MBL Group

Home entertainment distributor MBL, which supplies Morrisons with its CDs and DVDs, grew sales by 36% in a strong year to March.

On turnover increased from £143.6m to £194.9m, pre-tax profits pushed ahead by more than 22% to £9.9m during a year in which the games, CD and DVD distribution concern clinched contracts to supply retailers WH Smith and Best Buy that benefited its core Music Box Leisure division.

Non-executive chairman Peter Cowgill, who chairs JD Sports, explained MBL had been able to grow sales through its intimate knowledge of the consumer. 'We sell a number of impulse purchase type products that you would find at service stations', he explained, pointing out that in addition to selling chart CDs, the company sells a lot of CDs from the back catalogues of artists ranging from the Pet Shop Boys to David Bowie.

'DVDs and games have been an increasingly large part of the business', explained Cowgill, 'however, I see music making a comeback via other channels'. Regarding the future of physical media such as DVDs and CDs, Cowgill said that MBL would adjust to the increased popularity of downloading, for which 'we are developing digital platforms'.

Despite being a debt-free dividend-payer, forecast to up its dividend payment from 7.5p to 8p this year, MBL shares are selling for only 3 times forecast earnings, a ludicrously low p/e that reflects fears over the future of physical media and worries about the long-term security of MBL's Morrisons contract, set to expire in March 2012. With the shares trading on a budget rating, where they offer an attractive forecast yield of 6.6%, MBL is well worth a price recovery punt.