Portmeirion Group – an attractive asset-backed recovery stock

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Portmeirion Group – an attractive asset-backed recovery stock

Made famous in the 1970’s by ‘The Prisoner’, the TV series starring Patrick McGoohan, the enchanting Italianate style village of Portmeirion is on the North Wales coast. It is the inimitable tourist trap that was designed and built by the late Sir Clough Williams-Ellis, a labour of love and devotion that took from 1925 to 1975 to complete.

Don’t get this resort confused with the Portmeirion Group (LON:PMP), which is a UK manufacturer and worldwide distributor of ceramic tableware, cookware, giftware, glassware, barware, home fragrance products and associated high quality homewares.

The company, which is based at Stoke-on-Trent in Staffordshire, sells its products in over 70 countries. It encompasses some six main brands: Portmeirion, Spode, Wax Lyrical, Royal Worcester, Pimpernel and Nambe.

Portmeirion, established in 1960, offers tableware and gifts with collections including Sophie Conran for Portmeirion.

Spode’s product portfolio includes celebrated patterns such as Blue Italian and Christmas Tree. This brand dates back to 1770.

Since it was started in 1980 Wax Lyrical, the home fragrance brand, has manufactured and distributed a range of fragranced candles and diffusers.

The oldest brand in the group is Royal Worcester. Established way back in 1751, it offers products including fashionable fine bone china mugs and sophisticated tableware sets.

Pimpernel, set up in 1945, is the brand for placemats, coasters, trays, accessories and gifts.

And finally, since 1951 Nambe, the US brand, has been engaged in designing homewares.

The group, which has over 840 employees across the world, has sales offices established in the UK, US, Canada, Europe and China.

In 2019 the group developed 1,364 new products and derived 49.2% of its £92.8m total sales from its UK ceramic products, while its US sales were 34.9% of its totals. Its home fragrances products represented 16% of group sales.

In territorial allocation its sales per region were 65.1% UK and 34.9% US.

The group’s headline pre-tax profit for the year to end December 2019 were £7.4m, giving basic earnings of 56.32p per share and an 8p dividend.

On 10 June this year the group raised £11.2m net by way of a Placing at 380p a share. At that time the group stated that it is a cash generative and profitable business which has seen 11 years of consecutive revenue growth and has a strong balance sheet in the form of significant net assets. As at 9 June it had net debt of £12m and total borrowing facilities of £27m.That is now down to some £10m net debt.
The funds were being raised to capitalise upon the group’s growth opportunities. Although its retail sales had been impacted by the Covid-19 lockdown, its online sales in its main markets had increased over 90% in the first half year, with a strong Q2 trend of over 100% year-on-year.

However, the company expects to report a small pre-tax loss for the first half (H1 2019 £0.5m profit). Estimates are for an 8% easing in revenues to £32m.

Mike Raybould, the CEO, in the half year Trading Update issued mid-July, stated that “Given the backdrop of total retail lockdowns around the world for over three months, we are very pleased with our sales performance in the first half and are encouraged by the improving trend we saw in June. Although there remains considerable economic uncertainty in our key markets, we are cautiously optimistic for the second half of 2020.”

Although N+1 Singer, corporate brokers to the company, are currently making no sales and profit forecasts they are obviously bullish about the group’s prospects. Analyst Sahill Shan states that “the balance sheet is effectively ungeared while its shares at the current depressed level present an attractive entry point for investors looking for deep value asset-backed plays with a clear strategy to drive top-line and shareholder value.”

There are some 14.44m shares in issue, of which the Caroline Fullbright Settlements of 1986 and 1991 jointly own 1.79m shares (12.58%). Other large holders include Shahrzad and Kamrouz Farhadi (8.56%), Investec Wealth (7.77%), Killik & Co (4.14%), HSBC Global Asset (1.95%), Canaccord Genuity Wealth (1.93%), Hargreaves Lansdown Stockbrokers (1.83%), and the Portmeirion Group Employee Benefit Trust (1.68%).

The interim results should be declared on Thursday 24 September.

The group’s shares were trading at around 930p this time last year. They eased to just 230p in late March this year, since when they have responded well to recent corporate news, together with the successful fundraising at 380p.

Now at 376p I would agree with Sahill Shan and call these shares as an attractive asset-backed recovery stock.

I reckon that they will react well to good news and I now set a 480p Target Price on the company’s shares.

Certainly, Patrick that is a good number for a ‘free man’ is it not?


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