AGM comments were very much in line with those at the beginning of the year and our estimates are unchanged. Walker Greenbank is on track for a good profit uplift in FY18 derived from organic progress in both divisions and a full year contribution from Clarke & Clarke. Moreover, the business retains significant financial flexibility for further investment. We would expect the share price to regain or exceed the higher levels seen earlier this year in due course.
Written by
Walker Greenbank |
Maintaining momentum |
AGM update |
Care & household goods |
21 June 2017 |
Share price performance
Business description
Next events
Analysts
Walker Greenbank is a research client of Edison Investment Research Limited |
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AGM comments were very much in line with those at the beginning of the year and our estimates are unchanged. Walker Greenbank is on track for a good profit uplift in FY18 derived from organic progress in both divisions and a full year contribution from Clarke & Clarke. Moreover, the business retains significant financial flexibility for further investment. We would expect the share price to regain or exceed the higher levels seen earlier this year in due course.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/16 |
87.8 |
8.9 |
11.6 |
2.9 |
17.4 |
1.4 |
01/17 |
92.4 |
10.4 |
12.9 |
3.6 |
15.6 |
1.8 |
01/18e |
114.7 |
14.3 |
16.1 |
4.4 |
12.6 |
2.2 |
01/19e |
119.7 |
15.2 |
17.0 |
5.1 |
11.8 |
2.5 |
Note: *PBT and EPS (fully diluted) are normalised, excluding exceptional items and LTIP charges.
Early H1 trading trends confirmed
The Brands division’s organic revenue growth in the first four and a half months of FY18 was +4.5% y-o-y (or +1.1% at constant currency), which is in line with figures cited for the first 12 weeks of the year (ie +4.4% and +0.9%, respectively). Demand in overseas markets has been firmer than in the UK, which is broadly flat. Clarke & Clarke (acquired in October 2016) is trading in line with management expectations and will contribute an additional six months’ trading in Brands’ H118 results. The Manufacturing division’s year-to-date revenue performance was not quantified but is said to be on an improving trend, again with a pick-up in export orders noted. H117 trading was affected by flood-related factory disruption and, hence, will be a relatively weak comparator for H118.
Insurance claim complete, trading progress expected
The company’s insurance claim relating to the Lancaster (ie Standfast & Barracks) factory flood has now reached the full settlement. A £2.4m final cash payment is expected to be received by the end of H118, which together with previous receipts – including £1.5m outstanding at the end of FY17, now received – equates to total claim proceeds of £19.3m. The final settlement is in line with existing guidance. By the end of July, we will have more visibility on regained momentum in Manufacturing and trading at Clarke & Clarke, and the development of new and existing markets outside the UK is likely to continue to be a feature.
Valuation: Good prospects
Walker Greenbank’s share price has eased back since the end of May and has now under-performed the FTSE All Share Index by c 9% since its FY17 results announcement in April. Our expectations are unchanged and the prospects for a strong step forward in profitability in FY18 with further progress thereafter remain good in our view. We do not feel that this earnings profile is fully factored into the valuation, with Walker Greenbank now trading on a current year P/E of 12.6x and EV/EBITDA (before pension cash adjustments) of 9.1x.
Financial summary
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
||||
Year end 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||||
PROFIT & LOSS |
|
|
|
|
|
|
|
|
|
|
||
Revenue |
|
|
75.7 |
78.4 |
83.4 |
87.8 |
92.4 |
114.7 |
119.7 |
124.2 |
||
Cost of Sales |
|
|
(30.2) |
(30.3) |
(32.7) |
(35.9) |
(36.2) |
(45.0) |
(46.9) |
(48.7) |
||
Gross Profit |
|
|
45.5 |
48.1 |
50.7 |
52.0 |
56.2 |
69.7 |
72.7 |
75.5 |
||
EBITDA |
|
|
8.6 |
9.7 |
10.7 |
11.8 |
12.7 |
17.4 |
18.4 |
19.3 |
||
Operating Profit (before GW, except. & LTIP) |
6.6 |
7.5 |
8.3 |
9.1 |
10.6 |
14.6 |
15.4 |
16.1 |
||||
Operating Profit (before GW and except.) - reported |
5.8 |
6.5 |
7.3 |
8.2 |
9.8 |
13.6 |
14.4 |
15.1 |
||||
Net Interest |
|
|
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
(0.3) |
(0.2) |
(0.1) |
||
Intangible Amortisation - acquired |
|
|
0 |
0 |
0 |
0 |
(0.3) |
(1.0) |
(1.0) |
(1.0) |
||
Pension net finance charge |
(0.7) |
(0.9) |
(0.8) |
(0.7) |
(0.5) |
(0.7) |
(0.7) |
(0.7) |
||||
Exceptionals |
|
|
0 |
0 |
0 |
0 |
(1.8) |
1.0 |
0.0 |
0.0 |
||
Other |
|
|
0 |
0 |
0 |
0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
6.4 |
7.3 |
8.1 |
8.9 |
10.4 |
14.3 |
15.2 |
16.0 |
||
Profit Before Tax (FRS 3) |
|
|
4.9 |
5.5 |
6.3 |
7.3 |
7.0 |
12.7 |
12.6 |
13.3 |
||
Tax |
|
|
(1.0) |
(0.5) |
(1.2) |
(1.5) |
(1.6) |
(2.7) |
(2.7) |
(2.7) |
||
Profit After Tax (norm) |
|
|
5.4 |
6.6 |
6.9 |
7.5 |
8.6 |
11.6 |
12.5 |
13.3 |
||
Profit After Tax (FRS 3) |
|
|
4.0 |
5.0 |
5.1 |
5.9 |
5.4 |
10.0 |
9.9 |
10.6 |
||
|
|
|
|
|
|
|
|
|
|
|
||
Average Number of Shares Outstanding (m) |
|
57.5 |
58.5 |
59.3 |
60.0 |
62.7 |
70.2 |
71.0 |
71.4 |
|||
EPS - normalised (p) FD |
|
|
9.4 |
10.7 |
11.2 |
11.6 |
12.9 |
16.1 |
17.0 |
18.0 |
||
EPS - FRS 3 (p) |
|
|
6.9 |
8.6 |
8.6 |
9.8 |
8.6 |
14.2 |
13.9 |
14.9 |
||
Dividend per share (p) |
|
|
1.5 |
1.9 |
2.3 |
2.9 |
3.6 |
4.4 |
5.1 |
5.8 |
||
|
|
|
|
|
|
|
|
|
|
|
||
Gross Margin (%) |
|
|
60.1 |
61.3 |
60.8 |
59.2 |
60.8 |
60.8 |
60.8 |
60.8 |
||
EBITDA Margin (%) |
|
|
11.4 |
12.4 |
12.8 |
13.4 |
13.7 |
15.2 |
15.3 |
15.5 |
||
Operating Margin (before GW and except.) (%) |
7.7 |
8.3 |
8.8 |
9.3 |
10.7 |
11.9 |
12.0 |
12.1 |
||||
|
|
|
|
|
|
|
|
|
|
|
||
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
||
Fixed Assets |
|
|
18.5 |
21.1 |
21.5 |
18.9 |
47.5 |
46.2 |
44.7 |
43.0 |
||
Intangible Assets |
|
|
6.7 |
7.3 |
7.2 |
7.1 |
31.6 |
30.6 |
29.6 |
28.6 |
||
Tangible Assets |
|
|
9.8 |
11.7 |
12.7 |
11.7 |
15.8 |
15.6 |
15.1 |
14.4 |
||
Investments |
|
|
2.0 |
2.2 |
1.6 |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
32.6 |
35.3 |
37.1 |
40.3 |
51.3 |
60.6 |
61.6 |
69.7 |
||
Stocks |
|
|
16.8 |
18.4 |
22.0 |
18.1 |
30.3 |
31.6 |
33.0 |
34.2 |
||
Debtors |
|
|
12.8 |
13.9 |
14.1 |
19.3 |
15.5 |
17.7 |
18.4 |
19.0 |
||
Cash |
|
|
2.9 |
2.8 |
1.0 |
2.9 |
1.5 |
5.9 |
4.9 |
11.2 |
||
Other |
|
|
0.1 |
0.2 |
0.0 |
0.0 |
|
|
|
|
||
Current Liabilities |
|
|
(17.3) |
(19.4) |
(20.7) |
(19.4) |
(34.8) |
(35.6) |
(30.4) |
(32.0) |
||
Creditors |
|
|
(16.9) |
(19.0) |
(20.3) |
(19.0) |
(28.0) |
(28.7) |
(30.4) |
(32.0) |
||
Short term borrowings |
|
|
(0.4) |
(0.4) |
(0.4) |
(0.4) |
(6.8) |
(6.8) |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(9.6) |
(10.2) |
(10.9) |
(4.5) |
(12.7) |
(9.9) |
(7.1) |
(4.1) |
||
Long term borrowings |
|
|
(1.4) |
(0.9) |
(0.6) |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
|
|
(8.2) |
(9.2) |
(10.4) |
(4.3) |
(12.7) |
(9.9) |
(7.1) |
(4.1) |
||
Net Assets |
|
|
24.2 |
26.9 |
26.9 |
35.3 |
51.3 |
61.3 |
68.8 |
76.6 |
||
|
|
|
|
|
|
|
|
|
|
|
||
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
||
Operating Cash Flow |
|
|
6.0 |
6.2 |
3.5 |
7.1 |
12.4 |
13.5 |
15.4 |
16.3 |
||
Net Interest |
|
|
(0.2) |
(0.2) |
(0.2) |
(0.1) |
(0.2) |
(0.3) |
(0.2) |
(0.1) |
||
Tax |
|
|
(0.0) |
(0.0) |
(0.0) |
(0.6) |
(2.3) |
(2.7) |
(2.7) |
(2.7) |
||
Capex |
|
|
(3.1) |
(4.7) |
(3.2) |
(2.5) |
(6.7) |
(3.5) |
(3.5) |
(3.5) |
||
Acquisitions/disposals |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
(27.1) |
0.0 |
0.0 |
0.0 |
||
Financing |
|
|
(0.1) |
(0.0) |
(0.4) |
(0.1) |
18.3 |
0.0 |
0.0 |
0.0 |
||
Dividends |
|
|
(0.7) |
(0.9) |
(1.1) |
(1.4) |
(1.8) |
(2.6) |
(3.2) |
(3.7) |
||
Net Cash Flow |
|
|
1.8 |
0.3 |
(1.5) |
2.3 |
(7.4) |
4.4 |
5.8 |
6.3 |
||
Opening net debt/(cash) |
|
|
0.7 |
(1.2) |
(1.5) |
(0.0) |
(2.3) |
5.3 |
0.9 |
(4.9) |
||
HP finance leases initiated |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
(0.0) |
0.0 |
0.0 |
0.0 |
||
Other |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(1.2) |
(1.5) |
(0.0) |
(2.3) |
5.3 |
0.9 |
(4.9) |
(11.2) |
||
Source: Walker Greenbank accounts, Edison Investment Research
|
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