05/10/2007
Progress at fabrics and wallpapers group Walker Greenbank is running a year ahead of management’s internal plan. Sparkling interim figures to July reflected strong organic growth, with underlying profits trebling to £1.55m on sales lifted 17% to £30.8m.
Explaining the figures, chief executive John Sach pointed to benign market conditions, brand strength and the quality of the group’s ‘niche’ manufacturing. Though its growth rate slowed, mid-market brand Harlequin proved the star turn, achieving double-digit growth for the third consecutive year and substantially increasing its profits.
Sales at Sanderson (including the Morris & Co brand) accelerated on the back of investment carried out since its acquisition in 2003, with profits also on the rise. A return to ‘traditional design values’ was behind a double-digit revenue rise and a substantial profit surge at Zoffany, a brand that had previously lost its way.
Elsewhere, the group’s loss-making, Manhattan-based business scored top-line growth and boasts ‘considerable’ prospects in the key US market, while Anstey, Walker Greenbank’s wallpaper factory in Loughborough, is thriving due to a resurgence in the popularity of wallpaper.
Despite financial progress – Walker Greenbank enjoyed an improved cash inflow and has reduced net debt to £8.5m – investors will have to wait a while longer for a return to dividends. ‘We’re really a growth stock and we’ve got lots of things to invest in,’ reasons Sach, who is honing in on organic growth ‘in Europe and America’ rather than brand acquisitions for now.
Upgraded forecasts for January 2008 suggest a profits surge to £3.1m (£1.6m) and earnings of 5.5p (2.7p), placing the shares on a modest forward p/e of ten; too low for this turnaround-turned-growth tale. Buy.
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