13th July – thoughts on Next, EOG

Next. I’m a long time holder of this share and I am still a fan of the business. It has been selling off recently, but let’s take a look at some figures (courtesy of ADVFN.com).

 

25 Jan 2014 (GBP) 24 Jan 2015 (GBP) 30 Jan 2016 (GBP) 28 Jan 2017 (GBP)
turnover 3,740.00 100.00% 3,999.80 100.00% 4,176.90 100.00% 4,097.30 100.00% m
pre tax profit 692.50 18.52% 794.80 19.87% 836.10 20.02% 790.20 19.29% m
attributable profit 553.20 14.79% 634.90 15.87% 668.00 15.99% 635.30 15.51% m
retained profit 388.40 10.39% 200.50 5.01% 100.50 2.41% 321.20 7.84% m
eps – basic 366.10 428.30 450.50 441.30
eps – diluted 355.60 417.90 443.00 431.80
dividends per share 129.00 150.00 158.00 158.00

So the last four years seem pretty stable

  1. Turnover has increased by less than 10% – that’s ok this is already a large company and growth is not always the best route forward. Sustainable, quality earnings.
  2. EPS I tend to ignore unless I can trace how many shares were in issue at each date, but attributable profit is remarkably steady. Down slightly on last year but still significantly up from 2014
  3. Dividends have remained steady from last year but grown over a long period of time.

Next has a very stable and capable management team. Brexit won’t help general economic conditions but this is a very well established business with trading on a PE of 8.39. The share price is now at its lowest level since mid 2012

Europa Oil & Gas (EOG)  moves around a lot on news about the back and forth battle regarding the Wressle Oil field planning permission in Lincolnshire. Whatever your views of onshore exploration on what is, after all, a fairly small island, this issues seems to drive the value of EOG far more than the actual financial effect of a yes or no from the local authority. The real value seems to me to be locked up in the Irish sea.

Therefore, the postscript of the RNS release from this morning is the more relevant from a valuation perspective and should be good news in the near future:

In the meantime, we were pleased to note that Providence Resources has begun 
drilling operations on the Druid and Drombeg prospects in the South Porcupine 
Basin offshore Ireland.  With the recent arrival of a number of major operators 
to the region, we believe this well will be the first of many to be drilled 
over the next few years.  Success at this or any other well in Atlantic Ireland 
will have positive read across for our industry-leading portfolio of licences 
offshore Ireland where we have already identified 32 prospects and leads in a 
diverse range of six play types and three basins across all seven of our 
licences."