16/11/2005
Claiming to be 'reasonably immune to the tough retail market’, Britain’s leading shopping-at-work provider has a ‘young, aggressive and hungry’ board lining up an acquisitive step-change.
New chief executive and self-styled ‘direct-sales purist’ Eric McClenaghan now leads the board of Premier Direct, replacing founder Barry Moat slightly earlier than planned, after previously occupying the managing and sales director seats. Smaller short-term purchases are scheduled, but McClenaghan vows ‘we don’t want to be sat here in a year’s time as a £30m-valued company, we want to do something bigger and better.’
Premier’s network of distribution agents sell high-quality, cut-price goods directly to people at work. This opportunity is attractive to both distributors and customers because of the low prices and strong earnings Premier’s buying power generates, especially via its main Far East supplier DS-MAX, which also supplies retail leviathan Wal-Mart.
Premier has recently introduced a major change to this model as agents now buy all stock from Premier, and then sell these goods on at a profit (previously they sold goods on behalf of Premier and earned a commission). There is a further motivational push in that the agents now have self-employed status.
January acquisitions Greenwich Direct and Laughing Gull have been integrated, adding 50 more distributors to the network and giving Premier capacity to grow the existing business a further 50%.
Preliminary figures to July showed pre-tax profits up 9.4% to £4.4m on a 14% sales hike to £41.5m, producing 74.4p of earnings, an 8% leap. New house broker KBC Peel Hunt expects pre-tax profits in the next two full years to vault to £5.5m and £6.5m, with ensuing earnings figures of 91p and 106.8p.
The broker suggests the shares – tipped by GCI at 572.5p in 2003 – should be worth 1138p. Directors have bought shares today, showing their confidence despite the 10% price rise, and we agree that there's upside to follow.
| Market cap: | £26.26m |
| PE Forecast: | 7.08 |
| Share price: | 645p |
| AIM | 0pm |
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