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Earnings pot pourri - surprise efficiencies, greedy governments & don't burn the pizza!

By Chris Bailey | Thursday 8 March 2018


Disclosure: I own shares in one or more of the stocks mentioned. 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.


Roll on the Easter break in just over three weeks I say because those of us who track, appraise and opine about corporate names from around the world have now racked up two months' worth of earnings appraisal...and still they come thick and fast in the UK. So another pot pourri offering from me.

I see GKN (GKN) continues to discover efficiencies and corporate strategies that last year it could not find. Of course last year it was not subject to a bid! Today's presentation on the Driveline division promises to again outline cost savings and strategic worth. Perhaps it will also be kind enough to tell the attending analysts if the company would be tempted by a higher bid from Melrose (MRO), bids for bits of the business by various American industrial concerns or just trust the stock market by unbundling the group into its main constituent parts. Either way, as I previously concluded here, one of my tips of the year remains very much in play. Keep holding on if you have some.

As for Randgold (RRS), which is in my opinion the world's premier larger cap gold miner, it has been a bit of a shabby year-to-date with stellar production and cash flow numbers nobbled by pressures from the government of the DRC (which accounts for around 25% of its overall production) getting greedy and asking for more royalty income and related. You can read all the background here. Late yesterday there was an announcement that the DRC will be progressing with these plans and Randgold and others (including Glencore (GLEN)) will have ongoing discussions.

As I said in the linked piece above this is the way negotiations go in many countries. The government gets greedy but rows back a bit to ensure it ultimately does not hurt employment and tax revenues too much by hacking off the corporations it needs to attract/run the mines. As we stand today there is a hit which feels more than covered by the 15%+ off the Randgold share price in 2018 - hence the shrug of the shoulders of the Randgold share price today. It feels at a sentiment low here and hence I would buy.

Finally...pizzas in the form of Domino's Pizza (DOM) where I have remained gamely for something akin to a 250p share price to buy (as chronicled last October here). Today's numbers include insights such as breaking the £1 billion level in its UK sales and a 7% like-for-like sales increase in the last two months and some deep love for international (i.e. non-UK) sales opportunities in other parts of Europe. However the most striking aspect was that the company has decided to play faster and looser with its balance sheet with the announcement of a hiked dividend and a new share buyback observing:

'...the Board also raised the Group's leverage target to 1.75 - 2.5 times net debt to EBITDA. Given that the Group was in a net cash position only two years ago, this is clearly a significant development of policy, but we believe it gives us the necessary flexibility to pursue attractive growth opportunities, while maintaining a degree of conservatism should the environment deteriorate'

Well it better hope pizza sales remain...crispy rather than overdone. Wake me up again at 250p...and go for a pizza at Wedge Issue instead 'naturally.


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