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The 'Problem' which Destabilised Creightons' Shares Seems Like an Encouraging Sign to Me

By Malcolm Stacey | Tuesday 13 February 2018

Disclosure: I own shares in one or more of the stocks mentioned. 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.

Hello Share Shavers. One of my all-time big successes has been Creightons (CRL), the pocket company which does things to make your car smell better, fake suntans and so on. It wasn’t much more than a penny a throw at one of its darkest stages. Then the City finally woke up to its sterling performance and the share reached 45p. But you have to know when to say enough is enough and I sold a large lump of my shares at 43p. I wish I’d dumped the lot because they fell to 24p.

Yet the reason for this fall is not failure, but ironically it’s because Creightons has been selling too much stuff. It put out a trading statement this month saying it expects growth for the year to be up 12%. This is apparently ‘driven by an increased demand in all divisions of the business; owned brands, contract manufacturing and private label.’ The board goes on to say that this growth is due to a big and unexpected higher order intake in the last few months. 

Yes, it seems Creighton has not been able to make enough products to feed demand. So it has outsourced some of its manufacturing to other companies. This, in turn, means Creightons makes less profit.

The big cheeses expect gains to be down on last year. But only ‘marginally’ and, naturally, the company is in the middle of plans to enlarge capacity and train up its employees. But, as a result of this statement, the share plunged from about 36p to 24p. Talk about selling being overdone!

Of course, common sense is now beginning to reign again and the share price is up 10% as I write. What we have here gang is a firm forced to farm out some of its manufacturing because the demand from consumers is extra strong. That’s a position all sensible business people would die for. Should its shares have fallen so fast and far on this trading update? Well, what do you think?

And now let’s all support the Punter’s Return.

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