06/03/2008
Although its shares have been dragged down by worries about consumer-facing companies, profitable kitchen furniture-maker Omega continues to outperform and increase its market share.
Omega is standing firm against commodity cost increases, a consumer spending downturn and the credit crunch. Its results for calendar year 2007 revealed a 19% rise in sales to £33.7m, ahead of forecasts, and, thanks to its increasing operational gearing, pre-tax profits grew 27% to £8.1m. Earnings moved ahead 26% to 20.3p. Its industry-leading manufacturing efficiency also helped widen margins to 24% (22%).
Bullish chief executive Francis Galvin says selling to the right people is important, and they are the very opposite of ‘sub-prime’ – middle- to upper-market, slightly older people and young professionals. ‘We’ve got resilient customers. The property market has held up so we don’t think the majority of them would be troubled by the credit crunch.’
Reading the runes, he even thinks there are good signs to be found: ‘Even if there is a squeeze in the industry, we’re the strongest and would expect to continue to take market share from weaker players.’
Omega has reams of growth to go after, as it only speaks for a minimal amount of the addressable UK kitchen market. The company’s method for swelling sales is to add ‘around a hundred’ new dealers per year. Omega has just expanded its manufacturing facilities by 50% to allow plenty of expansion headroom.
House broker Cenkos forecasts a 20% surge in earnings this year to 24.1p, placing the shares on a forward p/e of only 10.6. Originally recommended by Growth Company Investor at 159p in 2005, the shares have fallen from 2007 highs of 350p and look undervalued for a growing company with proven resilience.
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| Market cap: | £72.44m |
| PE Forecast: | 10.6 |
| Share price: | 256.5p |
| AIM | £18.92m |
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