Investment Review  Six months to June 2017

 
                                           
As the past six months have included the election, we excluded the April Review and now update to June 2017

Our portfolio continues to grow in value, but we have made two changes to reflect our current views: 
SODEXO has been excluded as it is moving away from its traditional food based operations and, in particular, moves into prison management as a future growth area which is not appealing to us. Latest figures show revenue not reaching budgets, and our experience of its catering has been disappointing, which confirms our decision to disinvest prior to subsequent share price reaction.
PIERRE  ET VACANCES is an addition to our portfolio, providing self catering and leisure activities for the tourist market primarily in France but the acquisition of a Chinese shareholder opens the way to major development in the large China Market. There is also an interesting property potential in financing the residential element of its units.

COMPASS CATERING continues its record of increasing profits and dividends with a more attractive customer base than erstwhile Sodexo a main competitor. Compass has produced a 20% revenue increase this year with a 24% profit increase. Dividend is up 6% to 11.20p as expected but there is an extra 61p special dividend from surplus cash generated, all of which has helped the share price. Forecast is for steadily increasing profits in foreseeable future.

INTERCONTINENTAL HOTELS GROUP as anticipated increased its profits by more than expected, and increased the dividend by 11% to 49p per share, and for good measure paid a Special Dividend of 156p extra per share. Profits are expected to grow with new hotel openings on a weekly basis and it will be interesting to see the results of a new and very experienced CEO in the next 12 months.

ACCOR HOTELS GROUP  is the French alternative to England's IHG but differs in several ways. Much of its operations are European/Asian based in countries where French influence was dominant  and less in the US, but the recent acquisition of FAIRMONT/RAFFLES hotels and expansion in Latin America holds great potential. Allied to this is the Accor acquisition of several travel/reservation organisations and interests to make the group capable of providing an all inclusive range of leisure services. Accor is also marketing a different range of accommodation and catering facilities to the Millenials Market, as distinct from the other major hotel groups.
EBIT increased last year to £m 696 from £m665 and in the current year it has commenced disposal of major properties, so the results for 2017/8/9 should successfully reflect this new business model.

THE BUILDING/PROPERTY  INDUSTRY

Our holdings continue to concentrate on house building

PERSIMMON HOMES produced another set of record results for 2016 in February with profits up 23% and the 110p forecast dividend augmented by an extra 25p special dividend. A TRADING UPDATE in June has indicated business rising faster than expected since February, with a very strong provincial market demand, and one can expect another substantial rise in dividend in the next 12 months.

TAYLORWIMPEY  produced another set of record figures with a 20% profit increase, a 50% increase in its basic dividend and a 9.20 per share special dividend payable this week. We can also expect news on a further large special payment for next year and a resurgent share price.Latest figures are scheduled for 1st August.

BERKELEY  HOMES GROUP more than exceeded expectations with a 53% increase in profits and its anticipated 100p dividend for the six months, and has indicated substantial increase on the basis of existing orders for the next three years.Buying of its own shares is making the share price increasingly more attractive.

REDROW HOMES is the smallest of our main portfolio but has great potential. Based in North Wales it has developed its business successfully into the South East,Kent, Berkshire and outer London avoiding the difficult central London area.The latest profits rose by some 35% and the dividend by 50% and we expect further rapid growth when the Annual figures are issued in September.

CAPITAL POSITION
It is now three years and six months since we sold our last hotel and concentrated on hotel investment and leisure management. In this period we have earned 114% profit in dividends and capital gains on our portfolio of investments.

MANAGEMENT CONTRACTS
In the past  six months we have acquired a new client in the field of Media Content and Publishing in addition to our existing film/television interests.