Portmeirion Share Discussion Threads

[asagi] 25/5/2021 20:02

excellent contributions (if I may say?) from illiswilgig and pieric: thank you.

Asagi (long PMP)

[pireric] 25/5/2021 19:06

That sounds about right to me, illiswilgig. Base revenue of £34.9m, slightly ahead is maybe +2% = £35.6m

Plus maybe £4-5m in Nambe sales for 1H = £40.1m
PMP Canada was 50% owned and their first half is probably the bigger half as they are June year end so H1 includes Xmas. so maybe £1m or so to come from that and you get to £41.1m for the half.

What is interesting is that underlying trading of slight growth on 2019 on a like for like (excluding acquisitions) basis includes a chunky fx headwind I think. So true like for like could be more for a middle single digit rate of growth. With a backdrop that most of the first 4 months of the year had UK retail pretty much nailed shut, and non-online channels is 50% of overall revenue... is rather impressive. South Korea and the US are probably getting back towards normal now in the second quarter, as will the UK (you would hope)

There is a lot of latent value in Portmeirion's brands, as we all know. The business in the past has been turgid. Little direct to consumer, all through distribution channels, little true nurturing of the brands or developing them outside of annual product releases. There are so many easy wins that are being put in place, about developing that higher gross margin DTC channel, replacing rusty old inefficient machinery and manual labour processes with higher efficiency automation. There is a lot I'm sure they can do with their historic assets too. This gives a very good sense of all of the old patterns/moulds the company has and could digitise to create new ranges, or re-invent old ones.

These are some of the Spode mould stores (moulds for prior patterns):

Also

Given the fixed cost base, the developments on gross margin will probably end up being quite significant. The forecasts are for this to get back to a bit shy of a 11% operating profit margin business in 2022, generating EPS of 57p. If you take Churchill China as a decent example, they have been running at much closer to 16 to 17% operating profit margins servicing hospitality (rather than retail).

As with any stock, for the stock to re-rate upwards, the story needs to be good, and I think they've got a good one to tell here. If they get the manufacturing, and online channel angles working well, this could in time quite feasibly be a 15-18x forward P/E stock again. Earnings forecasts here for for 67p of EPS in 2023. Getting back to a 4-digit share price is thus very possible. In my eyes at least, the stock should be closer to 800p today to be more like fair value.

Eric

[illiswilgig] 25/5/2021 11:09

Hello eric, good to see you here.

I agree with your excellent summary.

My finger in the air stab at sales, assuming it stays 'slightly' up at +2.5% for the remaining few weeks in H1 is £35.7m like-for-liek. Adding Nambe and the recent 50% of the Canadian JV takes it to roughly £42.5m maybe 43m. Which is way ahead of my expectations at this stage. Very promising.

Seasonality makes it hard to adjust forecasts and margin is low in H1, I can understand management caution. But broker forecasts on many companies remain far too pessimistic, as costs have been reduced, margins improved, and sales returning to 2019 levels. All of which applies here so I expect profitability to return to 2019 levels. Though the eps will be reduced by the placing.

My impression is that the new management (CEO) has a clear vision and is transforming the company from a moribund pottery to an on-line prestige homewares group. Which makes me optimistic both for H1 and the FY, and despite the dilution bodes well for a much more valuable company in the medium term?

cheers

[asagi] 25/5/2021 08:08

I think that encapsulates the case very well indeed, pieric.

Asagi (long PMP)

[pireric] 25/5/2021 08:04

Reads well to me too. Slightly ahead of pre covid on a like for like basis and then the Nambe contribution coming on top of that. And delivered in a year where fx is a bigger headwind so far which tells us the underlying business is very robust.

I think we will need to wait until some of H2 is delivered before we can expect firm upgrades but signs still look good on that. Forecasts remain for 56/67p of earnings next year and the year after. Broker target price remains 920p

Manufacturing efficiency and online sales promise a good story here moving forwards

Eric

[asagi] 25/5/2021 07:10

Trading statement:


reads well to me. Slightly ahead of pre-COVID trading.

Asagi (long PMP)

[pireric] 19/5/2021 19:34

I imagine there is a trading update due next Tuesday alongside the AGM. Should be in a period for decent results against a weak first half comparator last year, even if retail was shut for some of the period.

Valuation still looks attractive here. Broker forecasts are for ~37 pence of earnings in 2021, ~57 pence of earnings in 2022 as you get back to a year of normalisation, and ~67 pence of earnings in 2023 as the full effects of some manufacturing upgrade measures kick in.

Some snippets worth recapping. Last year own website margins were 12 points higher in GM terms than the rest of the group. And the manufacturing optimisation plans (which are really just about putting in decent new equipment after years of underinvestment) are aimed at reducing cost per unit by 10%.

Given the starting operating margin the impacts of these could and should be quite substantial. The blue sky scenario is that in a few years this could be churning out a 15% operating profit margin on £100m+ of turnover, in which case this would be on something resembling 8x earnings.

Broker target price from March was upgraded to 920p, which works out at about 13.8x 2023 earnings or 16x 2022 earnings. That does not seem crazy to me given the business improvement story Portmeirion has to play for and the value inherent in its brands. Would - if achieved - work out at ~50% upside maybe on a 12 month view.

Eric

[1tx] 18/3/2021 10:06

Yes agreed;the shareprice is probably now up with events following its rise over recent months but I think if we see a further growth in profitability & return to dividends we will see more growth.I am certainly glad I bought here shortly after its share offer last year.It is my intention to hold for the long term.I have always liked this company,I was pleased to buy at a low price.

[firtashia] 18/3/2021 08:07

Pretty decent set of results out today.

[asagi] 17/3/2021 13:42

results tomorrow.

Asagi (long PMP)

[eggbaconandbubble] 14/1/2021 16:52

Thanks, yes, after I posted lazy me did some reading and I agree with you.

[forensic] 14/1/2021 15:59

South Korea. See RNS 14.11.19
A temporary hit in my opinion

[eggbaconandbubble] 14/1/2021 14:58

Chris or anyone else. - do you know why the share price was falling off well before the Covid crash last March?

[chrisb1103] 14/1/2021 08:36

"Revenue for the year to 31 December 2020 to be at least 6% ahead of market consensus expectations following a strong second half and seasonal trading performance."
"We expect to announce the Group's preliminary results for the year ended 31 December 2020 on 18 March 2021."

Lovely news :-)

[1jmurphy] 30/11/2020 21:24

Nice curving action on the chart could take this to 700p in short order because it looks cheap.

[pireric] 17/11/2020 17:00

Isn't the reality that this year is a write off for most cyclicals and that the market is looking into 2021 and beyond to value businesses. Its totally excusable why any cyclical will have a bad 2020.

Yet most of them are now rerating and I expect PMP to follow suit in due course. Forecasts are for this to get back over 50p of earnings in a couple of years time, which I think might prove a bit conservative, but even then a low-mid teens PE on that would support very substantial upside from here. Given the market is forward looking, I wouldn't be shocked to see Portmeirion post a very strong share price finish to 2020

Eric

[illiswilgig] 17/11/2020 14:24

It might. But then it might not.

I hear scented candles are the number 1 best seller in the UK at the moment?

Just in time for PMP's new production line, improved warehousing and on-line sales drive.

Which is not to say that this will replace lost sales of posh crockery through shops - but selling on line is at a higher margin than through department stores and it gives PMP an opportunity to transform itself into a direct on-line seller as well as a manufacturer.

Will they succeed? Who knows, and it won't happen overnight - but its got to be worth a try and better than a gradual decline as a supplier of posh plates to department stores whose days are numbered?

cheers

[boonkoh] 17/11/2020 11:47

Rise in cases in S Korea, might lead to tighter lockdown and shops closed.Same in the USA, especially ahead of the important Xmas season.There's a huge risk if lockdown is extended over Xmas, there is less incentive for people to buy nice crockery for entertaining.

[energeticbacker] 24/9/2020 16:19

A rate interim loss for the homewares group. Investor's Champion thinks it could be an interesting recovery play with plenty of focus on the online offering.

[zangdook] 28/8/2020 10:35

PMP were notified on July 2nd, and only announced it now?

[lord gnome] 28/8/2020 08:53

Next Question: Who sold?

[value hound] 28/8/2020 08:42

So Ruffer have managed to take a near 8% stake without budging the price?

[zangdook] 13/8/2020 08:09

Don't know if this means PMP snaffled a bargain or the seller dodged a bullet. Looks cheap on its face.

[mr_spock] 08/7/2020 14:36

Oh, how lovely it is to see a quiet thread. Must have had 600 posts today on the BOO thread.