Walker Greenbank
Written by
Walker Greenbank |
Becoming clearer |
Trading update |
Care & household goods |
3 August 2016 |
Share price performance
Business description
Next events
Analysts
Walker Greenbank is a research client of Edison Investment Research Limited |
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Things are clearing: trading is in line with expectations; the Lancaster factory is almost back to full production and working on its order backlog; insurance payments are coming in; and new business streams are being established. The share price is justifiably holding up well.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/15 |
83.37 |
8.13 |
11.20 |
2.31 |
17.6 |
1.2 |
01/16 |
87.84 |
8.95 |
12.13 |
2.89 |
16.2 |
1.5 |
01/17e |
90.00 |
7.50 |
10.10 |
3.00 |
19.5 |
1.5 |
01/18e |
98.00 |
9.80 |
12.92 |
3.15 |
15.2 |
1.6 |
Note: * PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments; EPS is diluted.
In line with board expectations
The key message in the half-year trading update is that trading is in line with board expectations. Under the continued influence of the major flood last December at its fabric printing business, Brand sales are 2.1% down in reported currency (4.2% in ccy), with an improvement in export sales just failing to balance a 6.1% drop in UK sales. There seems little doubt that interim results, to be announced in mid-October, will show underlying pre-tax profits, before the add back of the loss of profits claim, significantly below the £3.68m declared for the previous year.
Positive vibes
The group has announced receipt of a further £4.0m, making £12m to date, from its insurers. We look for further payments to be agreed and paid in the coming months. The factory is reported to be almost back to full production and making sound progress towards fulfilling the backlog of printed fabric orders for both internal and third-party customers; replacement capacity includes some more modern and more efficient machinery, raising the medium-term potential. Other positive vibes include the indication that Brexit will be marginally positive from a currency viewpoint, while last month’s announcement of a new licensing agreement for the supply of bed linen into the US is another indication that the group continues to look forward positively. We introduced a profit estimate of £7.5m for FY17 several months ago taking account of likely damage and loss of profits related to the flood; the extent of the insurance payments already agreed suggests the balance between underlying trading and loss of profits receipts will need revising, but we await the interim results announcement before adjusting this target. More significantly, we remain optimistic that the underlying performance for the full year, following the precedent set last year and consolidating loss of profits receipts, will meet our earlier adjusted pre-tax estimate of £9.4m. We do not propose to change our FY18 estimates.
Valuation: Sound value
The Walker Greenbank share price continues to hold steady in the face of uncertainty. A prospective rating of 15.6x CY17 earnings is 5.8% below the 16.5x of its peer group. This represents sound value in the context of the group’s consistent record and recovery potential from short-term challenges.
Exhibit 1: Financial summary
£000s |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
75,725 |
78,434 |
83,373 |
87,839 |
90,000 |
98,000 |
Cost of Sales |
(30,193) |
(30,347) |
(32,674) |
(35,875) |
(36,758) |
(40,025) |
||
Gross Profit |
45,532 |
48,087 |
50,699 |
51,964 |
53,242 |
57,975 |
||
EBITDA |
|
|
8,625 |
9,730 |
10,689 |
11,764 |
10,400 |
12,800 |
Operating Profit (before amort. and except.) |
6,577 |
7,513 |
8,340 |
9,126 |
7,700 |
10,000 |
||
Intangibles Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
||
LTIP / Exceptionals |
(746) |
(970) |
(1,005) |
(924) |
(900) |
(900) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
5,831 |
6,543 |
7,335 |
8,202 |
6,800 |
9,100 |
||
Net Interest/defined benefit pension charge |
(897) |
(1,048) |
(1,006) |
(864) |
(900) |
(900) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
6,384 |
7,333 |
8,132 |
8,947 |
7,500 |
9,800 |
Profit Before Tax (FRS 3) |
|
|
4,934 |
5,495 |
6,329 |
7,338 |
5,900 |
8,200 |
Tax |
(972) |
(451) |
(1,224) |
(1,466) |
(1,250) |
(1,800) |
||
Profit After Tax (norm) |
5,412 |
6,606 |
6,908 |
7,481 |
6,250 |
8,000 |
||
Profit After Tax (FRS 3) |
3,962 |
5,044 |
5,105 |
5,872 |
4,650 |
6,400 |
||
Average Number of Shares Outstanding (m) |
57.5 |
58.5 |
59.3 |
60.0 |
60.2 |
60.2 |
||
EPS - normalised (p) |
|
|
9.41 |
11.30 |
11.64 |
12.47 |
10.38 |
13.29 |
EPS - normalised and fully diluted (p) |
|
9.41 |
10.66 |
11.20 |
12.13 |
10.10 |
12.92 |
|
EPS - FRS 3 (p) |
|
|
6.89 |
8.63 |
8.60 |
9.79 |
7.72 |
10.63 |
Dividend per share (p) |
1.48 |
1.85 |
2.31 |
2.89 |
3.00 |
3.15 |
||
Gross Margin (%) |
60.1 |
61.3 |
60.8 |
59.2 |
59.2 |
59.2 |
||
EBITDA Margin (%) |
11.4 |
12.4 |
12.8 |
13.4 |
11.6 |
13.1 |
||
Operating Margin (before GW and except.) (%) |
8.7 |
9.6 |
10.0 |
10.4 |
8.6 |
10.2 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
18,506 |
21,142 |
21,463 |
18,899 |
21,203 |
21,716 |
Intangible Assets |
6,683 |
7,289 |
7,158 |
7,104 |
7,054 |
7,004 |
||
Tangible Assets |
9,808 |
11,690 |
12,714 |
11,687 |
13,987 |
14,687 |
||
Deferred income tax assets |
2,015 |
2,163 |
1,591 |
108 |
162 |
25 |
||
Current Assets |
|
|
32,618 |
35,295 |
37,105 |
40,286 |
40,689 |
48,045 |
Stocks |
16,825 |
18,428 |
22,004 |
18,104 |
20,500 |
23,322 |
||
Debtors |
12,810 |
13,884 |
14,130 |
19,280 |
15,000 |
16,833 |
||
Cash |
2,920 |
2,830 |
971 |
2,902 |
5,189 |
7,889 |
||
Other |
63 |
153 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(17,340) |
(19,435) |
(20,710) |
(19,392) |
(20,900) |
(22,722) |
Creditors |
(16,940) |
(19,035) |
(20,310) |
(18,992) |
(20,500) |
(22,322) |
||
Short term borrowings |
(400) |
(400) |
(400) |
(400) |
(400) |
(400) |
||
Long Term Liabilities |
|
|
(9,602) |
(10,150) |
(10,921) |
(4,509) |
(4,200) |
(4,200) |
Long term borrowings |
(1,364) |
(942) |
(569) |
(196) |
(200) |
(200) |
||
Other long term liabilities |
(8,238) |
(9,208) |
(10,352) |
(4,313) |
(4,000) |
(4,000) |
||
Net Assets |
|
|
24,182 |
26,852 |
26,937 |
35,284 |
36,792 |
42,838 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
6,023 |
6,165 |
3,468 |
7,103 |
9,109 |
9,967 |
Net Interest |
(209) |
(152) |
(181) |
(149) |
(200) |
(200) |
||
Tax |
(16) |
(18) |
(32) |
(630) |
(1,304) |
(1,663) |
||
Capex |
(3,119) |
(4,735) |
(3,230) |
(2,510) |
(3,500) |
(3,500) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
(145) |
(28) |
(367) |
(66) |
(50) |
(50) |
||
Dividends |
(711) |
(900) |
(1,144) |
(1,444) |
(1,772) |
(1,854) |
||
Net Cash Flow |
1,823 |
332 |
(1,486) |
2,304 |
2,283 |
2,700 |
||
Opening net debt/(cash) |
|
|
667 |
(1,156) |
(1,488) |
(2) |
(2,306) |
(4,589) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
(0) |
0 |
||
Closing net debt/(cash) |
|
|
(1,156) |
(1,488) |
(2) |
(2,306) |
(4,589) |
(7,289) |
Source: Walker Greenbank accounts, Edison Investment Research. Note: FY16 profit includes £1.4m loss of profits insurance payment.
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