Sometimes poor results cantriggera tempting buying opportunity. The following three companies have disappointed, but could this be a good entry point?
What does Foxtons say?
Who shotFoxtons Group (LSE: FOXT)? Once again, it was Brexit that pulled the trigger as the EUreferendum becomes theperfect blame-allfor any business with a disappointing story to tell. The groups half-year profits are certainly disappointing, down 42.2% to 10.5m due to a slowing property market withlittle hope of recovery this year. Revenue fell 3.1% to 68.8m.
The London property market, where Foxtons is focused, had toslow at some point, and there were signs it was doing so well before Brexit. What the result may do is stretch out the pain that little bit further, although the 10% drop in Sterling mayalso attract foreign buyers. The second quarter was much weaker than the first and this wasas much down to the 3% stamp duty surcharge introduced on 1 April as the Leave victory.
Foxtons remains a big player in the London sales and lettings market and is looking to expand to 100 branches, despite current uncertainties. The shares are down nearly 7% today leaving Foxtons trading at 10.08 times earnings and yielding 4.34%, whichmay tempt buyers whobelieve the capital can boom again.
Profits down, shares up
Engineering firm IMI (LSE: IMI) has seen its share price leap more than3% in early trading, despite reporting a 19% drop in first-half pre-tax profits from 107m to 86m as revenue fell in challenging conditions.Net debt rose from 289m to334m, partlydue to an adverse currency impact of 70m.
IMI expects more favourable currency impacts over the full year as itgenerates more than 90% of sales outside the UK and a weaker pound could boostrevenues and operating profits. The business faceschallenging conditions in a number of key sectorsbutchief executive Mark Selway claims he candrive growth throughoperational efficiency, enhancing processes and launching new products. Given the challenges, IMIlooks pricey at 16.64 times earnings, despite the respectable 3.59% yield.
Less than bullish
Multi-platform business information and events group Centaur Media (LSE: CAU) has had a tough year, its share price falling 54% from 81p to 37p. Ithas seenits advertising and sponsorships revenues squeezed in recent months, yet recent updates showrevenues rising ata fairly convincing pace, and this continues in todays update.
Reported revenues grew by 8% to 39.9m in the six months to 30 June withunderlying revenue growth of4%. Premium content and live events revenues was up, more than offsetting a 6% drop inadvertising revenues. Unfortunately, this was offset by a dip in adjusted operating profits to 5m, down from 6.1m in 2015, while adjusted operating margins of 12.5% were down from 16.6% in 2015.Lower advertising revenues, the cost of building premium content productsand commercial teamcapability all hit reported operating profits, which slumped to3.1m, down from 4.8m last year.
Centaurs 170%cash conversionfor the first four months of the yearmay convince some, as will itsrock bottom valuation of 6.73 times earnings and sky-high 8.33% yield. Tempting, but risky.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended IMI. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
