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RNS potpourri - my latest thoughts on three badboys: Greencore, Centrica & Thomas Cook

By Chris Bailey | Tuesday 31 July 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.


There is nothing like a bunch of regulatory news statements in the morning to get your blood pumping...although I guess a profit warning or so is never good for the heart...or the bank balance. Anyhow the cardiac and fiscal resuscitation units were on standby earlier as three names that have disappointed me at various times in recent months updated the market.

Top of the class has to be Greencore (GNC), which after suffering a sandwich shocker just under six months ago has quietly been bouncing back in a manner pretty consistent with the hopes I last updated on in May. Its chat about growth in its 'Food to Go' operations in the UK where it is the sandwich market leader by far was pleasing. However, the source of the earlier in the year shocker was in the US where comments like 'good underlying category growth and the impact of new business' read well. Throw in a reiteration of full year earnings and cash generation hopes and this one really should trade back to the lower 2 quid plus level it was happily at before the woopsie. As discussed in earlier Greencore write-ups, the opportunity to teach the Yanks something about convenience sandwiches and the like is a compelling growth theme.

So whilst Greencore is heading north, Centrica (CNA) remains volatile to say the least. I may have called the stock a 'juicy total return proposition' back in November but since then it has been volatile as hell. Still, today's update at least saw a reiteration of full year hopes and a pledge to maintain the full year dividend (an eye-catching 8%+ at prevailing prices) assuming nothing bogs up and cash flows go awry. Profit was hit by a quartet of pain ('rising commodity prices, extreme weather patterns, continued competitive pressures and ongoing political and regulatory uncertainty') and none of this is going away soon. Management admitted that they await the final government musings on price caps and related which is looking more and more (from the government's perspective) like a complete cup of Horlicks. But all of these are well known. I would hang tough here and munch those dividends.

Finally...Thomas Cook (TCG), whose shares have pushed back up to a quid after a trading update which included some good stuff ('Underlying EBIT up 8% to £14 million...Summer 2018 bookings up 11% on last year with 79% of programme sold') but also a weather warning of its own. Oh yes: that warm weather everyone has been enjoying so much has hit our propensity to book package tours to Spain and the like, so profits are going to come in at the low end of expectations...and the rebound of Egypt and Turkey is not going to be enough to compensate. So why are the shares up? Well the deadwood press ran a story over the weekend about the company looking at ways to create more value including monetising value in its airline business. I would prefer it retain the current vertical integration and would like to think - as I talked about a few months ago re this name - that the share bounce off iffy numbers is a reflection of value. I would not be shy snaffling some Thomas Cook sub a quid...unless you are very bullish on UK weather forever!


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