Companies: AXD ��

Tardy unearthing of an accounting discrepancy and profits disappointment for the year to January mean that corporate uniforms and workwear supplier Alexandra remains unloved.

Turnover reduced to �78m (2007: �81.5m), reflecting ongoing rationalisation and the loss of business from a significant customer that went into receivership. Pricing pressure and volume decline also played their part. Pre-tax profits fell to �4.8m (2007: �4.95m), significantly below analysts’ original �6.1m forecast, reflecting the recent discovery of a management information inaccuracy – the value of stock, and consequently gross margin, had been overstated – as well as a major contract delay. Reassuringly, the accounting blip had no effect on cash and Alexandra was able to increase the total dividend by 3.2% to 6.5p.

Julian Budd, chief executive, pointed out that this was still a year of positive developments, including meaningful productivity improvements, cost cutting and an ‘excellent’ turn from the corporate clothing business, which represents 50% of turnover. ‘We have been very successful in corporate clothing and this is where the growth in the market is,’ he enthused.

While cautious on the economy, Budd has yet to see any meaningful impact from current uncertainty among the client base. ‘Until now, it has been business as usual,’ he explained, ‘but some businesses in some sectors might question whether now is the time to roll out uniforms.’

Despite its recent hiccup, Alexandra, which has the financial firepower in place to continue to drive growth and a good track record of generating cash, remains a highly compelling income play.

Based on forecasts for January 2009, pointing to pre-tax profits of �5.2m, earnings of 11p and a 6.6p dividend, the shares trade on a prospective multiple of 6.45 with a 9.3% yield. On that basis, investors who still hold shares – Growth Company Investor recommended the company at 162.5p in 2006 – should continue to do so. This is no price at which to sell.

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