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Quiz plc – “trading update”… but what about profit & cash?

By Steve Moore | Wednesday 11 October 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.

Having IPO’d on AIM at 161p per share in July, shares in fast fashion womenswear retailer Quiz (QUIZ) initially rose towards 200p before recently sliding back towards 170p. However, having announced that it would release a trading update for the six months ended 30th September on 11th October, the stock rebounded to a 187p close prior to the announcement. The following updates with it currently retreating to 180p…

The trading update commences that the company “is pleased to announce a 35% increase in group revenue to £56.1m… compared to the same period last year. Gross margins remain in-line with expectations”. Hmmm, ok but what about earnings and cash compared to expectations?

The announcement then updates on online growth (“revenue increasing by 204% to £13.8m in H1 2017 reflecting the benefit of opening the new 180,000 sq. ft. distribution centre in the summer 2016, increased and effective marketing spend, particularly through digital channels, and the broadening of the product ranges available to customers”), international (an adjusted 25%, 23% in constant currency, sales increase to £10 million) and UK (sales increased by 15% to £32.3 million, “with each channel performing in line with expectations”). Er, ok but earnings and cash compared to expectations?

Instead it’s “we are confident of delivering further growth” and “intends to announce its interim results for the six months to 30 September 2017 on 22 November”, with CEO Tarak Ramzan “pleased with the QUIZ brand's strong growth across target markets and channels with online in particular”. Er, so readers are left to guesstimate on profit and the balance sheet position – not a great outcome of a first “trading update”!

House broker Panmure Gordon has though also updated – talking of ‘upside risk’ to forecasts of earnings per share of 6.4p, rising to 7.9p next year (and anticipating year-end cash of £14.1 million, the current market cap £223.6 million).

There's thus likely a still more than 20x forward earnings multiple for a still significantly offline retailer operating in a competitive space and amidst currently elevated economic uncertainty. It is continuing to develop and I’ll continue to monitor, but I currently continue to avoid the shares.

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