Walker Greenbank

Restructured wallcoverings and furnishing fabrics specialist Walker Greenbank has pleased investors with the news that full-year profits will beat forecasts, following a surprisingly upbeat Autumn selling season.

In a trading update, the company behind the Sanderson, Morris & Co, Zoffany and Harlequin brands said the improving sales trend flagged up in October, at the time of its interim results, had gathered further momentum. So much so that profits for the year to January 2010 will exceed the £2.1m pre-tax figure in the market – analysts have upgraded their estimates in response.

This better than expected performance has largely been within the mid-market brands, Harlequin and Sanderson, although in these recessionary climes the Zoffany brand continues to struggle in line with other luxury brands, as cash-strapped consumers trade down or defer spending.

In other pleasing news, analysts are now looking for better than expected year-end debt of £4m, versus an earlier £4.5m expectation, driven by Walker Greenbank’s better operating performance and tight control of stock.

Though profits declined from £1.72m to £570,000 on lower sales of £29.1m (2008: £33m) in the half to July, sales improvement was noted and the company cheered with a 28% reduction in net debt to £6.73m, as the business churned out healthy levels of cash.

For January 2010, investors should now look for £2.3m pre-tax on sales of £59.9m, ahead of a £3m profit from £62.4m turnover by 2011. Based on earnings of 3p and 3.8p this year and next, the shares are selling on undemanding prospective multiples of 7 and 5.5.

While the outlook for consumer confidence remains clouded, Walker Greenbank shares, up from a 52-week low of 7p, look an intelligent speculation, based on growth potential within its top-quality brands and an improving balance sheet.