Philip O'Sullivan's Market Musings

Financial analysis from Dublin, Ireland

Market Musings 16/11/11

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It never rains but it pours. After yesterday’s paucity of corporate newsflow we got a deluge of it today, along with a few interesting macro pointers. Let’s run through what’s been going on.


(Disclaimer: I am a shareholder in Glanbia plc). Glanbia released a strong trading update earlier today, with management guiding “circa 20% growth in adjusted earnings per share for the full year, on a constant currency basis”, which is at the high end of the previously guided 18-20% range. Within the statement management note weaker dairy prices, a theme I flagged last month, but this is being offset by stronger whey and US cheese prices. Overall, a very encouraging update from the company.


Elsewhere, Paddy Power also released a strong interim management statement, with its online division the key area of outperformance. Management is guiding  FY11 underlying diluted EPS growth in 2011 of 15%-20%, which compares to Bloomberg consensus (before today) of +13% yoy. The group also announced the acquisition of a Bulgarian games developer. Paddy Power’s net cash was a strong €96m as at November 14th, which, as management note, gives it “significant financial flexibility”. Following on from my recent remarks about the Irish retail betting market, it is instructive to note that Paddy Power’s like-for-like amounts staked and gross win were down 6% and 11% respectively in the July 1 – November 14 period, relative to year earlier levels. I wonder how many more of its peers will be exiting the market over the coming year.


Also on the ISEQ today we got full-year results from United Drug in which the company disclosed sales and operating profit growth of 1% and 4% respectively. Management has proposed a 3% higher dividend. Overall, this is a solid out-turn given the macro headwinds from United Drug, and reflects the good work being done by CEO Liam Fitzgerald and CFO Barry McGrane, along with their colleagues.


Switching to macro matters, today’s Goldman Sachs morning note had an interesting data pointer. Spanish house prices are only down 17% since the peak in 2008, according to government statistics. This seems highly dubious, given the realities of Spain’s property market, which I’ve blogged about before here and here. Unsurprisingly, I see no reason to own any bank with material exposure to Spain.


Staying with matters macro related, structural steel firm Severfield-Rowen is a leading indicator for the construction industry in the UK. Earlier today it said that the “UK market will be tough for the next few years”, which is something to bear in mind if you’re contemplating buying any stocks with an exposure to this market.


Written by Philip O'Sullivan

November 16, 2011 at 3:06 pm

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