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Portmeirion Group – looking through the 2016 results spin…

By Steve Moore | Thursday 9 March 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Shares in Portmeirion, Spode, Royal Worcester, Wax Lyrical and Pimpernel homewares group Portmeirion (PMP) are currently slightly lower despite it “delighted to be reporting an eighth consecutive year of record revenue”, this up by £8 million (11.7%) to £76.7 million.

However, the results statement later notes “at a constant US dollar exchange rate our revenue increase would have been lower at 6.5%” and that “the part year sales for Wax Lyrical… were £10.4 million (2015: £nil)”. I.e. adjusted for the Wax Lyrical (home fragrances) acquisition, revenue was actually lower! This is reflected in a decreased £7.8 million pre-tax profit and earnings per share 9.7% lower than for 2015, at 59.60p.

After particularly the net £16.7 million Wax Lyrical acquisition, £3.2 million of dividends and £1.6 million of income taxes paid, there was a £13.5 million swing to a £2.3 million net debt position. However, the dividend per share was still increased to 25.25p, taking the total for the year 7.5% higher to 32.25p.

A “challenging” year was attributed to UK EU membership referendum and US presidential election uncertainty (Hmmm), though South Korea and India were also significant problems.

Having fallen from more than £15 million to £12.3 million in 2015, sales into South Korea fell below £10 million in 2016 and sales into India fell from £5.8 million in 2015 to £1.1 million in 2016. The company notes it is “working closely with our exclusive distributor in South Korea to rebuild sales” and that “we have changed our distribution arrangements in India”, but also notes South Korean “economic problems particularly in demand for luxury products” and that “returning sales to prior high levels in India will take time”.

It seeks to mitigate that “trading in the first two months of the current year is ahead of the comparative period in 2016 on a like-for-like basis. The outlook for 2017 is positive and the issues experienced are being overcome by proactive management” and that “we have never cut or withheld our dividend as a listed company” (1988).

These give some room for optimism, but I’d want more evidence of sustainable recovery before paying the current (more than 960p) asking price for the shares. As such, I presently continue to avoid.

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