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Portmeirion + (PMP, House Stock at 156p) - Difficult FY24A - Transformation strategy
Portmeirion Group PLC
Portmeirion has delivered PBT in line with expectations, but net debt is higher, and no final dividend is declared. There were positive elements in the results and today, under the leadership of a new Chairman, a five-pronged plan has been laid out to reverse a period of underperformance and return the business to sustainable growth with a strengthened balance sheet. We await to see how the strategic reset plays out before reintroducing forecasts. Theoretically if PBT in the current year returns to at least the FY23 lows of £3.0m, the shares are trading on an undemanding 10x P/E, with little if any recovery being priced in
Portmeirion, one of the leading home ceramics and tableware businesses, has today announced the retirement of Dick Steele as Non-Executive Chairman. He will leave the Board at the end of this month. Mr Steele has a long association with Portmeirion as former CEO and latterly as Chair. He will be replaced by Peter Tracey as Non-Executive Chairman from 25th Feb’25. Mr Tracey is currently Managing Director of Blackdown Partners Ltd, an independent investment bank. He also holds non-executive roles at Hurtwood Capital and Inspired Plc. We view his appointment positively. Given Portmeirion’s mixed track record over the last 5-years, we anticipate the focus on delivering sustainable earnings growth and rebuilding shareholder value to be sharpened under his watch. Last month the company warned on the FY24 outcome. We anticipate a full YE update in the weeks ahead, at which point we will be in a better position to review FY25 prospects and reinstate FY25/FY26 forecasts. We believe FY24 should be a base to build from. Today’s new Chairman news should be supportive of a recovery thesis because at some stage trading challenges across key markets will gradually abate. In the meantime the shares on BS considerations are in value territory, trading 2.2x below historical NAV of 399p.
Portmeirion + (PMP, House Stock at 178p) - New Non-Executive Chairman
Portmeirion + (PMP, House Stock at 205p) - US and S. Korea issues impact FY24F results
Portmeirion’s unscheduled trading update reports that H2 trading has been weaker than anticipated. This is principally due to supply disruption into the US and continued softness in South Korea. Home fragrance performance has been ahead of our expectations. As a result, we lower FY24 PBT from £4.5m to £1.0m on revised sales of £90m. Whilst disappointing to be cutting forecasts again, we maintain that with a largely rebased cost structure and positive strategic execution in the last few years, operational gearing should work in Portmeirion’s favour once market conditions improve. For now we move from Buy to Hold and put our 12m TP under review.
H1-24 results as anticipated are weak. We make 5 key points: (1) Tough trading in South Korea masks a resilient performance in the dominant North America / UK territories (+5% cc). (2) South Korea trading has stabilised in Q3 which is sentiment positive. (3) Pro-active cost cutting action bodes well once market conditions improve. (4) Whilst the broad trading environment continues to have challenges, there is no change to FY expectations. (5) The interim DPS has been lowered, but this reflects a H1/H2 rebalancing with no change to our FY estimate. We hold our PBT forecasts and looking though the near-term uncertainty, the FY25 P/E of <6x (vs 10 year average of 12x) and a NAV of 380p highlights value at the current 15 year low on recovery considerations off a much leaner cost base. We upgrade from Hold to Buy.
Portmeirion + (PMP, House Stock at 223p) - Still on track for FY24F
Portmeirion + (PMP, House Stock at 234p) - New CFO to be appointed
Portmeirion in its H1 trading statement has maintained FY profit expectations. H1 revenue as previously flagged is lower (-17%), but this masks an encouraging 5% y/y growth ex South Korea. Commentary around cost savings, Wax Lyrical and the US Christmas order book is also positive. We leave numbers unchanged for now and while there is much work to do over H2 to hit our FY PBT estimate, we are encouraged by the areas of progress in H1. For now we stay at Hold but once headwinds wane and confidence builds around forecasts, the shares on an undemanding FY25 valuation of 5.4x P/E and 3x EV/EBITDA should re-rate significantly.
Portmeirion+ (PMP, House Stock at 210p) - H1 trading update - on track for FY24F
Portmeirion has delivered FY23 results in line with our estimates and FY24 PBT guidance has been maintained. While trading conditions are expected to remain challenging in the near-term, especially in South Korea, there is a clear focus on protecting earnings and maximising future profitability. To this end, 10% of the cost base has been reduced for FY24. The BS has improved with net debt lowered to £7.9m (vs £10.1m FY22). With debt reduction remaining a priority and given macro uncertainty, the dividend has been rebased from 15.5p to 5.5p. We make no changes to our PBT expectations but lower our revenue and DPS estimates. The shares trade on a FY24 P/E of 11x with a 13% FCF yield. While we remain confident on mid-term growth, for now stay at Hold until we see clearer signs of revenue and margin recovery.
Portmeirion+ (PMP, House Stock at 265p) - FY23A results, PBT on track for FY24F
Portmeirion + (PMP, House at 280p) - FY23F trading update
Portmeirion navigated a tricky Q4, with a good Christmas performance enabling it to meet FY23 PBT expectations. This is both a relief and a good outcome. We are however having to dial back FY24 estimates to reflect signalling of ongoing macro related caution for the US and South Korea. The challenges here remain market/consumer driven than PMP specific. Net, our FY23 PBT estimate remains unchanged but FY24 and FY25 are downgraded by 36%/28%. We remain confident about mid-term prospects given operational gearing upside once demand recovers in key markets. For now, prudence dictates a reduced TP of 250p and a move from Buy to Hold.
Portmeirion+ (PMP, House Stock at 240p) - Promising progress with Spode
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Any reference to a partner in relation to Hybridan LLP is to a member of Hybridan LLP or an employee with equivalent standing and qualifications. A list of the members of Hybridan LLP is available for inspection at the registered office, 2 Jardine House, The Harrovian Business Village, Bessborough Road, Harrow, Middlesex HA1 3EX. *A corporate client of Hybridan LLP ** Arranged by most recent first *** Alphabetically arranged Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Announced ITF 12 July: Substrate Artificial Intelligence, an artificial intelligence company based in Spain that creates, buys and scales companies around AI in diverse sectors such as fintech, agritech, energy, human resources, and health, intends to join the Access Segment of the AQSE Growth Market. Admission delayed. Announced ITF 6 July: Blackpoint Biotech plc, a medical cannabinoids company established to fulfil gaps in the medical cannabis market by creating products that provide fast onset of action and accurate dosing, intends to join the Access Segment of the AQSE Growth Market. Admission delayed. Our daily digest of news from UK listed Small and Mid caps Banquet Buffet*** Arecor Therapeutics 187.5p £57.4m (AREC.L) A focused biopharmaceutical company advancing today's therapies to enable healthier lives, announces its interim results for the six months ended 30 June 2023. Revenue increased by 141% to £1.7m (H1 2022: £0.7m); as a result, total income increased by 103% to £2.3m (H1 2022: £1.1m). The Company held cash, cash equivalents and short term investments of £8.2m as at 30 June 2023. Through the remainder of 2023 and into 2024, Arecor Therapeutics expects key data from AT278, achievement of further partnering milestones and continued commercial traction for Ogluo. Trading for the full year remains in line with Board’s expectations. Checkit 30p £31.3 (CKT.L) The intelligent operations platform for the deskless worker announces its unaudited results for the six months ended 31 July 2023 (H1 FY24). Annual recurring revenue (ARR) increased year on year by 24% to £12.6m (H1 FY23: £10.2m). The Group revenue increased 19% to £5.7m (H1 FY23: £4.8m) and as a result gross profit increased by 30% to £3.9m (H1 FY23: £3.0m). The Company held cash of £12.8m at 31 July 2023. The Company has increased investment in its data platform over the last year and is now applying the resulting capabilities, testing machine learning models to help managers take proactive steps to improve operational efficiency. The Board is confident of delivering an operating performance ahead of market expectations for FY24 . Churchill China 1325p £145.7m (CHH.L) The manufacturer of performance ceramic products serving hospitality markets worldwide, announces its interim results for the six months ended 30 June, 2023. Revenue increased by 6.3% to £44.0m (2022 H1: £41.4m), as a result, operating profit increased by 39% to £4.9m (2022 H1: 3.5m) and profit before tax was up 47.1% to £5.0m (2022 H1: £3.4m). The Company held net cash and deposits of £9.9m as at 30 June 2023. Management continues to focus on export to countries where market share is low and the Board is confident in the outlook of profitability. Cornish Metals 12.88p £74.0m (CUSN.L) A mineral exploration and development company focused on its South Crofty Tin Project (South Crofty) in Cornwall, releases an updated JORC (2012) Mineral Resource Estimate (MRE) for the South Crofty Tin Project. The focus of this new MRE is the Lower Mine area tin-only section of the Project, as such, the Company announced a 39.0% increase in tonnes and 31.6% increase in contained tin in the Indicated Mineral Resource category from the 2021 MRE and 35.6% increase in tonnes and 15.5% increase in contained tin in the Inferred Mineral Resource category from the 2021 MRE. The majority of new Mineral Resources are contained within the central part of the mine in No. 1, No. 2, No. 3, Main, Intermediate Lodes. Invinity Energy Systems 41.5p £79.3m (IES.L) A global manufacturer of utility-grade energy storage, announces that the Company has received the first customer order for its next-generation product, code-named Mistral. Invinity's customer is its Taiwanese strategic partner, Everdura Technology Company (Everdura). A 14.4 MWh vanadium flow battery, comprising a single Mistral array, will now be installed by Everdura at a site in central Taiwan and used to balance the island's electric grid through the provision of Enhanced Dynamic Regulation (E-dReg) services. Invinity expects to ship the order in late 2024. In addition to this order variation, the companies have signed a non-binding Memorandum of Understanding proposing a strategic manufacturing partnership for Invinity products in Taiwan. Keystone Law Group 467.5p £146.8m (KEYS.L) The network and tech-enabled challenger law firm, announces its interim results for the six months ended 31 July 2023 (H1 FY24). Revenue increased 14.9% to £42.4m (H1 FY23: £36.8m) as a result, profit before tax increased by 29.3% to £5.3m (H1 FY23: £4.1m). The Company remains debt free with net cash of £11.3m. During the period, the Company generated strong market and recruitment momentum including 144 qualified new applicants (H1 FY23: 122) and 25 new principals joined, increasing the number of principals to 415 (31 January 2023: 398). The Board is confident that FY24 results will be ahead of current market expectations. LoopUp Group 2.9p £5.6m (LOOP.L) The cloud platform for hybrid communications, announces its unaudited interim results for the six months ended 30 June 2023 (H1-23). Revenue increased by 84% to £12.2m (H1-22 £6.6m), as a result adjusted EBITDA profit of £2.5m (H1-22 loss of £1.5m). The Company has gross cash at period end of £0.9m and has a net debt of £5.6m. LoopUp was certified onto Microsoft's Operator Connect partner program, and now has Cloud Telephony service availability in 54 countries. The Group is confident of broadly meeting current market expectations for FY23. Mkango Resources 10.5p £27.3m (MKA.L) CoTec Holdings Corp. (CoTec) and Mkango Resources Ltd. (Mkango) announces that the two companies have entered into a 50:50 joint venture in relation to the United States roll-out of HyProMag's rare earth magnet recycling technology. HyProMag is 100% owned by Maginito, which is owned on a 90:10 basis by Mkango and CoTec. HyProMag is commercialising rare earth magnet recycling using Hydrogen Processing of Magnet Scrap technology in the UK, Germany and United States, with first production expected in the UK in 2023. CoTec will fund the initial operations of this joint venture (including the costs of the Feasibility Study), with expected funding of £30- £50m during the first three years post completion of the Feasibility Study. Revenue from the US joint venture is targeted for 2025/2026. Portmeirion Group 285p £39.9m (PMP.L) The owner, designer, manufacturer and omni-channel retailer of leading homeware brands in global markets, announces its results for the six months ended 30 June 2023. Revenue marginally decreased to £44.1m (H1 2022: £45.5m), loss before tax was £0.1m (H1 2022: profit £1m) and EBITDA was £2.7m (H1 2022: £3.3m). The Company has net debt of £15m but expects to reduce by year end to before FY2022 levels of £10.1m. With the improved productivity in Stoke-on-Trent ceramic factory maintained through ongoing automation programme, FY sales and profit are expected to be in line with consensus market expectations. Proton Motor Power Systems 8.25 p £128.2m (PPS.L) The designer and producer of hydrogen fuel cells and hydrogen fuel cell electric hybrid systems, announces its unaudited interim results for the six months ended to 30 June 2023 (H1 2023). During the period, sales were £929k marginally down from prior year (H1 2022: £980k) and order intake was £1.4m (H1 2022: £1.5m). The order book at the period end of £3.8m includes repeat orders from existing customers. The Company completed delivery of 19 fuel cell systems from across its product range to customers and announced a new 13,500m² production facility expected to support scale up of product production capacity. If you would like to unsubscribe, please email enquiries@hybridan.com with “unsubscribe me”. Hybridan Chefs research@hybridan.com
PMP MKA KEYS CUSN CUSN CHH AREC LUPGF
Soft interims as anticipated with no change to FY guidance. North America retailer de-stocking issues had been well flagged, but set against this there is good evidence of resilient trading across UK, South Korea and ROW. We welcome current trading being in line and note encouraging Christmas orderbook/shipment commentary. Overall, we sense expectations have bottomed out. Given this the shares merit a closer look on recovery grounds for the medium term. They trade c.40% below NAV/share of 462p, and on our unchanged forecasts yield 5% with the FY24 P/E 7.5x and EV/EBITDA 4x vs a LR average of 13x/7.5x. We also note the share price is almost back to near the worst point in the pandemic, despite a sound revenue and margin strategy under new CEO. On valuation grounds we move from Hold to Buy.
Portmeirion+ (PMP, House Stock, 293p) - No changes to profit forecasts after interims
News of a soft H1 North America outcome due to de-stocking will disappoint today. The softness however is contained, with the UK, South Korea and ROW showing y/y progress. With North America trends expected to continue into H2, management has lowered FY23 PBT expectations and we reflect this in downgrading by 68%, reflecting high operational leverage. We also opt to take a prudent view on outer year forecasts. Strategically, management continues to make good progress around geographic diversification, NPD and initiatives to improve margins. However, like a lot of consumer facing businesses at present, PMP is not immune to demand challenges / uncertainty. We remain confident around the mid-term potential but for now lower our 12m TP from 600p to 355p and move from Buy to Hold.
Portmeirion + (PMP, House Stock at 395p) - Tough first half on back of weak N. America
Portmeirion+ (PMP, House Stock, 418p) - Appointment of Non-executive Director
Portmeirion+ (PMP, House Stock, 508p) - No changes to forecasts on AGM statement
Portmeirion has issued a brief AGM statement covering the traditionally quieter period of the year. Progress has been made YTD with geographical diversity and self-help being supportive features we understand. Overall, the expectation is for a flat H1 performance, which in the context of a challenging consumer backdrop would be a creditable outcome. We note USA has been singled out as showing customer caution in recent weeks re ordering and will need to be closely monitored over Q2. With c.80% of profits being H2 weighted, investors should welcome reference to initial Christmas order intake being ahead of the comparative period. NPD has also been well received. We make no forecast changes at this stage, opting to see how trading fares over the next few months. For reference we assume a conservative 2% top-line growth for FY23 and a 150bps EBIT margin improvement to primarily reflect an easing of supply side pressures and ongoing self-help benefits, e.g. automation. The shares have had a strong recovery (+68% YTD) from oversold levels and trade on a YR1 P/E of 10x, 5.6x EV/EBITDA and yield 3.4%.
Having again delivered record sales in FY22A, Portmeirion (PMP) is focusing on improving profitability further in FY23F, notwithstanding the difficult macroeconomic environment. The strategy of increasing sales, both by brand and by geography, coupled with the target of achieving a 10%, building to 12.5%, EBIT margin is not presently reflected in the current share price, in our view. The FY23F EV/EBITDA multiple is well below the rating of peers and its historical five-year average of 10.1x. We initiate coverage of PMP with a fair value of 700p, which is backed up by a reverse DCF analysis and note the supportive FY23F c.5% dividend yield. HOUSE STOCK.
Set against a tough consumer / inflationary backdrop today’s finals are satisfactory and in line with previous guidance – revenue +5% and PBT +11%. Higher net debt is the main forecast variance, reflecting elevated inventory but we expect most of this to unwind in FY23. The outlook is cautiously optimistic and whilst prudence dictates holding fire on forecasts, the risk is on the upside. Our conservatively pitched numbers imply a 3 year EPS CAGR of 14%. The equity story is all about delivering against the revenue and margin growth objectives set out in 2021. Whilst macro factors stymied progress in 2022, looking forward there are lots of strategic irons in the fire which should deliver future upside. Trading on a lowly P/E of 7x and 5% yield the risk / reward dynamic is compelling. We reiterate our Buy and 600p TP.
Issuer Sponsored PORTMEIRION+ (PMP, House Stock at 353p) – Appointment of Shore Capital FTSE 100 GSK^ (GSK, Buy at 1,458p) - CDC weighs RSV vaccine cost effectiveness Shore Capital Media News Includes articles covering: WPP, Future, Wilmington, Zoo Digital, BT Sport, Eurosport, OnTheMarket, games revenue, Pinewood, Meta, greenwashing advertising
Portmeirion Group PLC GSK plc
Portmerions Y/E update signals a pleasing outturn to FY22. This is captured in a 4% sales beat led by a strong finish to the year and FX. Whilst our FY22 PBT expectations are unchanged, the update reinforces the growing significance of international, now representing 75% of sales, and the strategic pivot to online. We also make no FY23/FY24 PBT forecast changes but feel the shares offer an attractive entry point for mid-term investors. A lowly rating of 6x P/E, 4x EV/EBITDA and a 5% yield is in deep value territory given future earnings potential. Todays update should go some way to reassure investors. We reinforce our Buy and 600p TP.
This morning, despite consumer market headwinds, Portmeirion has reported a strong Christmas trading period with robust demand across its portfolio of consumer goods brands resulting in FY22E Group sales 4% ahead of expectations of at least £110m. Strategic and operational changes are also bearing fruit with improved operating margins resulting in FY22E PBT expected to be 10% higher than FY21A. With 75% of sales now outside the UK and a focus on further geographical expansion and the implementation of more operational efficiencies, we expect further progress to be made to reaching the company’s long-term target of more than 13% operating margins. With a prospective PE of 6.9x and yield of 4.8%, it is hard to imagine many stocks providing more upside. We reiterate our BUY recommendation and 810p TP.
Positive collaboration news today involving the Spode brand. It is teaming up with renowned British designer Kit Kemp. The new co-branded range will include tableware and giftware for the Kit Kemp new hotel and a wider retail offer. Strategically it is pleasing to see management continuing to invest and grow Spode, building on the success of various collaborations for the Portmeirion brand. Investors should also welcome reassuring trading commentary around the important months of September and October. We make no forecast changes at this juncture. After recent weakness, on GARP considerations the shares trading on a P/E <7x falling to <6x with a c.5% yield are oversold. We anticipate a positive reaction to today’s news and reinforce our Buy and 600p TP (blended 13x FY23 P/E and 8x EV/EBITDA).
If evidence was needed that there is no let-up in its long-term growth strategy then today’s announcement of a new and exclusive design collaboration between the Spode brand and Kit Kemp MBE, the inimitable interior designer and founder of Firmdale Hotels and Kit Kemp Design Studio should fit the bill. This is the sort of bottom-up progress which happens too slowly to be noticed especially when the trading environment faced by the company is arguably the worst in recent memory. Nevertheless, management has taken this opportunity to assert that group revenues remain robust and that trading in September and October have been in line with its expectations. Accordingly, there is no change to our forecasts at this stage.
Today’s interims highlight a resilient performance, reflecting international diversification and self-help. The fact that good momentum has continued into Q3 is positive. As is reinstatement of the interim DPS (3.5p). PMP however makes the bulk of profits in Q4 and whilst the US order book is good, UK uncertainty and a higher cost outlook in some areas means we rein back our current year PBT by 20%. This still implies a credible flat H2 EBIT and y/y PBT growth of 11%. Prudence also means we lower FY23/24 PBT by 20%/13%. With the shares down 40% YTD, investors were discounting downgrades and, post revision the shares are trading on an undemanding P/E of 8x falling to 7x with a 4% yield. Under the bonnet there is good progress being made around the stated strategy of expanding the customer base and targeting higher margins. This should be shareholder accretive in the medium term. We stay at a Buy with a revised 12m TP of 600p (from 840p).
This morning, the company has reported a robust H1/22 performance, with revenues and PBT up 5% and 30%, respectively. We note from the interims report that for the full year management expects to at least match 2021 revenue performance but exceed 2021 profits. This would be a creditable performance against arguably the worst external environment faced by the company in recent memory. On the one hand, fears over weak consumer discretionary spending have hit demand from retailers in key markets – the US and the UK. On the other, every imaginable cost, except for energy costs which are fixed until March 2024, has increased sharply. As we were more optimistic than the company’s current expectation, we are cutting our 2022 revenue and PBT forecasts by 4% and 21%, respectively. Accordingly, we reduce our TP by 21% to 810p. We maintain our BUY recommendation.
A positive strategic step forward from PMP this morning, announcing the launch of its new UK and international ecommerce sites. By way of reminder a central tenet of the new teams growth strategy has been to transform the digital and online offering. Online remains a significant growth opportunity, offering attractive margins and greater visibility of the end customer. Beyond this the expectation is that the new sites will help improve customer acquisition, conversion and cross selling opportunities. The ambition is to generate >20% of sales from its own websites. Interims next Thursday are expected to show a resilient H1 outcome. Sales growth of 5% to at least £45m (vs a stiff 35% comp) has already been announced and we estimate this to flow through to PBT of £1.9m vs a £1.4m comp. Any reassurance on Q3 trading and the Q4 order-book should be well received. Trading on a P/E of 6x with a c.6% DPS yield we feel much of the consumer/forecast uncertainty is priced in. Overall, PMP is in good shape and has a cogent growth strategy with net-cash on the balance sheet. On a 12m view we feel there is deep value at current lows.
We hope to learn more about AromaWorks London at the interim results on 15 September. In this note, we discuss how this recently announced acquisition might advance the business model and ambition set out in February's CMD. We believe that it should extend the customer reach as it is highly complementary to Wax Lyrical, Portmeirion’s home fragrance business based in the Lake District, whilst also leveraging the investments in sales and production infrastructure. It is too early to quantify the synergies, but we expect this acquisition to be a source of upside risk when management has completed the integration. For now, we retain our TP of 1,020p and the BUY recommendation.
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.
Today’s H1 update highlights a resilient top-line, with sales growth a solid 5%. Clearly macro conditions do not seem to have dented the overall performance, with geographical diversity, good NPD and ongoing self-help actions helping to mitigate top-line pressures. It can be argued that the growth strategy under the new team is working. Management understandably signal caution around the H2 outlook, but with better visibility around the all-important Q4 order-book/retailer intentions not expected to become clearer until the September interims, we make no forecast changes at this juncture. The shares currently trade on a depressed FY22/FY23 P/E of 7x/6x and a 4x EV/EBITDA rating. At current lows we feel forecast downside risk is largely priced in. Moreover, given a strong BS the shares on an 18-24m view are in good value territory. We reinforce our Buy.
It is difficult to argue with today’s trading update which has a similar cautionary tone to the one issued in May. While revenues in H1/FY21 at around £45m are expected to represent a 5% improvement YoY, the seasonally stronger H2 faces a difficult consumer discretionary spend environment. However, it is futile to build an investment case around top-down analysis. Bottom-up progress happens more slowly and takes longer to notice and, against all the external challenges in recent years, Portmeirion has been focused on building its digital channels, investing in brands and improving productivity. Notwithstanding the gloomy prognosis for H2, which is reflected in the share price, we see no reason to change our 2022 forecast of c4% revenue growth and 2.5ppt improvement in operating margin. Hence, we retain our TP of 1,020p and BUY recommendation.
Today’s AGM update highlights a satisfactory start to the year. Against a worsening consumer backdrop and further supply chain disruption sales are up 2% and gross margin has nudged up. This reflects favourably on management and the strategy reset. With 80% of profits generated in H2 we leave our forecasts unchanged for now but clearly much will depend on the state of consumer demand in the months ahead. We expect to get better clarity with the H1 update in July but equally, geographic diversity, self-help and strategic repositioning should further help mitigate various pressures. The shares have retreated by c.20% in recent months and trade on a YR1 P/E of 8.5x falling to 7x with a 4% yield. We feel investors have adequately discounted near-term consumer / inflation headwinds and the shares on a 12m view are in good value territory given PMP is a much improved business under the new team – Buy.
If today’s trading update has a cautionary tone then it should surprise no one. This is already reflected in the recent share price weakness, albeit not out of line with the wider consumer discretionary sector as inflation in staples and energy prices takes its toll. However, if what really matters is how a business copes with unexpected and wild movements in its external environment then surely today’s news that the company increased revenues and improved margins YoY in the Jan-Apr period should reverse the share price decline. Notwithstanding the seasonal H2 weighting of revenues and profits, we see no reason to change our 2022 forecast of c4% revenue growth and 2.5% improvement in operating margin. Hence, we retain our TP of 1,020p and the BUY recommendation.
Today’s finals show Portmeirion is a much improved business entering 2022. It is executing very well against strategy and has delivered an FY21 PBT broadly in-line with FY19, despite navigating lockdown 3.0 and supply side challenges. Macro uncertainties means the trading backdrop is likely to present further challenges in 2022, but management signal it can navigate these through ongoing self-help. We make no PBT forecast changes and following recent weakness, view the shares as oversold on a YR1 P/E of 11x and a 5% FCF yield. We stay at Buy with an 840p 12m TP – 10% P/E and EV/EBITDA premium to LR average multiples of 13x/8x.
The recent geopolitical backdrop may have taken some of the gloss off the exceptional execution reported in this morning’s 2021 results. However, this should not detract from the ongoing transformation, especially the lifetime value being created from the growth in direct customers and the ability to reach them on more occasions through personalised digital platforms. With three countries accounting for 89% of revenues, the potential to reach more customers, directly or indirectly, is also largely unexploited. Despite the sharp increase in capex and the ongoing disruption in supply chains, the balance sheet ended 2021 with net cash of £0.7m against our expectation of £0.2m; the Board has reinstated the dividend reflecting its confidence in cashflows despite the continuing high rates of investment planned. It is too early to gauge how the Ukraine conflict and recent COVID-related lockdowns in China will impact near-term trading, so we have kept our PBT forecasts for 2022-23 unchanged. Hence, there is no change to our TP of 1,020p, equivalent to 17.8x FY22E EPS.
Portmeirion hosted a CMD at its Stoke facility earlier this week, evidencing good execution against the 3 year growth plan. We conclude the platform is firmly in place to build on the positive momentum exiting 2021 to drive earnings growth and higher margins/ROCE. We explore and discuss the 5 key themes from the event. Given an improving equity story, deep value investors should take a closer look at PMP. The shares, trading on a FY22 P/E of 12x falling to 10x with a FCF yield of 7% and a 2 year EPS CAGR of 29%, are excellent value – Buy.
In the all-important Christmas quarter of 2021, where the difference between beating or missing the expectations of customers and investors was entirely dependent on supply rather than demand, Portmeirion has unquestionably delivered. Revenues and PBT for 2021 are now expected to be at least £104m and £7m, respectively, or 10% and 9% above current consensus market forecasts. To top it all, we estimate that the balance sheet ended 2021 with net cash of £0.2m against our previous expectation of £2.6m net debt. This outperformance can only be described as blowout execution against every imaginable supply chain disruption. The latter may have kept our forecasts for 2022-23 unchanged but given the upside risks we now expect the stock to be re-rated by at least 10% to 17.8x FY22E EPS. This raises our TP from 920p to 1,020p and, hence, we continue to recommend BUY.
A strong year-end update from Portmeirion this morning, signalling a full year Sales and PBT outcome 10%/9% ahead of consensus. Profitability has been helped by strong trading over the peak Christmas season. So another impressive update, reflecting favourably on the digital led growth strategy and management’s ability to navigate the inflationary backdrop. For now we hold fire on outer year forecasts given ongoing covid/inflation uncertainties but continue to have conviction around double-digit PBT growth in FY22/FY23. With the strength of today’s update a further stepping stone in evidencing that PMP is returning to sustainable sales/profit growth and cash generation, the shares on a FY22 P/E of 11x with a 7% FCF yield are significantly undervalued. We are buyers with a 840p TP and would encourage value investors to have a closer look.
In a world where satisfying demand is significantly harder than creating it, Portmeirion is exceeding expectations. It now expects 2021 sales to be at least 5% above consensus. Not surprisingly, the additional output has not fed through to the bottom line in an environment of unpredictable but generally rising costs, predominantly in shipping and labour. However, the company has avoided the recent sharp spike in energy costs, having extended its long-term contracts in H1/21 until early 2024. Still, it is remarkable that despite all the other supply-side challenges, some of which are not transitory, management is confident that these will not negatively impact consensus for profits in 2021 or derail plans to grow organically and increase margins. With no change to our EPS forecasts, we are leaving our TP of 920p unchanged which represents 35% upside over the current share price; hence, we maintain our BUY recommendation.
Portmeirion has released an ‘ahead of revenue expectations’ update. This is pleasing news as the business has continued to see good demand over H2. A strong top-line has helped mitigate short-term inflationary cost pressures, meaning no change to FY21 PBT expectations at this stage but with some upside risk dependent on peak season in the run up to Christmas. We hold fire on FY22/FY23 PBT forecasts also. We see cost challenges as short-term in nature and should not detract from the strategic progress being made to return PMP to sustainable sales/profit growth and cash generation. Our analysis supports fair value towards 840p.
In reiterating its confidence of attaining market expectations for FY21, it would appear that management is continuing to navigate any unforeseen supply chain issues such as the COVID-related factory closures and tightening freight markets it flagged in July’s trading update. Looking beyond these transitory issues, the long-term drivers remain in place – the continuing growth in own-website sales and the strong recovery in South Korea to name but two. Despite the accelerated capex and the seasonal working capital outflow in H1/FY21, the company retains a healthy balance sheet with net cash of £0.1m. With no change to our forecasts, we are leaving our TP of 920p unchanged which represents 48% upside over the current share price; hence, we maintain our BUY recommendation.
An excellent set of interim results with trading comfortably back above pre pandemic levels and a strong start to H2. Significant investment remains underway to support sustained sales growth and mid-teens margins, with good progress YTD. Prudence / wider supply chain risks means we make no forecast changes, but the risk remains on the upside. Overall, Portmeirion is firmly moving in the right direction and the shares are attractively valued on a FY22 P/E of 11x and 6x EV/EBITDA with a strong balance sheet. Our analysis supports fair value of 840p.
If proof was needed that demand is not a problem, then the 6% organic increase (23% including acquisitions) in H1/FY21 revenues over H1/FY19 should silence any doubts. Arguably, in delivering 34% YoY sales growth over H1/FY20, the company has also comfortably navigated any unforeseen supply chain issues such as COVID-related factory closures and tightening freight markets. The balance sheet appears to be in good shape; in today's trading update management has reiterated its intention to resume dividend payments for FY21. However, we remain alert to a tougher logistical test in the important Christmas trading season. Therefore, despite a very strong YoY performance in H1/FY21, we are sticking to 2.4% revenue growth for the full year. Our unchanged 920p TP continues to be based on 16x FY22E EPS. This represents 40% upside on the current price; hence, we maintain our BUY recommendation.
Today’s H1 update makes positive reading. Since the AGM update, strong trading continued into May and June and the Group exits H1 with a strong global order book. Overall, 34% y/y sales growth / 6% LFL (vs H1-19) is a highly impressive outcome against the backdrop of UK lockdown 3.0 and ongoing CV19 related global shipping and supply chain delays. All this reflects favourably on the strategic progress under the new leadership team and supportive of the double-digit sales / margin recovery thesis we see playing out on a 3 year view to near double PBT on our conservative assumptions. Today’s update also reconfirms an intention to resume the dividend this year. Given 80% of earnings are H2 biased, we make no forecast changes as prudence dictates we see how ongoing supply chain risks play out in Q3. The shares have near doubled since last June’s Placing but remain attractively valued on a FY22 P/E of 11.6x and 5.6x EV/EBITDA. A 10% premium vs the LR average implies fair value towards 840p.
Portmeirion’s AGM update signals an “excellent start” to the year, building on the positive momentum seen in H2-20. Particularly pleasing is LFL sales growth in the period against the 2019 comparative, reflecting continued growth in online and international markets stabilising with good growth in the USA. So a good start to FY21 and further building on the positive direction of travel under a new and strengthened leadership team. Prudence around Covid19 and the fact that profitability is c80% H2 biased influences us to make no formal forecast changes at this juncture, but clearly if the positive momentum is sustained the risk is on the upside. We have been promoting the stock as a deep value recovery/growth play and it is pleasing to see the shares up 34% YTD. The strength of today’s update is a further step in the right direction and we see an FY22 P/E of 11.6x; 5.6x EV/EBITDA and a 9% FCF yield as undemanding. Investors should welcome today’s update and the share price make further headway.
If confirmation was needed, then today's trading statement should allay any doubts that revenues have bounced back to pre-COVID levels. However, it would be unfair to describe it as a return to normality. Qualitatively, the company is in a much better shape today than this time in 2019 to take advantage of opportunities in digital platforms and international markets. However, we are cognisant that revenues remain seasonally second-half-weighted and that it may be too early to rule out further COVID-related disruptions and, as such, we leave our forecasts untouched. Our unchanged TP of 920p continues to be based on 16x FY22E EPS. This represents 40% upside over the current share price; hence, we maintain our BUY recommendation.
Finals show a resilient performance with strong online growth a standout feature. This provides confidence for the future. It is also pleasing to see a £0.2m beat at the PBT level. The positive trading momentum seen in H2’20 has continued into Q1’21 and investors should be reassured that the growth strategy is on track with good progress on a number of fronts. Covid-19 related prudence means we make no forecast changes at this juncture but the risk is on the upside. For valuation considerations we see the benefits of the growth strategy and a normalisation of trading as best captured in our FY22 estimates. On this basis the shares trade on a low FY22 P/E of 10x and 4.8x EV/EBITDA with a 10% FCF yield. In the context of a recovery/growth thesis we see scope for meaningful rating expansion as management evidence execution against the strategic plan. The tenor of today’s results is a step in the right direction and we are optimistic about a return to growth and paying a dividend.
A positive Y/E trading update from Portmeirion this morning with the full year outcome comfortably ahead of market expectations. There is a c7% revenue beat vs our forecast which flows through to us upgrading our FY20 PBT from £0.2m to £1.2m - a highly pleasing outcome in the context of our deep value/recovery/new management thesis. The outperformance was led by the UK/USA where trading proved robust in H2 despite lockdown due to strong online momentum. We keep our outer year profit forecasts unchanged at this stage given the CV19/macro backdrop, but understand current trading is positive with both factories open and the order-book healthy. Management is fully focused on executing the strategic growth plan outlined at the time of the June’20 fund raise and we expect a fuller update at the March finals. Overall, today’s update is a step in the right direction in building confidence in the growth / online plan and should be well received by investors
We initiate on Portmeirion and argue that it is in a better position than the current market valuation suggests. It has delivered a resilient first half and, following a strategy reset under the new CEO, it has much more enhanced capabilities with an improving model and profit outlook. Furthermore, Portmeirion is well funded with no balance sheet concerns. The shares trade on low spot multiples of 10x FY21 P/E with and 5x EV/EBITDA with a 9% FCF yield. A SOTP analysis based on peer/corporate deal metrics shows fair value towards 650p. Patient deep value investors should take a much closer look.
Portmeirion has acquired the remaining 50% of the Canadian associate company Portmeirion Canada Inc from Royal Selangor Inc. The total cash consideration is CA$1.0m (£0.6m) vs a 30 June unaudited net assets of CA$2.3m. As part of the acquisition, key license distribution agreements in the Canadian marketplace are expected to continue. This strategic move is in keeping with the various initiatives recently outlined as part of the equity raise to drive growth. Historically, the Canadian business generated c.£2m of sales and modest profit but we see significant upside under full ownership, particularly through further penetration of online channels and leveraging Portmeirion’s USA infrastructure. N+1 Singer currently has no formal forecasts and will initiate coverage in due course. The shares trade on a historic FY19 P/E of 6.5x and 5.4x EV/EBITDA with a >10% FCF yield. The balance-sheet is effectively ungeared. The share price at the current depressed level presents an attractive entry point for investors looking for deep value asset backed plays with a clear strategy to drive top-line and shareholder value.
In the context of a tough Covid-19 related backdrop, Portmeirion has issued a pleasing H1 trading update. LFL sales in the period were -20%, a credible outcome we feel given the retail shutdown over the majority of Q2. We note LFL’s in June improved to -9% and if this positive trend is sustained, then management expectation of the company moving into profitability in H2 should materialise. Notably, online sales growth was 90%, with Q2 >100%. This is a very strong showing and supportive of the growth strategy management is focusing on. Finally, we understand the various growth / margin related projects for which management recently raised a net £11.2m of new funds are progressing well. A fuller update around these is anticipated at the September interims. N+1 Singer currently has no formal forecasts and will initiate coverage in due course. The shares trade on a historic FY19 P/E of 6x and 5x EV/EBITDA with a >10% FCF yield. The balance-sheet is effectively ungeared. The share price at the current depressed level presents an attractive entry point for investors looking for deep value asset backed plays with a clear strategy to drive top-line and shareholder value.
Portmeirion has provided an AGM trading update this morning effectively covering 20 weeks of H1. Online commentary is upbeat and export demand has sufficiently picked up for management to partially reopen the ceramics factory. Unsurprisingly the core retail demand in UK/USA remains subdued but we should stress Q2 (Apr-June) accounts for c25% of sales – 60% of sales and 80% of profits are made in H2. Investors should also take huge comfort around the balance sheet. Pro-active actions to minimise cash outflow means a significantly low cash burn of <£1m for the whole of Q2, whilst liquidity headroom of c£15m on our estimates is highly reassuring in the current climate. Management remain committed to reinstating the dividend once deemed prudent to do so. N+1 Singer currently has no formal forecasts in the market and will initiate coverage in due course. The stock has recovered from its 240p low in March and trades on a historic P/E of 7x and 4.5x EV/EBITDA with a >10% FCF yield and a NAV of 452p. Fundamentally the legacy brand portfolio is an attractive cash-cow with broad international appeal and significant brand equity. We feel this provides the foundation to support an exciting NPD/online/Wax Lyrical led strategy recently unveiled by the new CEO. The share price at the current depressed level presents an attractive entry point for investors looking for deep value, asset backed plays on a mid-term basis.
Portmeirion : Momentum, Raising TP to 1,340p
Interim numbers are in line with our expectations and our full year target. More importantly, successive set of results continue to highlight the success of diversification strategy, both in product and geographies, in managing pressures in major markets like the US and South Korea. Revenues in the RoW more than doubled. Cash generation in H1/17 was also impressive given the seasonal working capital needs in the first half of the year, leaving the balance sheet with just £1.6m of net debt (end-Dec-2016: £2.3m). The shares continue to sit at a 20% discount to its main UK peer. We reiterate our buy recommendation on the stock.P
Last week, we accompanied a group of investors to visit the operations of Wax Lyrical, the home fragrance company acquired by Portmeirion last year. While only time can ultimately prove the value to shareholders, our first impression is that Wax Lyrical is a high quality asset managed by creative, energetic and professional people. The strategic fit (Made in Britain pedigree and revenue synergies) is clearly strong and also decouples Portmeirion’s revenues and profits from ceramics. Revenue synergies (cross-selling to Dunelm, John Lewis) are already being delivered but have yet to be reflected in the share price which has only performed in line with the general UK market since the profit warning in July 2016. We also note the significant discount to Churchill China, which we expect to narrow as financial markets accept that last year’s challenges were temporary and actions taken have made the group more resilient to specific geographic setbacks.
The 2016 results announced today underlined the success of the diversification strategy, both in products and geographies, in enabling Portmeirion to manage decline in key markets like the US, South Korea and India, which together accounted for c.59% of group sales in 2015. Indeed, revenues in Rest of the World grew by 27% excluding any contribution from Wax Lyrical, led by various markets including Australia, Europe, Malaysia, Thailand, Hong Kong, Taiwan and Canada. As more markets such as China, where in-house entertaining is underdeveloped, open up, Portmeirion should become even more resilient to specific geographic market issues. At the same time, the strategic fit with the home fragrance business of Wax Lyrical is already starting to deliver revenue synergies. We continue to forecast organic recovery in 2017, with PBT and EPS growing by c.11.5%. The balance sheet remains strong with £2.3m net debt at end-2016 after £20m spent on acquisitions and dividend. We are forecasting nearly net cash neutral position by end-2017.
Portmeirion Group, the manufacturer and worldwide distributor of high quality homewares, has released a trading update confirming that profit before taxation for the year to 31st December 2016 will be ahead of market expectations. The shares had a set-back during the period but today’s announcement highlights how resilient the Group is to such external shocks. We are upgrading our FY16 and FY17 earnings estimates this morning and increase our price target from 1036p to 1066p which implies c13% upside.
Portmeirion Group has reported their interim results this morning which are inline with our revised estimates. The company has had a mixed first half year but should be well positioned to rectify underlying issues in South Korea and India and hit our full-year numbers. The recent profit warning should be viewed as a blip and should not overshadow the company’s fantastic track record.
Portmeirion has released a trading update this morning stating that PBT is expected to be materially below the record level of £8.6m reported for 2015. The company has seen an immediate negative on demand in the UK following the vote to leave the EU referendum with the potential benefits of a weaker pound yet to translate into firm overseas orders. We believe that this is a short term set-back and take comfort from the fact that management intends to increase the 2016 interim dividend by c14%.
Portmeirion has announced the acquisition of Lighthouse Holdings Ltd for a total consideration of £17.5m plus surplus cash. We think that Lighthouse’s wholly owned subsidiary, Wax Lyrical, is a great addition to the group’s portfolio of brands and represents a strong strategic fit; substantial revenue synergies are expected from this acquisition going forward as Portmeirion grows the brand through existing customers, websites, outlets and distribution channels. We therefore increase our estimates this morning, taking into account the acquisition, and increase our Price Target from 1171p to 1296p.
The Portmeirion Group enjoyed a seventh consecutive year of record sales in FY2015 with revenues and earnings being driven to their highest ever levels and ahead of our expectations. With the shares trading at a discount to what we believe to be their intrinsic worth and to Churchill China, their nearest quoted competitor, we continue to believe that the shares are well positioned to create further value for its shareholders. We therefore reiterate our Buy recommendation on the stock and increase our price target to 1171p (from 1059p).
The Portmeirion Group has released a trading update this morning stating that profit before taxation for the year to 31st December 2015 is expected to be slightly ahead of market expectations. With the stock trading at a 13.6% discount to what we believe to be their fundamental worth, we continue to believe that the shares are well positioned to create further value for its shareholders. We reiterate our Buy recommendation on the stock with a price target of 1059p (from 1013p).
Portmeirion has made an impressive start to FY2015, delivering revenue growth of 14% through the first half of the accounting period. With a strong order book in H2 and positive underlying momentum in the two largest, most mature markets, the group is well positioned to meet full year expectations. The shares weakened through 2Q2015 and now sit at 13% discount to what we believe to be their intrinsic worth. We reiterate our buy recommendation on the stock and raise our price target to 1013p from 1000p.
