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St. Ives – emphasises “ahead of management's expectations”… but another earnings decline still currently expected

By Steve Moore | Friday 1 December 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Marketing services group St. Ives (SIV) has updated on recent trading “ahead of management's expectations” - and the shares have currently responded more than 6% higher towards 80p…

This is with ‘Strategic Marketing’ like-for-like revenue growth of approximately 22% and as operating margins there “have remained strong”. However, Books revenue was approximately 12% below the equivalent period last year, reflecting contract loss, and ‘Marketing Activation’ segment revenue approximately 4% lower as trading conditions “continue to be challenging and highly competitive”.

Net, it is reported “group revenue running approximately 4% ahead of the equivalent period last year” - which suggests not exactly exciting overall growth.

Indeed, I note brokerage N+1 Singer is now forecasting circa 13p of earnings per share for the full year – that a slight upgrade, though compares to an adjusted 13.4p delivered last year, 17.6p for the year before that and more than 20p (up from 18.7p) the year before that. With though a return to growth forecast for next year and an only circa 80p share price, isn’t there value?

Firstly however the balance sheet needs to be taken into account. At the company 28th July year-end this showed net debt of £54.6 million and, excluding goodwill and other intangibles, a net liabilities position of £54.3 million (circa 38p per share). And then I remain wary of the current macro environment, particularly with that recent earnings record here. As such, I currently continue to avoid though will continue to monitor for evidence of a sustainable recovery.

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