Walker Greenbank
Written by
Walker Greenbank |
Estimates in line |
Full-year trading update |
Care & household goods |
3 February 2016 |
Share price performance
Business description
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Analysts
Walker Greenbank is a research client of Edison Investment Research Limited |
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Walker Greenbank’s trading statement indicates profits in line with market expectations. A likely interim insurance payment covering lost profits and asset damage, relating to the December 2015 flood, is expected in due course. We hope to restore our pre-flood profit estimates when the payment is confirmed.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/14 |
78.4 |
7.33 |
10.66 |
1.85 |
18.3 |
1.0 |
01/15 |
83.4 |
8.13 |
11.20 |
2.31 |
17.4 |
1.2 |
01/16e |
88.2 |
7.40 |
10.13 |
2.70 |
19.2 |
1.4 |
01/17e |
90.0 |
7.50 |
10.21 |
2.90 |
19.1 |
1.5 |
Note: * PBT and EPS (diluted) are normalised, excluding intangible amortisation, exceptional items, share-based payments and defined benefit pension adjustments.
Revenues in line with expectations
The clear message in the Walker Greenbank year-end update is that trading is in line with market expectations, despite the more challenging global climate. Brand sales are reported 6.4% ahead in constant currency 5.7% in reported currency; a 4.8% rise in UK sales (61% of the total) has been supported by continued strong export progress, with increased sales in the US, Western Europe and the rest of the world. Manufacturing operations also performed strongly, despite the cessation of trading at the fabric printing business following the flash flood in early December. Overall full-year revenue rose by 5.8% to £88.2m.
Profit estimates may be restored
Management has indicated that declared profits (to be announced in mid April) may also consolidate an interim payment from its insurers. We understand that this payment will be declared as an exceptional item, comprising costs incurred in tackling the flood damage and the anticipated loss of profit for the period to 31 January 2016. On this basis, it is quite likely that we will be able to reinstate our pre-flood estimates of underlying pre-tax profits of £8.7m and £9.4m for the years to January 2016 and 2017. However, at this stage, we have decided to await an announcement from the company to the effect that such a payment has been agreed and received before making any adjustments.
Finances remain sound
We adjusted our cash flow estimates in December. The timing of cash movements related to the flood is difficult to predict; however, group finances remain strong.
Valuation: Sector rating undervalues the shares
On the basis of the above EPS figures, Walker Greenbank shares are rated at a 23% premium rating relative to its peer group. However, reinstatement of earlier estimates would give the shares a similar rating (15.5x vs 15.4x) on the basis of prospective calendar 2016 earnings. We believe that this reflects neither the group’s strong medium-term record nor its positive medium-term outlook, although the market is unlikely to recognise this fully until the interim payment is confirmed.
Financial summary
Exhibit 1: Financial summary
£'000s |
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
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Year end 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
74,014 |
75,725 |
78,434 |
83,373 |
88,200 |
90,000 |
Cost of Sales |
(30,029) |
(30,193) |
(30,347) |
(32,674) |
(34,566) |
(35,271) |
||
Gross Profit |
43,985 |
45,532 |
48,087 |
50,699 |
53,634 |
54,729 |
||
EBITDA |
|
|
7,822 |
8,625 |
9,730 |
10,689 |
10,300 |
10,550 |
Operating Profit (before amort. and except.) |
5,969 |
6,577 |
7,513 |
8,340 |
7,600 |
7,700 |
||
Intangibles Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
||
LTIP / Exceptionals |
(414) |
(746) |
(970) |
(1,005) |
(900) |
(900) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
5,555 |
5,831 |
6,543 |
7,335 |
6,700 |
6,800 |
||
Net Interest |
(661) |
(897) |
(1,048) |
(1,006) |
(1,100) |
(1,100) |
||
Net defined benefit pension charge |
407 |
704 |
868 |
798 |
900 |
900 |
||
Profit Before Tax (norm) |
|
|
5,715 |
6,384 |
7,333 |
8,132 |
7,400 |
7,500 |
Profit Before Tax (FRS 3) |
|
|
4,894 |
4,934 |
5,495 |
6,329 |
5,600 |
5,700 |
Tax |
(1,065) |
(972) |
(451) |
(1,224) |
(1,200) |
(1,250) |
||
Profit After Tax (norm) |
4,115 |
5,412 |
6,606 |
6,908 |
6,200 |
6,250 |
||
Profit After Tax (FRS 3) |
3,829 |
3,962 |
5,044 |
5,105 |
4,400 |
4,450 |
||
Average Number of Shares Outstanding (m) |
56.7 |
57.5 |
58.5 |
59.3 |
59.8 |
59.8 |
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EPS - normalised (p) |
|
|
7.26 |
9.41 |
11.30 |
11.64 |
10.36 |
10.45 |
EPS - normalised and fully diluted (p) |
|
7.26 |
9.41 |
10.66 |
11.20 |
10.13 |
10.21 |
|
EPS - FRS 3 (p) |
|
|
6.76 |
6.89 |
8.63 |
8.60 |
7.36 |
7.44 |
Dividend per share (p) |
1.20 |
1.48 |
1.85 |
2.31 |
2.70 |
2.90 |
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Gross Margin (%) |
59.4 |
60.1 |
61.3 |
60.8 |
60.8 |
60.8 |
||
EBITDA Margin (%) |
10.6 |
11.4 |
12.4 |
12.8 |
11.7 |
11.7 |
||
Operating Margin (before GW and except.) (%) |
8.1 |
8.7 |
9.6 |
10.0 |
8.6 |
8.6 |
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BALANCE SHEET |
||||||||
Fixed Assets |
|
|
18,274 |
18,506 |
21,142 |
21,463 |
21,613 |
21,701 |
Intangible Assets |
6,111 |
6,683 |
7,289 |
7,158 |
7,108 |
7,058 |
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Tangible Assets |
9,313 |
9,808 |
11,690 |
12,714 |
13,014 |
13,164 |
||
Deferred income tax assets |
2,850 |
2,015 |
2,163 |
1,591 |
1,491 |
1,479 |
||
Current Assets |
|
|
32,298 |
32,618 |
35,295 |
37,105 |
41,627 |
45,421 |
Stocks |
17,000 |
16,825 |
18,428 |
22,004 |
23,178 |
25,151 |
||
Debtors |
13,047 |
12,810 |
13,884 |
14,130 |
16,948 |
17,994 |
||
Cash |
2,197 |
2,920 |
2,830 |
971 |
1,501 |
2,276 |
||
Other |
54 |
63 |
153 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(17,961) |
(17,340) |
(19,435) |
(20,710) |
(21,286) |
(21,712) |
Creditors |
(17,561) |
(16,940) |
(19,035) |
(20,310) |
(20,886) |
(21,312) |
||
Short term borrowings |
(400) |
(400) |
(400) |
(400) |
(400) |
(400) |
||
Long Term Liabilities |
|
|
(9,559) |
(9,602) |
(10,150) |
(10,921) |
(11,750) |
(12,250) |
Long term borrowings |
(2,464) |
(1,364) |
(942) |
(569) |
(1,000) |
(1,000) |
||
Other long term liabilities |
(7,095) |
(8,238) |
(9,208) |
(10,352) |
(10,750) |
(11,250) |
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Net Assets |
|
|
23,052 |
24,182 |
26,852 |
26,937 |
30,204 |
33,160 |
CASH FLOW |
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Operating Cash Flow |
|
|
4,530 |
6,023 |
6,165 |
3,468 |
6,486 |
7,457 |
Net Interest |
(230) |
(209) |
(152) |
(181) |
(200) |
(200) |
||
Tax |
(18) |
(16) |
(18) |
(32) |
(1,100) |
(1,238) |
||
Capex |
(2,538) |
(3,119) |
(4,735) |
(3,230) |
(3,500) |
(3,500) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
(24) |
(145) |
(28) |
(367) |
(50) |
(50) |
||
Dividends |
(570) |
(711) |
(900) |
(1,144) |
(1,537) |
(1,694) |
||
Net Cash Flow |
1,150 |
1,823 |
332 |
(1,486) |
99 |
776 |
||
Opening net debt/(cash) |
|
|
1,817 |
667 |
(1,156) |
(1,488) |
(2) |
(101) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
667 |
(1,156) |
(1,488) |
(2) |
(101) |
(876) |
Source: Company accounts, Edison Investment Research
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