT. The advantages of orphan status seems to be a lighter regulatory touch, a period of marketing exclusivity and the availability of grants. This stock could be one well worth watching, as Executive Chairman Andrew Knight is hoping to conclude a deal as soon possible.
Risk management services provider Red24 has announced that HSBC will be renewing its contract for a further three year period. HSBC provides its customers with HSBC Premier, HSBC Advanced and HSBC Passport accounts, which are all red24 services. Simon Richards, Chairman, commented "We are delighted with the continued success of our relationship with HSBC and remain committed to adding value to its customers. This means that we have now secured out two main distribution partners for the foreseeable future, which provides an excellent platform for our continued growth."
Irish energy group Kedco specialises in turning biomass and waste into electricity using processes such as gasification and anaerobic digestion. In December, the board announced a joint venture deal to open a 4MW gasification project in Newry, Northern Ireland. In all, the project needs a total of £15m financing with £5m coming from the Company and the balance provided by bank debt. As yet, Kedco has been unable to secure financing on reasonable terms and so this plant is now not expected to be commissioned before the Company's financial year end in June. To date, Kedco has incurred significant costs to do with the Newry project and is seeking funding for potential investors. A trading update pointed out that the “..board is confident that suitable investment will be secured however, it acknowledges that there can be no guarantees such investment will be forthcoming. In the absence of suitable investment in the short-term, the board would pursue alternative means of maintaining an adequate cash reserves, including of its working capital position..”.
After last week's painful market, which was dominated by Greece's problems, it was nice for the market to open without any overriding Systematic Risk. There was still an initial nervous undertone to the market whilst it awaits clarification of the PIGS nations issue but bullish sentiment eventually overtook this to leave us with a better playing field to take our stance on. |
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