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Walker Greenbank – 2017 sales +17.9%, results “in line” sounds promising. BUT…

By Steve Moore | Tuesday 6 February 2018

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.

Interior furnishings company Walker Greenbank (WGB) “is pleased to announce a trading update for the year ended 31 January 2018” and emphasises “sales for the year are expected to be up 17.9% at £108.9 million”. Sounds promising…

The sales are noted to be “reflecting the full year contribution from Clarke & Clarke, increased overseas sales from brands and manufacturing, and continued licensing momentum”. Ah, so acquisition-boosted then. Indeed, it is stated “brand sales including Clarke & Clarke were up 17.9% in reportable currency (up 16.1% in constant currency) compared with the prior year… Brand sales excluding Clarke & Clarke were down 1.0% in reportable currency (down 2.8% in constant currency)”!

Despite this, overall “the results for the year are expected to be in line with the board's expectations”. However, in November it was “momentum in order intake has not been sustained and Brand sales in the UK, excluding Clarke & Clarke, have weakened significantly against management's expectations”.

As such, “in line with the board's expectations” is now earnings per share of circa 14p, comparing to 13.7p delivered in the prior year (6.9p v. 4.9p was the half-year position) - and only circa 5% underlying growth is forecast for the now current year. There is also currently net debt - and this all comparing to a present just over 130p share price.

That still actually suggests possible value – but I remain wary of both recent trading and visibility here (it was previously from “improving trend” to “weakened significantly against management's expectations” in 6 weeks). As such, ahead of further detail – I note the results announcement is scheduled for 5th April – this is on the watchlist.

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