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TREASURY WINE ESTATES LTD
TREASURY WINE ESTATES LTD
Salient play in a healthy industry
16 Feb 17
PepsiCo’s (PEP US, N/R) full year figures reconfirmed growth expectations for the US FMCG giant in 2017. PepsiCo – which generates one third of its revenue from North American beverages – looks for 3% organic sales growth in 2017. Our own view about UK soft drinks remains positive. Flexibility around sugar, ongoing innovation, potential price support from a sugar tax and further M&A are all consistent with the industry maintaining sales growth and delivering positive share price performances.
13 Feb 17
Middlesbrough-based pawnbroker Ramsdens Holdings is set to join AIM on 15 February. Its growth is not coming from its core business but from providing foreign currency, pre-paid travel cards and international payments. The strategy is to increase the group’s online activities and grow the number of branches. In the year to March 2016, group revenues improved from £29.2m to £30m. The accounts of the main subsidiary show that foreign-currency margin rose from £5.36m to £7.59m. This contributes 35% of group gross profit. By contrast, the core business of pawnbroking, precious metal purchases and retail sales fell from £21.3m to £19.8m. Revenues from other financial services were flat at £2.6m. Ramsdens has 127 sites and last year it made an operating profit of £3.19m. In the six months to September 2016, revenues increased from £16.2m to £18.4m and operating profit improved from £2.81m to £3.48m. The placing will raise £15.6m at 86p a share, valuing the company at £26.5m. NorthEdge Capital, which backed a buyout in September 2014, will receive just over £10m from share sales. The NorthEdge stake will fall from 75.6% to 30.7%. The other £5m will go to the company and be used to repay the remaining loan notes and the costs of the flotation. By the end of March 2016, there were still £4m of loan notes outstanding to NorthEdge, with £4.86m paid off during the previous year.
New CEO resets targets: cost savings ahead, mid single-digit top-line target by 2020
16 Feb 17
Nestle’s FY and Q4 update: In Q4, sales grew organically +2.9% (weaker than 3.5% expected). In Q4, Zone Americas, EMENA and Others slowed down compared to the previous quarter. Zone AOA (+4.4%), Waters (+5.4%) and Nestle Nutrition performed better than in Q3. On a FY basis, organic sales are up +3.2% (cons. 3.4%) with RIG +2.4% and pricing of 0.8%. On reported figures, sales are up +0.8 (FX: -1.6%). The trading operating margin is up 30bp on constant FX and +20bp on reported figures (in line with consensus). FY17 outlook: top-line growth of 2-4%, stable operating margin as a result of a considerable increase in restructuring costs to drive future profitability. EPS is expected to rise at constant FX and capital efficiency is also expected to rise. For the mid-term, Nestlé targets mid single-digit top-line growth and 200bp in structural cost savings by 2020. The proposed dividend is CHF2.30 (vs. CHF2.25 last year).
PG: Growth Prospects in Healthcare
26 Jan 17
We expect the volatility of the last 3 months to continue, with macro events, particularly the uncertainty brought by President Trump and his focus on pharma pricing and dismantling the Affordable Care Act, likely to keep healthcare in the headlines for the wrong reasons. We believe the more highly valued larger stocks are likely to struggle to break out to new trading levels, but note there remains good value within the smaller end of the sector for stockpickers, with company specific events likely to drive some stocks well ahead of the crowd.
Foundations laid; building starts
15 Feb 17
Last week RM posted a reassuring set of prelims (adj. PBT 4% ahead) that showed continued progress within RM Education (+6% EBIT gr’th) and RM Results (+22% EBIT gr’th) – achievements that shouldn’t be overshadowed by the challenging (but temporary) external market, which is weighing on RM Resources (-9% EBIT). Indeed, combined with Connect Education & Care, we are bullish on the division’s long-term prospects, and as such we raise our target price to 207p and retain our Buy recommendation.