N Brown, a company that in the past has given the impression that it did not much care to engage with the City, has decided to reveal a significant amount more information on the metrics that affect its performance as a retailer. That performance over the past couple of years has not been encouraging, and a little more transparency is useful.
Many probably think of N Brown as a purveyor of clothing in larger sizes through its long-running catalogue. The company is nearing the end of a restructuring under a new management team that aims to move sales online, while focusing on fashion brands such as JD Williams, Jacamo and Simply Be.
About two thirds of the company’s sales are online, and it has a better record than most for converting visits to its website into sales. The process will be accelerated by the migration to a new platform by 2017, and its products will be more readily available in other markets, such as the United States, which at present is loss-making, if only just.
That restructuring has been accompanied by a couple of profit warnings. N Brown has also had to take a hit from closing 18 stores that used to sell surplus stock, as such sales went online.
Those fashion brands have about 15 stores on the high street, which act as shop windows to drive online sales, and there is scope to open about ten more. The switch online will allow the range of stock to be updated more frequently — catalogues, by their nature, tended to be restricted to the spring and autumn seasons.
It is hard to fault any of this strategy, while the US offers a real opportunity once the necessary IT is in place. However, the halfway numbers to the end of August hit a few headwinds, over and above the cost of closing those clearance stores. These included increased marketing spend, higher costs from opening new stores and the need to invest in those internal systems.
They left underlying trading profits 16 per cent lower at £35 million, though the shares added 24p to 340p on signs that the restructuring was bearing fruit. The halfway dividend is held, and this suggests a forward yield of 4.4 per cent. Those shares sell on an earnings multiple of 14, though, which does not suggest much immediate upside.
Revenue £416m
Dividend 5.67p
18 Number of stores closed
MY ADVICE Avoid for now
WHY Dividend yield is attractive, but most of the good news from the restructuring looks to be in the price already
You have to wonder if the market has somehow persuaded itself that Domino’s Pizza is a digital business, rather than the purveyor, through franchisees, of workaday food.
The company, along with the share price, has had an extraordinary run on the back of non-stop growth, typically about 10 per cent annually, as it adds those franchisees at a rate of about 50 a year.
It is ultimately dependent, though, on just how much pizza we are prepared to consume, even if three quarters of sales are made online. The share price, up 112p to £10.02p yesterday, an all-time high, on some punchy third-quarter numbers, reflects an earnings multiple of above 30 times, which looks a little hard to, well, digest.
UK like-for-like sales were ahead by 14.9 per cent year on year to £200 million in the three months to the end of September. This compares with a 10 per cent rise year on year in the corresponding quarter and has the benefit of a couple of positives — the poor weather, which encouraged couch potato comfort eating, and the sponsorship of the Hollyoaks teenage soap, right in the Domino’s core demographic.
Progress may be a little slower into the fourth quarter, even if that 10 per cent growth looks achievable again. Domino’s has 840 stores in Britain and a target of 1,200, which puts some sort of cap on eventual growth, while Germany remains a drag, albeit a small one.
A share price that has risen 40 per cent this year and commands that multiple must lend itself to some profit-taking, though.
Group sales £214.5m
UK sales £200m
MY ADVICE Take profits
WHY Earnings multiple looks hard to justify
Connect Group is sticking to its target of getting half of all profits from outside its core newspapers and magazines business within the next year or so, and the target will be reached even if there has been some minor slippage. Some in the market remain unconvinced about the former Smiths News and its choices for diversification, doubts reflected in a sluggish share price.
The company has decided its main skill is in moving goods from one place to another. At the end of last year it bought Tuffnells, which required a hefty rights issue. This delivers awkwardly shaped parcels to businesses of the sort that automated carriers have difficulty handling — think automotive parts or ladders.
Connect also has a “click and collect” venture for consumer goods with Amazon initially and is adding new retailers, using its existing newspapers distribution network. Both businesses are highly promising, Tuffnells raising revenues by 20 per cent under its ownership, and the shares gained 11¾p to 159¾p on results that showed a solid enough performance from that core business. On 8.5 times earnings they are not expensive, and a 5.7 per cent dividend yield provides income while investors await developments.
Revenue £1.9bn
Dividends 9.2p
MY ADVICE Buy long term
WHY New ventures offer prospect of decent growth
And finally...
André Lacroix has been chief executive of Intertek, the FTSE 100 testing specialist, for less than six months, and he has announced the company’s biggest acquisition since 2011. He is paying $330 million for PSI, a US provider of testing to construction markets. The shares were a poor market through 2014 on fears of Intertek’s exposure to oil and gas markets, while PSI gets an estimated fifth of revenues from pipelines. Still, on less than eight times earnings and profitable in the first full year, the deal looks well timed.
Follow me on Twitter for updates @MartinWaller10
