Eurocell Share Discussion Threads

[jg88721] 13/3/2017 00:25

thanks Melody

To be more specific, I was mostly looking at the trend of operating profits margins over the past five years. Gross margins grow strongly over 5 years - excellent. 43.9%, 45.8%, 48.3%, 51.7%, 52%.

but administrative expenses have grown faster than sales. Ie, revenues are up on average 9.9% p.a. from 2012-2016. But administrative expenses have grown by 14.7% p.a. on average.

I just don't get that. EXEL is doing a great job growing gross margins, but profits would be much higher if distribution expenses were being managed as well as other costs.

EDITED: Admin expenses not distribution expenses

[barnesian] 12/3/2017 22:49

jg - you are right to highlight the large increase in overheads.

Excluding exceptional costs, I estimate that overheads increased by 24% from £67.9m to £84.2m, an increase of £16.3m from 2015 to 2016.

The Chairman states "Overheads were a little (!) higher than expected, reflecting accelerated investment in the branch network and business development teams, as well as increased logistics costs."

They opened 18 new branches in 2016 and plan to open another 30 this year. New branches operate at breakeven for the first two years as their revenue builds. This impacts overheads but not GM. The logistics problem with DHL seems to have cost of the order of £1.3m and has been addressed.

I think the answer to your question is your 2) namely investment in new branches with the payoff in 2+ years time.

The 18 new branches are on top of 141 existing branches and so should drive an extra 13% growth in revenue and profit in due course. The 30 new branches this year should drive an even bigger increase in revenue but will come with their own overheads to start with.

They are also extending their product range (500 new third party products) plus recent acquisitions of door panels and security hardware companies.

It seems to me that this is a well managed growth company and I'm tempted to top up, given the attractive dividend yield.

[melody9999] 12/3/2017 22:09

Hi jg - I too was having an initial nose around this one. Here is the section from the final results which I think answers your question.

CASH FLOW

Net cash generated from operating activities was strong at £28.4 million, compared to £19.4 million in 2015.

This includes a net inflow from working capital for 2016 of £0.8 million, comprised of a decrease in stock (£1.6 million), an increase in trade and other receivables (£0.6 million) and a decrease in trade and other payables (£0.2 million). This compares to a net outflow from working capital of £0.8 million in 2015. It also includes tax paid of £3.5 million (2015: £5.7 million).

Other payments include acquisitions of £6.3 million (2015: £1.7 million), capital investment of £7.2 million (2015: £6.4 million) and financing costs of £0.6 million (2015: £4.0 million).

Dividends paid represent the final dividend for 2015 of 5.2 pence per share (or £5.2 million) and the interim dividend for 2016 of 2.8 pence per share (or £2.8 million).

Taking all of these factors into account, net debt reduced by £5.6 million during the year to £20.3 million at 31 December 2016 (31 December 2015: £25.9 million).

[jg88721] 12/3/2017 21:41

I've only just started looking at this company. Looks interesting enough, but I don't get why revenues and gross margins are growing so strongly, but net profits are not (if you exclude the exceptional costs, esp. IPO costs etc, as mgmt. highlight. (Including these exceptional costs make the profit growth look stronger). Do they:
1. have a cost mgmt. issue (which would be a real problem if revenue growth slow/stopped/went backwards) OTOH, gross margins are improving suggesting they manage costs well enough. OR
2. is there some investing for the future which may mean faster profit growth in future. If so, what is the investment?

will do more work, but interesting in any others' thoughts.

GLAH

[hpcg] 08/3/2017 13:02

I only have a very small holding here, less than 1%, sits in my value / dividend bucket. Slow and steady is all I'm looking for.

[barnesian] 08/3/2017 11:44

Yes - I agree. And an 8% increase in dividend shows cautious optimism about the future. Very steady.

[hpcg] 08/3/2017 11:33

Pretty good results I thought. Some mixed language on future prospects, cautious because cautious, not cautious because an actual slow down is being experienced.

[firtashia] 23/2/2017 15:53

Nice to see this breaking out but can't see a catalyst for it. Anyone have any suggestions?

[firtashia] 24/8/2016 18:37

Given today's announcement I wonder if they deliberately took it down yesterday so that the NED could buy in.

[firtashia] 23/8/2016 07:55

Laughable share price response to the results so far today. P/E, PEG and dividend yield all suggest undervalued. Taken a position here, good luck all holders.

[boldtrader] 22/8/2016 07:48

Thanks BBD for opening this ecel thread. I believe these are going back to pre brexit. as a company they appear to be doing well and the drop was overdone. I have a small stake and look forward to alittle profit!! Cheers.

[mickharkins1] 20/8/2016 02:06

I have also been buying the past few days.

PE of under 7 with a 6% yield (now slightly less after yesterday's rise!). They are forecast to grow revenues by 11% this year, while at the AGM in May they stated revenues for the first 20 weeks were up over 16%, so am expecting good half year results to be released on Tuesday. Margins have also been increasing the past couple of years although I suspect raw material prices could recently have been impacted by the weakening GBP.

Not without risk as they only listed a couple of years ago and both the CEO and CFO departed in the last few months - having sold some shares! Although these are fully listed (not AIM) which does provide a bit of extra reassurance.

[mickharkins1] 20/8/2016 02:06

Short term target is for the chart to complete the test tube formation and get back to 1.80!

It seems the fall from 1.80 was due to Brexit, which I expect the company will say has had no material impact so far, judging by the statements coming from most other companies operating in this sector.

[texaspete2] 19/8/2016 13:52

Nice to see some other people on this board. I've been watching this share for a while and have finally bought in today, hopefully bottom has been hit and the rise continues based on the value on offer here

[extrader] 19/8/2016 11:10

Hi bigbigdave,

Thanks for starting this thread.

I came across ECEL doing some screening on stockopedia and my interest was piqued on its (previous) lack of coverage on advfn. It's not covered by spreadex either.

Any idea why ?

ATB