Portmeirion has strengthened its position in the home fragrance market by acquiring smaller rival AromaWorks out of administration. AromaWorks is a well-established brand in the UK, having also very recently broken into the USA market. Historical sales last year amounted to £4.1m (c.35% of PMP’s Wax Lyrical’s FY21 outturn) and a PBT of £0.3m in what was a Covid impacted year. The total consideration is a modest £0.44m and we anticipate a short payback period. Strategically, this is a low risk deal with meaningful cost synergies given manufacturing overlap. We also see a clear opportunity to drive revenue synergies through effective cross-selling and leveraging PMP’s existing USA operation. With interims next month providing a more appropriate opportunity to fully review overall group forecasts, we make no changes today. By way of reminder the H1 pre-close update last month signalled a pleasing 5% revenue growth, reflecting geographical diversity and good NPD momentum. Clearly going into H2 there is uncertainty given the macro backdrop and to this end, forthcoming interims will be critical to better gauging visibility and strength of order-book for the all-important Q4 trading period. A lowly YR1 P/E of 7x, 5% dividend yield and 7% FCF yield we feel adequately discounts any near-term forecast uncertainty. On a 12m view we see good value at current lows – Buy.
