Continuing the theme of my column in the magazine, this week I delve into how provisions for bad contracts have fed into profit numbers at FirstGroup and I also look at the effect capitalising and amortising R&D expenses has on Avon Rubber’s earnings. Another theme this week is value traps – and I’ve highlighted some issues for concern with Vodafone and utility company SSE. Finally, I explain why funeral company Dignity is a riskier business than I used to think.
- Avon Rubber (AVON) has two very solid businesses that operate in profitable niche markets. The key issue is how does it grow.
- How long can it be before Vodafone (VOD) has to cut its dividend? That is the question many investors are asking.
- If you want a good example of how a high yield share becomes a value trap the look no further than utility company SSE (SSE).
- I used to think that Dignity’s (DTY) funeral business was bullet-proof. Yet, downward pressure on prices and its high level of financial gearing are risks not to be under-estimated.
- The way FirstGroup (FGP) presents both its adjusted profits and cash flow performance frustrates me. Its income statement is often littered with exceptional one-off costs which make it difficult to work out its true level of profitability.
